Cash pooling and the COVID-19 Pandemic

What do managing directors and board members currently have to be mindful of?

Securing liquidity and cash management - the advantages of cash pooling and the motives for setting up a cash pool

The group-wide control of payment processes and the bundling of liquidity across group companies by setting up a "central group account" can help to create transparency of the economic situation within groups of companies and to achieve cost-saving effects - cash surpluses and cash deficits are balanced, external credit lines can be lower with better conditions and lower costs.
However, a cash pool regularly implies complicated and legally challenging framework arrangements, which, even in "normal times", entail a variety of stumbling blocks. In any case, physical cash pooling (physical as opposed to mere notional pooling) is subject to a tightly woven set of rules that results from the interaction of capital maintenance regulations, liquidity protection and high monitoring requirements in order to avoid undesirable liability situations and possibly far-reaching consequences under insolvency law.

At the same time, a merely fictitious cash pooling (notional cash pooling) does often not go far enough and the advantages associated with cash pooling can only be achieved to a very limited extent with this method. Virtual cash pool models, which bring about the desired effect usually resemble physical cash pooling in such a way that the same legal issues arise with the same intensity.

Our working paper (download) discusses:

  • Current situation and problems
  • The (net) contributors to the cash pool
  • The cash pool master
  • Facilitations through the COVInsAG?
  • General current recommendations for action
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