Legal news in 2021

Companies and entrepreneurs are again facing numerous legal changes in Germany in 2021. Here we give you an overview:

Minimum wage

The statutory minimum wage has risen to 9.50 Euros at the turn of the year. It will then rise in semi-annual steps to 10.45 euros by July 1, 2022. The increase can have significant consequences: If a so called 450-euro jobber was previously able to work around 48 hours a month without paying social security, only around 47 hours remain since the start of the year - and only 43 hours from mid-2022. For contracts that fully utilize the EUR 450 limit, the scope of employment should be adjusted regularly. Otherwise, there is a risk of compulsory social insurance payments.

Bonuses for companies employing trainees

The Corvid-19 crisis imposes major financial challenges for many companies employing trainees. To ensure that trainees can continue and successfully complete their training even if the company is experiencing economic difficulties due to the pandemic, the federal program "Securing Training Places" was launched. With this program, the Federal Ministry of Education supports small and medium-sized companies employing trainees in all sectors of the economy. The funding program provides bonuses for companies for maintaining or increasing the level of training, for avoiding short-time work for trainees, for taking over and continuing training relationships, as well as funding for contract and joint training. The funding has been available since November 2020 and is currently limited to June 30, 2021.

Facilitated decision-making at stock corporations and limited liability companies also possible in 2021

General and shareholders' meetings in the classic sense, i.e. in the form of a physical meeting, will not be possible for the foreseeable future even if the group of shareholders is small - or at least it would be unreasonable. Without meetings of the shareholders, however, necessary resolutions cannot be passed. The legislator immediately recognized the problem in spring 2020, during the first "Covid-19 wave", and introduced the possibility of a (purely) virtual general meeting for stock corporations and facilitated the written circulation procedure for limited liability companies. These facilitations, originally limited to the end of 2020, were extended by decree until December 31, 2021. In order to enable virtual meetings by telephone or video conference in limited liability companies as well, corresponding provisions should be included in the articles of association.

Extension of the suspension of the insolvency filing requirement

From March up to and including September 2020, the obligation to file for insolvency was suspended for over-indebted and insolvent companies, provided that the reasons for insolvency were attributable to the COVID 19 pandemic and there were prospects of eliminating the reasons for insolvency. For over-indebted but not insolvent businesses, the filing requirement was extended again in the fall until December 31, 2020. The suspension of the unrestricted insolvency filing requirement was further extended until April 30, 2021, to the extent that the insolvency situation is due to a slow payment of government aids for companies affected by the COVID 19 pandemic.

Reform of the insolvency law

In October 2020, the German government presented draft legislation to further develop restructuring and insolvency law in implementation of the European Restructuring Directive. This new law entered into force on January 1, 2021. Part of the new law is the "Corporate Stabilization and Restructuring Act". This is intended to create a new framework for restructuring and provide financially distressed companies with new instruments to restructure under their own steam and responsibility outside of insolvency proceedings. The prerequisite for the new restructuring procedure is that the company in crisis is only threatened with insolvency and is not yet insolvent or overindebted. In order to make the reorganization options created by the draft available to practitioners as quickly as possible, the law will come into force at the turn of the year.

Digital certificate of incapacity for work

The "yellow slip" has been replaced by the digital sick note since the beginning of 2021. The German government expects this to result in significant time and cost savings for employees, employers and health insurers. From January, employers will then have to retrieve their employees' certificates of incapacity for work electronically from health insurers. The procedure is mandatory. However, some details still need to be worked out. In particular, the aspect of employees' informational self-determination has not yet been conclusively regulated. What is clear, however, is that employers will not be able to view diagnoses in the future.

CO2 pricing for heating and transport

At the beginning of January, the CO2 emissions trading system (Emissionshandelssystem, "EHS") was launched for the heating and transport sectors in Germany, i.e. in those areas not already covered by the European EHS. Through a national CO2 emissions trading system, greenhouse gas emissions from heating and driving will thus receive a - politically determined - price. When companies sell heating oil, liquefied petroleum gas, natural gas, coal, gasoline or diesel, they require a certificate as a pollution right for each ton of CO2 that the substances will cause in consumption. This is intended to make the use of climate-friendly technologies, such as heat pumps and electro mobility, more attractive. At the same time, incentives are created for companies and consumers to save energy and use renewable energies. Initially, the price is 25 Euros per ton of CO2 and will then gradually rise to 55 Euros in 2025. A price corridor of at least 55 and at most 65 Euros is to apply for the year 2026.

Law against the abuse of warning letters

Abusive mass warning letters should no longer be lucrative: On September 10, 2020, the German parliament (Bundestag) passed the "Act to Strengthen Fair Competition." After it also passed the Federal Council (Bundesrat) in October, it came into force on December 2, 2020, with a few exceptions. The law is intended to remove the basis for the business model of "mass warning letters" and to protect in particular self-employed persons and small and medium-sized enterprises from the consequences of unnecessary and anti-competitive warning letters. This is a concern that the German Chamber of Industry and Commerce has long advocated. In order to reduce financial incentives for warning letters, for example, the right to reimbursement of the costs of a warning letter for violations of information or labeling obligations on the Internet or violations of data protection law by companies with fewer than 250 employees is excluded. Conversely, the person warned is now entitled to reimbursement of costs if the warning was recognizably unjustified, does not meet the formal requirements for a warning, or a claim for reimbursement of costs was asserted without justification. Finally, the so-called "flying forum" is abolished for infringements on the Internet, i.e. the court before which an action is brought can no longer be chosen freely, but must be chosen at the defendant's place of business.

New wine law

After more than 50 years, German wine law is being reformed. At the heart of the reform are new regulations for determining quality. Until now, the rule in Germany has been that any wine - regardless of its origin - can be a top-quality product ("quality in a glass" principle). Since the 1960s, the quality designation has been based not on origin but - to put it simply - on the sugar content of the grapes (Oechsle). As is well known, however, it is not the Oechsle grade alone that is decisive for the quality of a wine, but rather the interplay of soil, climate and other natural conditions (terroir). Following the example of other major European wine-growing nations such as France and Italy, the origin of a wine is to be the focus of attention in Germany in the future as well. The principle is: the more precise the origin, the higher the quality. To this end, a "pyramid of origin" is to be introduced, with a single vineyard at the top. The German Winegrowers' Association (DWV) has proposed a transitional period until the 2026 vintage. A decision by the legislator on this is still pending.

Ban on single-use plastic

From July 3, 2021, certain disposable plastic items, including "to-go" cups, plastic cutlery, plastic tableware, straws, polystyrene containers for hot takeaway food or even plastic cotton buds, may no longer be sold. Following the German Bundestag, the 2^nd chamber of the German parliament, the Bundesrat, also approved a corresponding ordinance on November 6, 2020.

Extension of the "Western Balkans Regulation"

The so-called "Western Balkans Regulation", which actually expires at the end of 2020, will be extended until 2023. This means that nationals from Albania, Bosnia and Herzegovina, Kosovo, northern Macedonia, Montenegro and Serbia will continue to be allowed to enter Germany regardless of formal qualifications, provided they can present a binding job offer. In particular, the Central Association of the German Construction Industry had lobbied for an extension, as otherwise there were fears of a shortage of skilled workers in the construction industry. However, the extension now also introduces a quota. For example, the German Federal Employment Agency - which must approve every recruitment - may now only issue 25,000 approvals per year. This is intended to prevent visa issuing offices from being overloaded.

Real Estate Transfers

A reform of the Real Estate Transfer Tax Act has long been planned. Meanwhile, discussions continue between the government factions on the draft passed by the German government in July 2019, which should have come into force as early as January 1, 2020. Some federal states - most recently also Baden-Württemberg - are continuing to exert pressure and are pushing for a rapid amendment. The draft stipulates that the land transfer tax must also be levied if not a property but a company holding a property is transferred. Currently, the tax is only due if 95% of the shares in such a company are transferred within five years; in the future, 90% of the shares within ten years would be sufficient. The new regulation would thus result in a considerable increase in tax on so-called "share deals".

Competition law 4.0

Advancing digitization has brought about significant changes in the balance of economic power. Data is becoming increasingly important as a factor in value creation. Especially in the area of the platform economy, strong market concentration and monopolization tendencies can be observed. The draft "Competition Law 4.0" (GWB Digitization Act) recently presented by the German government is intended to strengthen small companies in the future and limit the market power of Google & Co. Among other things, the draft law provides for tighter abuse control for digital companies with market power. According to the bill, platform companies with cross-market significance will in future be prohibited from giving preferential treatment to their own offerings - for example, in the presentation of search results - compared with competitors. Consumers should thus be able to choose the product that is best for them and the opportunities for innovation and market and data access for competitors should be increased. The Bundestag has approved the new law on  January 14, 2021 and the respective provisions will come into force in several steps until  January 1, 2022.

Compliance

The sanctioning of companies for violations of the law and for failing to take the necessary supervisory measures - i.e. for a deficient compliance organization - has so far been based on the law on administrative offenses. In the past, this was often perceived as insufficient, for example because violations could only be punished with a maximum of 10 million Euros. Against this background, the German government set itself the goal in the coalition agreement of comprehensively reorganizing sanctions law for companies. After an initial unofficial draft was published in 2019, the German government presented a draft of a "Law to Strengthen Integrity in Business" in mid-2020. The draft aims to place the sanctioning of companies on an independent legal footing and, in doing so, provide the authorities with a tougher set of sanctioning instruments. At the same time, compliance measures are to be promoted and incentives created for companies to help solve criminal offenses through internal investigations. The German government introduced the bill to the Bundestag on October 21, 2020, thus initiating the final phase of the legislative process. As the law is not due to come into force until two years after promulgation, companies have sufficient time to put their own compliance organization to the test and take further compliance measures if necessary.

Comprehensive reform of partnership law

At the end of November 2020, the German Federal Ministry of Justice and Consumer Protection published the draft of a "Law for a Modernized Partnership Law". The draft law establishes the civil partnership (GbR) as the basic form of all legally capable partnerships and adapts the law on partnerships, some of which dates back to the 19th century, to the practical needs of modern business life. Up to now, the GbR in the German Civil Code (BGB) had basically been conceived as a non-legally capable community formed to carry out a limited number of individual transactions. However, the Federal Court of Justice granted the GbR legal capacity as early as 2001 and land registry capacity in 2009. In order to provide legal transactions with certainty regarding liability and representation relationships, a company register similar to the commercial register is being introduced in which GbRs can be entered. In addition, a modern right to contest resolutions is to be introduced for commercial partnerships, which in principle follows the model under stock corporation law. Partnerships should keep an eye on the further legislative process in order to be able to adapt to the new regulations at an early stage. Finally, it is worth noting that in future the legal forms of commercial partnerships, such as the limited partnership (KG), may also be chosen for the joint practice of liberal professions by the partners.

Extension of fast KfW bank loans

In view of the continuing tense economic situation due to the COVID 19 pandemic, the German government intends to extend the existing KfW bank's special program until June 30, 2021. Approval from the European Commission is still pending on this. Under this program, companies can apply for KfW loans of up to 300,000 Euros through their principal banks, depending on the sales generated in 2019. The federal government assumes the full default risk and releases the house banks from liability. Since November 9, 2020, solo self-employed persons and companies with up to 10 employees can also apply for KfW fast loans.

Supply Chain Act

In mid-March 2020, the German Federal Ministry for Economic Cooperation and Development published the "Draft for Key Points of a Federal Law on Strengthening Corporate Due Diligence to Avoid Human Rights Violations in Global Value Chains (Due Diligence Act)." The future law is to cover companies that are based in Germany and employ more than 500 workers. The corporate due diligence obligations are to define a process standard according to international guidelines, i.e. companies are to identify and analyze risks to internationally recognized human rights in order to subsequently take appropriate measures against them. An obligation to make an effort applies instead of an obligation to succeed. The required risk management should be "appropriate" with regard to the type and scope of the business activity, i.e. "proportionate and reasonable". The more detailed definition is to be provided by recognized guidelines, frameworks or industry-specific standards. Civil liability for breach of these obligations would then also be possible. Companies that join and implement a government-recognized (industry) standard can limit their civil liability to intent and gross negligence. The German government now plans that the law will come into force at the beginning of 2023 for large enterprises with more than 3,000 employees and at the beginning of 2024 for smaller enterprises.