Whether you are the general counsel of a company, an investment manager in a private equity fund, or a board member, there are a number of matters you should consider when assessing the impact on your activities of the current COVID-19 emergency.
With input from our lawyers in Italy, we set out – in no particular order – the top 10 tips to help you in this exercise.
Not all the the matters are necessarily directly or currently relevant for you or your business, but you may wish to review them periodically as the situation evolves.
Check your contracts
Contracts may include provisions affected or triggered by the current emergency situation.
For instance, it may not be possible to meet certain contractual obligations, thus potentially resulting in a breach, unless it is possible to rely on force majeure clauses or similar defences under general principles of law (e.g. hardship).
The mere existence of the current emergency and its implications on the market and/or business may be relevant under material adverse change/effect clauses, affecting the effectiveness of the parties’ obligations.
Where possible/realistic, discussing the issue with the counterparty may be a necessary path to find a solution.
Logistics may be an issue
Given the strict restrictions to travelling and movement in general, standard activities, such as board meetings, or meetings with public authorities, but also the execution of an agreement, may practically not be possible.
Workarounds may be available (e.g. video-linked meetings, written resolutions), although it may not be possible or expedient to waive all the formalities, such as the presence of a minimum number of attendees in a certain jurisdiction or the attendance of a notary public.
Plan ahead
Standard timeframes do not necessarily apply nowadays.
This is particularly the case for deeds requiring the involvement of third parties: regulators/authorities and public registers, for instance, may not be fully staffed (or may be even closed) and thus not be able to ensure responses according to the standard timetable.
Appointments with notaries (which may be relevant for legalization of documents, but also to transfer assets or create securities) may be more difficult to obtain in a short timeframe and possible for truly urgent matters only.
Delays in the supply chain should also be factored in, as goods may be stopped before reaching their final destination or above-normal time may be experienced for deliveries.
Threats and opportunities of financial distress
The current emergency is likely to result in the need to urgently discuss business contingency plans or, in the worst case scenario, seek restructuring measures to protect the business.
A variety of tools are available to companies to restructure their businesses and to investors to get the chance to pursue their investment plan and catch M&A and business combinations’ opportunities.
But existing circumstances may make things a bit more difficult to achieve; therefore, knowing these tools, current threats and what they may imply will be key to take the right decision at the right time.
Cash/funding management
One of the effects of the emergency is that payment terms may not be met by counterparties, with possible direct effects on the capacity of the company to timely make its own payments.
Reach out early to your customers and suppliers to assess the situation and the possible need to discuss extensions.
Verify with treasury and banks the availability of credit facilities which may help to bridge the gap in case of need.
Certain benefits can also be available to companies: you may want to be aware of that.
Public support may be available
Governments and local authorities are approving almost daily measures aimed at providing support or relief to businesses.
This may encompass the postponement of tax due dates, moratorium on payment and state salary support.
While some measures may be of general application and not require any initiative on the part of the beneficiary, others apply only to certain sectors or companies and/or need to be activated by way of positive actions.
Special directors’ duties
Directors may be called to take difficult decisions, ranging from basic organisational issues, such as the logistic for holding the annual general meeting, to what to do with already taken/disclosed measures or strategic moves, such as payment of dividends or M&A, or how to react to liquidity/capital issues.
Material issues must reach the boardroom as soon as reasonably practicable, so as to allow adequate response. Involve the relevant stakeholders and advisers when faced with extraordinary matters.
Health and safety is key
Now more than ever health and safety at the workplace must be taken seriously. This is key for the business to keep on running (where allowed). Consequences of non-compliance may involve also criminal responsibility.
In addition to the compliance with measures involving the workplace (e.g. distancing), make sure that any organisational decision is made in consultation with the company’s H&S advisor and that the relevant advice is considered when actions must be taken.
Keep communication channels open
In uncertain times, it is very important to keep the communication channels with all key stakeholders open.
They include shareholders, public authorities, employees and their representatives, as well as lenders, bondholders and major contractual counterparties.
This will not only be of help at the time when certain decisions must be taken, but also for business to continue when the worst will be over.
Moreover, the effects of the current emergency on the company or its business may trigger notification obligations, stemming from the circumstance that the company has securities listed on an exchange, or that specific obligations are provided in contracts by which the company is bound.
IT systems and data protection
While agile work is pivotal for many organisations as a mean to mitigate the business disruption caused by the emergency, security systems should be strictly monitored and maintained to avoid that data leaks may cause harms in terms both of damages or fines for breach of the data protection regulations and of possible reputational implications.
Should you require further information in relation to any of the above, please do not hesitate to get in touch with either Luigi and Fabio.
For more insights on COVID-19-related issues, visit our coronavirus alert hub.
