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Your go-to source for latest insights from our lawyers. Through sharp analysis and commentary, we explore the pressures facing businesses today.

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Covid-19 and D&O: Mitigating insolvency risks

In the light of immense pressure on the liquidity of many companies and obligations to file for insolvency in case of illiquidity or overindebtedness, the Germany government will suspend this obligation until 30 September 2020. The suspension will apply if the insolvency is caused by the coronavirus pandemic and if there are sufficient prospects that the company can be turned around.

Next to financial and economic support, this crisis can also be a real opportunity for D&O insurers to support their insured. Many insured and their D&Os now need help in understanding the financial and legal requirements to meet the threshold for sufficient prospect of restructuring in the future. Now is the time where D&O insurers can provide preventive assistance, help their insured surviving the crisis instead and, at the same time, mitigate the potential insolvency-related claims wave that the industry might otherwise be facing.

"We want to avoid companies having to declare insolvency because government aid does not arrive in time," Justice Minister Christine Lambrecht said in a statement on Monday. "The regular three-week delay is thought too short for such cases."