⚠️ Coronavirus: Business Measures and Potential Impact

//⚠️ Coronavirus: Business Measures and Potential Impact

The effects of the outbreak caused by COVID-19 virus determines the need to adopt measures focused on limiting the spread of the disease that shall cause a great impact on business related aspects. Thus, there shall be carefully observed the potential impact on the performance of the ongoing agreements and on the undertaking activity of companies, with a specific view on credit agreements and also on employment and business measures intended to protect employers by adjusting their business to the crisis situation.  Please find the following comments that come as useful measures to be taken into consideration in a crisis period that has not yet reached its peak.

  1. Necessary measures to protect company’s employees and business

Useful measures must be considered by companies in order to limit the impact of coronavirus outbreak.

Preliminary, there should be determined a work group for handling any implications associated with the virus outbreak by either appointing workers within the company or by contracting external services and also undertake immediate sanitary measures.

Moreover, it is recommended that a home work system should be tested and implemented to limit the impact of the infection associated with the need of a special IT equipment able to ensure simultaneous functioning of tens or even hundreds of personnel computers.

At the same time, any employer may requalify the employers’ roles within the teams, prioritize their tasks and consider their personal aspects implied by the home work system in order to identify best action measures to keep a balance in the crisis context created by the COVID-19 outbreak.

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  1. Objective impossibility to perform agreements

In the predicted context some agreements may become impossible to be performed or their performance may become excessively onerous. In order to conjure causes that influence the fulfillment of the contractual obligations, each interested party should preliminarily check some relevant aspects. In this regard companies should determine the agreements and the contractual obligations within these contracts whose performance may be influenced by COVID-19 virus, the contractual definitions of force majeure, unforeseeable event and hardship, existence of clauses for undertaking risks if one of these events may occur and the if there is a necessity for obtaining a force majeure certificate.

The notion of unforeseeable event reunites both force majeure and unforeseeable circumstances. Regardless of whether COVID-19 outbreak is qualified as force majeure or as unforeseeable circumstances the effects determine the impossibility to fulfill contractual obligations as a direct consequence.

In the given situation, hardship can also intervene. In this case, the fulfillment of the obligations can either become more onerous, in which case the debtor will continue to fulfill its contractual obligations or excessively onerous in which case the court may order the adjustment or even the termination of the agreement.

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  1. Impact on credit agreements

The credit agreements concluded with borrowers usually limit the effects of either force majeure, unforeseeable circumstances or contain clauses for the undertaking by the borrowers of the risk of change of circumstances (hardship).  However, the effect on borrowers’ activity cannot be neglected as creditors may encounter problems at the level of the portfolio of credits form a certain industry or geographic.

Creditors should assess some aspects in their contractual relationship with borrowers, such as: identify borrowers whose activity could be significantly influenced by COVID-19 outbreak, possibility of observance of the financial covenants at the future reporting terms, reevaluation of the borrowers’ assets and cross-default clauses.

On the other hand, borrowers should also take into consideration the implications of the virus outbreak upon their own capacity to fulfill the obligations that arise from the credit agreements.

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This piece of information is brought forward by the attorneys at law of Zamfirescu Racoți Vasile & Partners.