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ALG 1 judgment: start-up subsidy despite high severance pay?

The start-up subsidy is intended to ensure subsistence when implementing a business idea. But does this claim also apply if founders received a high severance payment from their previous employer?

Starting a business with financial planning security: legal basis

After a period of unemployment, the step of becoming self-employed is a new, promising option for many people. Of course, this is associated with some major financial challenges. This is especially true if there is little equity or financial reserves for the first few months. This is exactly where the start-up subsidy comes into play. According to § 93 of the Third Social Code, this can be granted for 6 months in the amount of the previously paid unemployment benefit plus 300 euros.

In addition, an extension for 9 months is possible if entrepreneurs can prove the chances of success of their project with a viability certificate. A monthly payment of 300 euros is planned for the extension period. An expert opinion must show whether the entrepreneur actually has the necessary specialist knowledge. It should be emphasized that there is no legal entitlement to this funding. Employment agencies can refuse to pay. With a view to a court decision, this applies above all if applicants have previously received a high compensation.

A groundbreaking judgment with a signal effect for start-ups

A landmark ruling by the Giessen social court (file number S 14 AL 6/13) shows that receiving this funding is not legally guaranteed. This case concerned a 59-year-old employee who, after more than 30 years with the company, as part of a termination agreement Compensation of 170,000 euros (gross) had received. He then received unemployment benefit I and, based on this situation, planned a business model (sale and repair of replacement parts in heating technology). The company was founded with the legal form “GmbH und Co. KG” and the business registration had already taken place and an application for the start-up subsidy had been submitted.

But the responsible employment agency rejected the request. The case ended up in court, which confirmed the view of the employment agency. The main reason for this decision in the grounds for the judgment is that the severance payment ensures adequate financial security. The argument that the start-up subsidy was intended to replace loans was also contradicted. According to the verdict, this is not the purpose of this subsidy for starting a business. It’s primarily about them Securing the livelihood. And with such a high severance payment, there can never have been any doubt about that. The financial starting point therefore plays an important role when applying for this subsidy for company founders.

Start-up grant alternatives: explore a broad financing strategy

This judgment shows that the individual planning requirements must be checked at an early stage. This is the only way to ensure financial planning security, which should be important to all founders right from the start. In this respect, they should use the payments from this funding program see as bridging moneybut there can be no guarantee of receipt.

The responsible employment agency always uses a when making its decision case-related consideration through. The principles of economy and economy play a central role here. Anyone who received a high severance payment in a previous employment relationship is highly unlikely to be able to rely on this financial building block for the path to self-employment. This court ruling clearly speaks for examining all possible funding options when starting a business and using them consistently.

When starting a business out of unemployment, the aim must be to make your own business model viable and sustainable right from the start sustainable basis to deliver. In the course of business start-up advice, it can be checked in this context which funding options and instruments of financing come into question. Irrespective of this, a convincingly developed business plan is still an indispensable means of winning over banks and/or other financiers for one’s own business model.

More information (external links): § 93 of the Third Social Code and judgment of the Giessen Social Court (file number S 14 AL 6/13)