The COVID-19 outbreak has caused unprecedented disruption to business operations worldwide and significantly altered both personal and professional relationships. The changes being encountered are extremely dynamic. We are closely monitoring COVID-19 developments and making adjustments to the way we do business as we keep our people and our communities safe. As a firm, our resources, people and client-focused culture well situate us to provide uninterrupted service to our clients.
Dechert has created a COVID-19 Task Force to provide guidance and support to clients across each of our disciplines, including antitrust, capital markets, corporate, employee benefits, labor and employment, leveraged finance, litigation, M&A, private equity, taxation and trade, as well as pro bono work, with updates occurring daily. Below we have a dedicated webpage and library of relevant materials with a link to our Broadcast Series and upcoming webinars. | Read about our commitment to pro bono during COVID-19
Our unwavering commitment to providing high-level service to our clients remains the same as ever. We maintain a dedicated and determined team committed to supporting our clients in the current environment, so that we can emerge from this challenging time stronger and more committed partners. For more information, please contact Stuart Davis.
As COVID-19 is a fluid situation, please note that these articles are current as of the date of publication. Please check back periodically for the most up-to-date information.
The European Commission has issued guidelines on how to prevent or moderate investments by non-EU investors in European companies in several key sectors, including healthcare, energy and finance. The EU's new Foreign Direct Investment Regulation (FDI Regulation) takes effect in October and keeps the decision-making function with Member States while providing the European Commission with nothing more than advisory powers.
The global COVID-19 pandemic has changed how merger enforcement regimes around the world are currently reviewing proposed transactions. Two weeks into the new environment, we now have a body of experience from which to assess how merger reviews are proceeding (and may continue to evolve) under these unprecedented circumstances. Here is what we have experienced and what it means for your deal.
Amongst many moves being initiated in different markets, AIM regulation set out certain temporary measures it is implementing to support AIM companies and nominated advisers in an attempt to afford market players some latitude during the pandemic crisis. AIM regulation has stated it will be applying 'discretion' to the application of some of the junior market's rules until further notice. AIM companies should continue to meet their disclosure obligations without delay.
The global capital markets are in a state of flux, with major sell offs in global stock markets due to fears about the impact of the COVID-19 coronavirus, as well as a result of the slump in oil prices. In these precarious and volatile times, issuers should take time to consider the following.
In the context of COVID-19 pandemic and subsequent lockdown measures, many professionals are facing difficulties, if not impossibility, to fulfill their contractual commitments. Yet contracts are still binding. In the hypothesis where renegotiation of the contract is not possible or would not be sufficient to overcome the difficulties to perform the contract, force majeure could prove to be a useful tool to protect professionals who are exposed, in good faith, to the temporary or permanent impossibility of fulfilling their contractual commitments provided that the specific terms of the contract regarding force majeure and legal requirements are strictly observed.
COVID-19 constitutes a force majeure event. However, if the risk of unforeseen events like the COVID-19 pandemic is fully attributed to one party in the agreement, that party might not be entitled to request an adjustment of the terms of the agreement, or to terminate the agreement, and might even be held liable for the damages caused by the non-performance under German statutory law.
Given the recent recommendations for social distancing in connection with COVID-19 as well as stay-at-home orders that have been implemented in most states, many public companies, including business development companies, and registered closed-end funds will need to address how best to satisfy their obligation to hold an annual stockholder meeting while complying with these restrictions. Companies and funds may elect to hold a "virtual-only" stockholder meeting or a so-called "hybrid" stockholder meeting in line with recent SEC relief that eases compliance with federal securities laws governing annual meetings.
In light of the regulations, and the continuation of travel restrictions and mandatory quarantine measures for arriving travelers globally, listed Hong Kong issuers should consider the adoption of technology-assisted virtual meetings, hybrid virtual meetings, or participation via teleconference when interacting with their shareholders provided these measures are allowed under the laws and regulations governing the listed issuer in question as well as its constitutional documents.
The UK Information Commissioner's Office (ICO) recently issued guidance in relation to the collection of additional personal information as part of the process of providing a safe environment for staff. The guidance clarifies the steps that organizations should take with regard to what type of personal information should be stored, how it should be stored and how long it should be stored.
The Information Commissioner's Office has now confirmed specifically the approach it will take to the enforcement of data protection obligations in light of its role as an independent regulator acting in the public interest and its approach of being a pragmatic and proportionate regulator.
Dispute boards, a dispute resolution mechanism historically found in construction contracts, can allow life sciences companies partnering in the fight against COVID-19 to resolve disputes arising under their agreements in a novel manner and with greater speed.
This overview sets out a number of important clarifications on the practical application of recent legislative developments as well as recent COVID-19 related measures to dispute resolution, contract performance and creditors' rights.
To address problems faced by participants and beneficiaries in exercising their healthcare coverage continuation rights, the U.S. Departments of Labor and Treasury jointly issued a notice on May 4, which gave plan participants an extended period of time to elect continued healthcare coverage under COBRA. While the COBRA changes provided by the Notice are very favorable for qualified beneficiaries, by extending the option period to elect COBRA coverage, they increase the risk of adverse selection for insurers – i.e., only those most in need of coverage, and therefore the most expensive group to insure, will elect COBRA coverage.
Companies receiving assistance under Title IV of the Coronavirus Aid Relief and Economic Security Act will be required to limit compensation payable to certain highly paid officers and employees. This OnPoint identifies various interpretative and operational challenges under the new rules that companies seeking assistance will need to address.
Interest rates that are used for loans to family members, loans to trusts and to value gifts to certain trusts have been further reduced as a result of market conditions driven by the COVID-19 pandemic. These historically low interest rates present time-sensitive estate planning opportunities that could produce significant transfer tax savings.
As each of us copes with the ongoing challenges posed by COVID-19, we hope this finds you and your families safe and healthy. We wanted to reach out to let you know we are here to help ensure you are comfortable with your current estate planning documents – and to call attention to opportunities and relief that are currently available.
Under the Main Street Lending Program, three new loan facilities will be created that will enable lending to small and medium-sized businesses by eligible lenders. While the Program is not yet open for loan applications, the following is a Q&A summary addressing questions that prospective borrowers might have.
Although the loan industry has long looked at loans as being obligations that arise in a commercial lending relationship, the law supporting this view has been more than just a little unclear...until now. A New York district court's decision not to classify syndicated loans as securities in Kirschner is especially important in the context of the current COVID-19 crisis, as a decision subjecting syndicated loans to securities regulation could have chilled this market at a time when many borrowers have a heightened demand for liquidity.
Federal regulators and self-regulatory agencies have provided relief to registered funds and investment advisers whose operations may be affected by the COVID-19 coronavirus outbreak. They acknowledge that Coronavirus-related disruptions may pose challenges to satisfying certain requirements under the Investment Company Act of 1940 as well as the Investment Advisers Act of 1940. In light of these challenges, Dechert has created the COVID-19 Coronavirus U.S. Regulatory Relief Tracker for Registered Funds and Investment Advisers.
When clients are adversely affected by governmental measures, we assist them in evaluating what forms of recourse might be available and, where appropriate, pursuing recourse through international arbitration or other means. This OnPoint addresses the types of measures arising out of past crises that have been so severe as to result in international arbitration, and identifies immediate action items that investors in the banking and finance sectors could take to protect their investments.
Both the German Federal Government and the German Federal States have enacted a variety of key government financial support programs available to private equity and venture capital-financed companies in Germany as they seek to mitigate the economic impact of COVID-19.
The CARES Act provides several ways for nonprofits to receive financial support during the pandemic. This OnPoint provides an overview of the Paycheck Protection Program, the Economic Injury Disaster Loan Program and the Mid-Sized Business Loan Program and provides an FAQ for nonprofit organizations as to the differences between the programs.
The Patent Trial and Appeal Board is adjusting its deadlines for some patent owners looking to file inter partes review and post grant review extensions. Read the following OnPoint to see if you're affected.
The COVID-19 economic crisis has increased the risk of investment disputes in the banking and financial sector, as the economic effects of the crisis spiral and as governments introduce responsive measures. International investment protection can mitigate this risk so long as investors in the banking and finance sectors ensure that their investments are properly protected and satisfy certain basic requirements.
The COVID-19 economic crisis has increased the risk of defaults and restructurings of sovereign bonds. International arbitration of sovereign bond disputes has led to sizeable settlements in the past, which can affect the impact of sovereign debt and restructurings both on sovereign states and on foreign investors. Governments and bondholders should fully assess how the international investment protection system affects their rights, as well as the implications for any negotiations over sovereign bond defaults or restructurings.
The U.S. government has implemented several trade-related measures in response to COVID-19, including a new Federal Emergency Management Agency regulation allowing companies to export personal protective equipment in certain circumstances, a 90-day duty deferral issued by Customs and Border Protection, and extension of the temporary closure of the U.S. borders with Canada and Mexico until May 20, 2020.
On April 10, 2020, the Department of Homeland Security, through the Federal Emergency Management Agency (FEMA), issued a new rule at 44 C.F.R. Part 328 prohibiting exports of certain PPE used in the global response to the COVID-19 pandemic, otherwise known as the FEMA Rule. The FEMA Rule will remain in place until August 10, 2020. For companies that need to export PPE for critical reasons, we suggest quickly preparing an application before FEMA receives more applications than it can handle.
On Wednesday 1 July 2020 the UK Government updated its various guidance materials addressing the Coronavirus Job Retention Scheme and its operation. This OnPoint highlights the key points to note as well as the ongoing uncertainty about whether notice pay can be claimed under the scheme in respect of those made redundant while on furlough.
The UK government issued its third Treasury Direction which establishes the legal basis for the operation of the Coronavirus Job Retention Scheme. The Direction sets out detailed and complex provisions concerning what constitutes a claim period, the maximum number of employees in respect of whom a claim for payment under the Scheme can be made and the calculation of what can be claimed where employees work on flexible furlough with different approaches being prescribed for those with fixed and variable rates of pay.
Dispute boards, a dispute resolution mechanism historically found in construction contracts, can allow life sciences companies partnering in the fight against COVID-19 to resolve disputes arising under their agreements in a novel manner and with greater speed.
With hand sanitiser gel stocks under pressure worldwide, increasing numbers of businesses are considering how they could begin direct production of their own to ensure that they have sufficient stock for their own use. If your business plans to manufacture its own sanitisers following the WHO Guide, using ethanol or isopropyl as the active ingredient, and gets its active ingredient from approved sources, approval may now not be needed to do so.
As part of its response to the COVID-19 pandemic, the UK government on 7 May 2020 issued guidance "strongly encouraging" contractual parties to "act responsibly and fairly in the national interest in performing and enforcing their contracts." The Guidance does not override any legal rights or obligations that the parties may have, but raises the question of English law's approach to express and implied obligations of Good Faith and the extent to which the English courts might take the Guidance into account (if at all) when considering parties' conduct.
As COVID-19 continues to impact corporations' operations and financial results, as well as markets in general, we anticipate an increase in securities and derivative litigation. Public U.S. companies should understand how the uncertainties created by the coronavirus may increase the risk of securities and derivative litigation, and steps that can be taken to minimize such risks.
Although deal volume has already started to decrease as a result of the impact of COVID-19, some sale processes remain ongoing. As a result of the measures put in place globally to control the spread of the virus, buyers need to ask relevant questions of their targets to fully understand how they are dealing with the current situation and their plans to mitigate any delayed impact that it could have.
In the wake of the COVID-19 pandemic and its continuing impact on global financial markets, executing M&A deals at the right price has, almost overnight, become more challenging than ever. This OnPoint explores certain strategies to bridge valuation gaps, including classic earn-out mechanisms, the increasing prevalence of toe-hold and minority positions and other valuation trends observed in the Asian markets in the early days of the Coronavirus outbreak.
Given the volatile economic environment caused by the COVID-19 pandemic, business development companies need to proactively manage their loan portfolio companies to mitigate risk and avoid surprises that may arise in the foreseeable future. This OnPoint discusses the strategies and work-out plans that BDCs, whether holding first lien, second lien, mezzanine or unsecured debt, need to employ in advance to address any defaults or liquidity issues that may arise.
Economic uncertainty as a result of the COVID-19 pandemic has caused a decline in trading prices for debt and equity securities and liquidity and covenant compliance issues. BDCs and CEFs, and their affiliates, can repurchase shares of their securities at a discount to real value in various ways to take advantage of lower trading prices or to restructure their liabilities. Issuers and their affiliates should consider the potential pitfalls of repurchase transactions.
On June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020. The PPP Flexibility Act makes a handful of significant changes to the Paycheck Protection Program (PPP) that may be impactful for businesses facing challenges in complying with the previously existing rules relating to PPP loan forgiveness. Importantly, these changes have retroactive effect to the date of enactment of the Coronavirus Aid, Relief, and Economic Security Act and, as a result, apply to all outstanding PPP loans regardless of when originated. The key changes implemented by the PPP Flexibility Act are outlined in this OnPoint.
The COVID-19 pandemic continues to impact many aspects of the private equity and venture capital industries in Germany and around the globe. This update from Dechert's German team examines the new details of the government's stimulus package, including the Corona Matching Facility (CMF).
The COVID-19 crisis has impacted upon valuations in the UK, with site visits often being impossible. This OnPoint looks at the effect on valuations and transactions, as well as possible disclaimers and the margin for error.
The COVID-19 situation has forced the government in England to temporarily change planning laws, which include new rights for restaurants and pubs to trade as food takeaways, relaxation of certain planning controls and the postponement of all public local inquiries. This permitted change comes with two caveats: first, some planning permissions contain conditions prohibiting a change out of a specific use class to another use. Second, the amendment does not affect the terms of any existing lease of premises.
A UK High Court judge was persuaded, on the evidence, that there was a strong case that COVID-19 had a financial effect on the company before the presentation of a winding-up petition and, further, that the facts on which the petition would be based would not have arisen if COVID-19 had not had a financial effect on the company. This OnPoint discusses the implications of this case on any future insolvency matters in the UK.
The UK Government's Corporate Insolvency and Governance Bill will implement the most significant reform to the insolvency framework in decades. In addition to permanent landmark changes, including introducing a business rescue moratorium and new restructuring plan, the Bill contains a number of temporary measures to help businesses respond to the COVID-19 crisis. Whilst the timing for implementation is currently unclear, we anticipate that this new framework may be enacted as soon as June 2020.
DAC6 (sometimes referred to as "MDR" – the Mandatory Disclosure Rules) requires the identification and reporting of cross-border arrangements involving at least one EU Member State (for these purposes, including the UK) and which feature one or more 'hallmarks' which the EU considers to be indicative of potentially aggressive tax arrangements. If formally adopted, and subject to the discretion of each Member State as to whether to adopt the postponement, the Council agreement will extend the deadlines of new and historical tax arrangements.
Due to the uncertainty caused by COVID-19, the European Commission has decided to postpone the Mandatory Disclosure Regime deadline by three months. While the EU's proposal is welcome, and will relieve some of the immediate pressure upon organizations and their advisers, many will consider the extension period insufficient.
With an estimated one quarter of the world's population in lockdown, the COVID-19 coronavirus crisis is likely the transportation industry's greatest challenge yet. This OnPoint explores the recent developments as well as potential opportunities and strategies for companies operating in this sector.
The UK Financial Conduct Authority has reinforced its expectations on market conduct during the COVID-19 pandemic. This article provides practical guidance that market participants can take to ensure they meet the these expectations in the current environment concerning the use of inside information and mitigate the risks of market abuse.
In the short term, the FCA will dedicate its resources to combatting the myriad of issues that are and inevitably will be caused by COVID-19. Firms can expect continued scrutiny in respect of the regulatory areas set out in the article below and where failings are found, enforcement action may be likely to follow. It would be prudent for firms to assess how well they are performing in each of these areas.
