Posted on: 19 March 2020
International law firm Watson Farley Willaims LLP (WFW) in its recent briefing discusses the recent announcement by the German Federal Government to support measures for businesses and employees struggling from the effects of the COVID-19 epidemic. This article focuses on the implementation of a protective financial shield as well as certain additional measures including tax reliefs and a loosening of insolvency filing requirements.
The most important measure being taken for companies facing loss of revenue as a consequence of the coronavirus pandemic is the protective shield. The Finance Minister and the Economics Minister have made it clear that there is no monetary limit to these programmes. At this stage, the Federal Government intends to expand the scope of several existing programmes offered by the state-owned development bank Kreditanstalt für Wiederaufbau (KfW) to allow for such assistance. These programmes will be available through a company’s principle bank (Hausbank).
“For larger companies, the KfW growth programme will now be accessible to businesses from all sectors with a revenue of up to €5bn, with KfW guaranteeing up to 70% of syndicated loans.”
In particular, the existing KfW programmes for existing businesses (KfW Unternehmerkredit) and for new businesses (ERP Gründerkredit Universell) will be expanded to cover businesses with a turnover of up to €2bn. These programmes will allow for working capital loans of up to €200m, which will be 80% guaranteed by KfW. For larger companies, the KfW growth programme (KfW Kredit für Wachstum), which originally targeted businesses in the innovation and digitalisation sectors, will now be accessible to businesses from all sectors with a revenue of up to €5bn, with KfW guaranteeing up to 70% of syndicated loans.
The existing large guarantee programme (Großbürgschaftsprogramm), under which the federal and state governments co-operated to guarantee working capital and investments loans in structurally weak regions, will be expanded to other regions and allow for guarantees of more than €50m covering up to 80% of the loan amounts. In addition, there are export credit guarantee facilities in place to assist the export industry. The ministers also indicated that new programmes could be implemented to accommodate the impact on businesses of the coronavirus pandemic. Further details have yet to be announced.
Other measures include tax relief such as deferments of payment (Stundungen) and a renunciation of enforcement measures and late payment fines (Verzicht auf Vollstreckungsmaßnahmen und Säumniszuschläge). Tax prepayments may also be adjusted for businesses facing difficulties.
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