BYE, BYE “BEIBEHALTUNGSGENEHMIGUNG”…
April 09, 2024
Good news for Germans who intend to acquire US-citizenship and keep their German citizenship! The new law regarding German citizenship (“Gesetz zur Modernisierung des Staatsangehörigkeitsrechts“) was finally published (https://www.recht.bund.de/bgbl/1/2024/104/VO.html?nn=55638) and (most of its provisions) will become effective on June 26, 2024.
That means, from this date on a “Beibehaltungsgenehmigung“ (retention permission) is no longer required, if German citizens want to keep their German citizenship when they become US-citizens.
Florian Alexander Carl, LL.M.
Attorney-at-Law (California) I Rechtsanwalt (Germany)
Certified Specialist for Commercial and Corporate Law (Germany)
CIPP/E
INHERITING ASSETS IN GERMANY
MARCH 12, 2024
The issue:
Anyone who has dealt with US trusts and estates that involve assets in Germany will quickly realize that presenting a US trust document, last will, letters, etc. -even with a proper German translation attached- usually won’t get them very far, particularly when the estate includes real property located in Germany or bank accounts held by a German bank.
The solution:
Typically, the (only) solution is to obtain an “Erbschein” (=Certificate of Inheritance), issued by a German court that is recognized in Germany as proof of one or more heir(s) being entitled to receive the estate assets.
The process:
For US residents this process will usually start at the designated German Consulate in their region, although the proceeding itself will take place at the local court in Germany.
The tricky part:
Although the process is pretty straight forward in theory (completing an application form, signing it at the German Consulate, submitting supporting documents, waiting for the court to issue the “Erbschein”) it can be cumbersome to obtain (original) birth and death certificates (in the US, Germany, or a third country), marriage licenses, passports etc. of the parties involved (i.e. typically the deceased, the heirs or beneficiaries, trustees, but also pre-deceased spouses of the deceased, etc.), and to navigate the legal areas where US (state) laws, German law, and international treaties intersect.
Things can become particularly complicated, if a US trust is involved, because the concept of a (common law) trust is foreign to the (civil law based) German legal system.
The good news;
While every case is different and the approach by the local courts in Germany to “international” matters may differ, the outcome intended (for the German assets) by the decedent can be implemented in the vast majority of cases. With decades of experience in international estate matters and a physical presence in the US and in Germany we can help you through this process reliably and efficiently.
Shouldn’t this be easier?
Absolutely, and things have already become simpler in the last ten years, but although these international estate cases are not rare, simplifying the resolution of international estate matters does not appear to be a priority for governments these days. On a personal level, consciously addressing any assets abroad in your own estate planning goes a long way and can help safe time, money, taxes, and will make sure your assets end up where you want them to be.
Florian Alexander Carl, LL.M.
Attorney-at-Law (California) I Rechtsanwalt (Germany)
Certified Specialist for Commercial and Corporate Law (Germany)
CIPP/E
GRACE PERIOD FOR THE REGISTRATION OF BENEFICIAL OWNERS IN THE GERMAN TRANSPARENCY REGISTER ABOUT TO END
MAY 26, 2022
The grace periods for the registration of beneficial owners in the German transparency register (www.Transparenzregister.de)
expire:
- on June 30, 2022 for GmbHs (Limited Liability Companies), UGs (entrepreneurial companies), Genossenschaften (German Cooperative Societies), Europäische Genossenschaften (European Cooperative Societies)
- on December 31, 2022 for other forms of associations, foundations, registered partnerships, e.g. KGs (limited partnerships).
For AGs (corporations), SEs (European Corporations) and KGAAs (limited partnerships by shares) the grace period ended on March 31, 2022.
A person is considered a beneficial owner, if they -directly or indirectly- hold more than 25% ownership or voting rights of an entity. In the absence of such a person, the managers of the entity are considered beneficial owners.
Non-compliance with the registration obligations may result in fines.
Florian Alexander Carl, LL.M.
Attorney-at-Law (California) I Rechtsanwalt (Germany)
Certified Specialist for Commercial and Corporate Law (Germany)
CIPP/E
GERMAN GOVERNMENT DECLINES TO EXTEND KEY PROVISIONS OF THE ACT FOR THE MITIGATION OF THE CONSEQUENCES OF THE COVID-19 PANDEMIC
JULY 28, 2020:
When the Act for the Mitigation of the Consequences of the COVID-19-Pandemic for the Civil Law, Insolvency Law, and Criminal Procedure Law (“Gesetz zur Abmilderung der Folgen der COVID-19-Pandemie im Zivil-, Insolvenz-, und Strafverfahrensrecht”) was passed in Germany in March 2020, the legislature granted the executive branch the power to extend some of the key provisions beyond their original duration.
With respect to the termination provisions for lease agreements and the moratorium for recurring payments an extension through September 30, 2020 would be possible, in case social life, a large number of businesses or the gainful occupation of a large number of people would continue to be affected by the COVID-19 Pandemic.
In regard to the changes to insolvency law, an extension through March 31, 2021 was permitted, if this appeared to be necessary due to continuing demand for available government subsidies, ongoing difficulties to obtain financing, or other circumstances.
Although Germany –as of today- has been less affected by COVID-19 than some other countries, the impact on social life and the economy is still very real and is expected to continue far beyond the time when Sars- CoV-2 will be contained around the globe. The demand and calls for the government to step in and support individuals and businesses under the extraordinary circumstances has not ceased either.
Nevertheless, the German government has not chosen to extend the
1) Changes to the law of termination of lease agreements based on default
2) Moratorium for individuals and micro entrepreneurs regarding recurring payment obligations
3) Changes to the Insolvency law
While the decision had been hotly debated within the government the fact that a smaller number of people and enterprises than initially expected took advantage of the payment moratoria, combined with initial signs that the gradual re-opening might be a relative success, seems to have played an important role in letting the “exceptions” to pre-COVID-19 German civil law expire.
That means in regard to the three areas of law listed above:
1) Changes to the law of termination of lease agreements based on default
In regard to lease agreements for real property any default with rental payments due between April 01, 2020 and June 30, 2020 cannot justify a termination for default, if the non-payment is caused by the COVID-19-Pandemic.
The termination based on default for rental payments in the above mentioned time period is excluded until June 30, 2022.
That means, if the default for payments that were due between April 01, 2020 and June 2020 continues beyond June 30, 2022, a termination based on the default may be justified.
All rental payments due on or after July 1, 2020 are subject to regular law, including default and termination provisions.
Comment: Many parties to lease agreements, particularly in long-term commercial leases have already negotiated amendments to address their particular circumstances and either cut the rent (temporarily) or install a payment plan for past rent, or both.
Nevertheless it is expected that the economic effects of the pandemic will continue to impact a wide range of businesses, particularly in the retail and hospitality sector and thereby force tenants and landlords to re-evaluate their relationship, in order to avoid default, vacancies and/or insolvency (see also Sec. 3 below).
Because many businesses, e.g. restaurants are still not operating at full capacity and a severe recession seems inevitable, it is likely that absent the special COVID-19 provisions and/or amendments to pre-COVID-19 lease agreements, default–based terminations will increase, lead to disputes and find their way into court.
2) Moratorium for individuals and micro entrepreneurs regarding recurring payment obligations
Individuals and micro entrepreneurs affected by the COVID-19-pandemic were granted a moratorium for payment obligations under contracts for necessary goods and services (e.g. telecommunication services, electricity, etc.) entered into on or before March 08, 2020, if they were unable to comply with their obligations as a result of the COVID-19 pandemic.
The right to refuse performance was excluded, if (i) debtor's non-performance would be unreasonable for the creditor because it would jeopardize the economic basis of their business or, if the creditor is a micro-entrepreneur, the non-performance would put in jeopardy the creditor’s ability to sustain themselves or their dependents, or the economic basis of the creditor's business.
In this event, the debtor had a special termination right.
The moratorium expired on June 30, 2020.
Comments: In comparison to rental payments, the recurring payments subject to this moratorium, particularly electricity and telecommunication services, typically constitute a smaller monthly amount for individuals and micro-entrepreneurs, so the end of this moratorium will probably not have as broad-reaching effects as the end of the lease termination provisions (see. Sec. 1 above). Other mechanisms will likely keep providers of recurring services afloat and consumers and microbusiness able to obtain (government) support to maintain access to necessary services.
3) Changes to the Insolvency law
The following changes to the insolvency law have been enacted:
Until September 30, 2020 any person or entity is relieved from their obligation to file for insolvency,
-unless the illiquidity is not caused by the COVID-19 crisis, or
-the forecast for reversing the illiquidity in the future is negative
As a mirror-image to this relief provision focused on the debtor, a creditor is prevented from filing for insolvency of a debtor within the above stated time period.
In addition, the changes comprise privilege for certain payments made by debtors within the stated time period, and repayments of loans taken out during the time period and repaid before September 30, 2023 in insolvency proceedings after September 30, 2020.
Comments: While COVID-19 has affected German businesses and individuals to different degrees, it is widely expected that Germany faces a wave of insolvencies starting this fall and continuing through 2021. Clearly, not every insolvency is (exclusively) caused by COVID-19 but structural and macro-economic problems that have plagued certain segments of the German economy before the pandemic have been exacerbated and will take their toll. Particularly hard-hit businesses like retailers, restaurants and businesses that rely on tourism and events are expected to file for insolvency in large numbers. Therefore, German insolvency law will likely be on the agenda for many companies located in Germany or doing business in Germany, either in order to ensure compliance with the strict application mandates for management of entities on the brink of insolvency, or in order to make the right decisions when dealing with a business partner that might file for insolvency or that has already filed. Since some of the regular provisions of insolvency law continue to be suspended until September 30, 2020, the remaining months should be used to prepare for what is likely to be a turbulent 4th quarter.
Outlook
Although the spread of CIVID-19 has slowed down in Germany and its neighboring countries the economic and societal effects continue to be severe. The expiration of some of the changes to German contract and Insolvency law will be a litmus test, in regard to how “normal” businesses can operate under the current circumstances and regular German law.
Florian Alexander Carl, LL.M.
Attorney-at-Law (California) I Rechtsanwalt (Germany)
Certified Specialist for Commercial and Corporate Law (Germany)
FC@LA-GermanLaw.com I www.LA-GermanLaw.com I www.fassbender-lawyers.com
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Germany enacts Changes to various laws in reaction to Covid -19 crisis
March 29, 2020:
As expected, on March 27, 2020 the Law for Mitigation of the Consequences of the COVID-19-Pandemic for the Civil Law, Insolvency Law, and Criminal Procedure Law (“Gesetz zur Abmilderung der Folgen der COVID-19-Pandemie im Zivil-, Insolvenz-, und Strafverfahrensrecht”) passed through the Bundesrat along with a variety of other measures that the federal government had introduced earlier this week and that had passed the Bundestag last Wednesday. The law was published in the federal gazette late on Friday, March 27, 2020
The main parts of the COVID-19 legislation are
1) Financial aid
2) Changes to the law of termination of lease agreements based on default
3) Changes to the Insolvency law
4) Moratorium for individuals and micro entrepreneurs regarding recurring payment obligations
5) Relief for borrowers under Consumer Loan Agreements
6) Changing voting requirements for German limited liability companies (GmbH) and corporate entities (Aktiengesellschaften, etc.) and extension of time periods in conversions.
7) Expansion of short-time work benefits
1) Financial aid
Financial aid will be provided through the KfW, the German state-owned development bank, through a newly founded Economic Stabilization Fund, and through the state governments (immediate financial support for small businesses). In addition, the Länder (federal states) have their own financial support programs, respectively are expected to enact programs to support their citizens in dealing with consequences of the COVID-19-Pandemic.
Ø Under the federal program of the Economic Stabilization Fund, companies that meet at least two of the following three criteria (more than 249 employees, more than € 50 Mio. in revenues, more than € 43 Mio. balance sheet total) and that are considered to be important in terms of Germany’s employment market, critical infrastructure, technological sovereignty, security of supply, or the economy can receive loans and loan guarantees.
Ø The KfW has a variety of existing programs that are beefed up and opened to more applicants.
Ø Micro businesses, sole proprietors and professionals can apply to receive up to € 15.000 in direct, non-repayable support to mitigate immediate liquidity problems.
2) Changes to the law of termination of lease agreements based on default
In regard to lease agreements for real property any default with rental payments due between April 01, 2020 and June 30, 2020 cannot justify a termination for default, if the non-payment is caused by the COVID-19-Pandemic. The time period can be extended by decree through September 30, 2020.
The termination based on default for rental payments in the above mentioned time period (i.e. April 01 through June 30, 2020, or September 30, 2020, if extended by decree) is excluded until June 30, 2022.
That means, if the default for payments that were due between April 01, 2020 and June (respectively September) 30, 2020 continues beyond June 30, 2022, a termination based on the default may be justified.
The legislature did not follow calls for a general moratorium on rental payments.
3) Changes to the Insolvency law
The following changes to the insolvency law have been enacted:
Ø Until September 30, 2020 any person or entity is relieved from their obligation to file for insolvency, unless
§ the illiquidity is not caused by the Covid- 19 crisis, or
§ the forecast for reversing the illiquidity in the future is negative
The relief of the filing obligation can be extended through March 31, 2021 by decree.
Insolvency is defined under German law as inability to make payments or imminent danger of inability to make payments (illiquidity), or overindebtedness. The new law does not specifically address overindebtedness, and so the relief regarding the obligation to file for insolvency should apply in case of an overindebtedness, too.
As a mirror-image to this relief provision focused on the debtor, a creditor is prevented from filing for insolvency of a debtor within the above stated time period.
Ø In addition, the changes comprise privilege for certain payments made by debtors within the stated time period, and repayments of loans taken out during the time period and repaid before September 30, 2023 in insolvency proceedings after September 30, 2020 (or the respectively extended date by which these provisions expire)
4) Moratorium for individuals and micro entrepreneurs regarding recurring payment obligations
Individuals and micro entrepreneurs affected by the COVID-19-pandemic are granted a moratorium for payment obligations under contracts for necessary goods and services (e.g. telecommunication services, electricity, etc.) entered into on or before March 08, 2020, if they are unable to comply with their obligations as a result of the COVID-19 pandemic.
The right to refuse performance shall be excluded, if (i) debtor's non-performance would be unreasonable for the creditor because it would jeopardize the economic basis of their business or, if the creditor is a micro-entrepreneur, the non-performance would put in jeopardy the creditor’s ability to sustain themselves or their dependents, or the economic basis of the creditor's business.
In this event, the debtor has a special termination right.
The moratorium will initially last until June 30, 2020. The moratorium can be extend by decree.
5) Relief for borrowers under Consumer Loan Agreements
For borrowers who have entered into a consumer loan agreement on or before March 15, 2020, payments due between April 01, 2020 and June 30, 2020 are deemed to be deferred for three months from the due date, if the borrower has lost income due to the extraordinary circumstances caused by the COVID-19 pandemic and this would make the obligation to make payments under the loan agreement unreasonable.
Similar additional requirements for and exceptions to the right to defer payments as for the moratorium for recurring payments for necessary service contracts (see no. 4 above) apply.
It falls to the borrower to lay out and prove the loss of income. Deferment of payment shall have the effect of postponing the due date and shall be assessed individually for each payment.
The parties to the consumer loan agreement are encouraged to find consensus on payments due after June 30, 2020. If the parties do not reach an agreement the loan period shall be extended by three months, so monthly payments are not staggered.
The Federal Government may by decree expand the application of this provision to other borrowers, in particular micro-companies and/or extend the duration of the law until September 30, 2020 and the extension period for loans up to twelve months, if circumstances caused by the COVID-19 pandemic so require.
6) Changing voting requirements for German limited liability companies (GmbH) and corporate entities (Aktiengesellschaften, etc.) and extension of time periods in conversions.
Changes have been made to the requirements for corporations (e.g. Akteingesellschaften or AG) and limited liability companies (Gesellschaft mit beschränkter Haftung, or GmbH) and certain other entities and associations to hold votes through remote participation.
Also certain provisions of the law of mergers and conversions were made in order to make it easier to comply with statutory periods for the use of annual financial statements in transactions under the conversion law (Umwandlungsgesetz).
7) Expansion of short-time work benefits (Kurzarbeitergeld)
The German labor administration’s tool of short-time work benefits (Kurzarbeitergeld), which essentially subsidizes loan payments to employees who are temporarily put on leave by their employer has been expanded, e.g. extended to employees who work through temp agencies.
Outlook
It is likely that at least some of the above described measures and changes to existing law will be amended and/or extended in reaction to a rapidly changing situation. Many potential conflicts and hardships caused by the COVID -19-pandemic have not been addressed, let alone resolved by the legislature as of today. Disputes about the exact meaning, scope and effect of the new and existing law will arise.
It will be important for consumers and businesses alike to look for creative solutions, and stay abreast of changes and developments yet to come.
Florian Alexander Carl, LL.M.
Attorney-at-Law (California) I Rechtsanwalt (Germany)
Certified Specialist for Commercial and Corporate Law (Germany)
FC@LA-GermanLaw.com I www.LA-GermanLaw.com I www.fassbender-lawyers.com
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Germany to change law on termination of leases and insolvency law amid Covid -19 crisis
March 22, 2020:
In addition to a massive budget increase for the federal government as a result of the impact of Covid-19 and the restrictions prompted thereby by state and federal governments in Germany, the German Bundestag is expected to vote on important changes to the statutory rights of landlords to terminate tenants that are in default on rental payments and the obligations of debtors to file for insolvency in the week starting March 23, 2020.
Deferral for rental payments
The changes will likely include an automatic deferral for rental payments for tenants who can show that there liquidity is negatively impacted by the Covid-19 crisis and/or the government actions prompted as a reaction to the pandemic. The deferral will avoid tenants to default on rent. The changes will become effective starting April 1, 2020 and will initially cover a period until September 30, 2020 with a possible extension period.
Many details are still uncertain, e.g. whether there needs to be compensation for landlords, how long the deferral period will initially be, and what a tenant will actually have to show in order to be eligible for this relief.
Obligation to file for insolvency relaxed
As another measure to relieve debtors from the effects caused by the current situation, the Bundestag is expected to vote on an amendment to current insolvency law in order to relax the obligation to file for insolvency within three weeks,
- if the insolvency (in Germany defined as inability to make payments or imminent danger of inability to make payments, or overindebtedness) is caused by the Covid- 19 crisis,
- and the debtor has asked the government for support and/or is re-negotiating debts,
- and it is likely that the application for government support and/or renegotiations will be successful
Similar measures had been taken in the past on a smaller scale for debtors affected by natural desasters.
As it is the case with the deferral of rental payment (see above) many details are still open.