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COVID-19 Coronavirus Business Impact

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.


 

Antitrust/Competition

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.

Read our guidance: COVID-19 and EU FDI: Towards a European CFIUS (Europe) - April 1, 2020

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.

Read our guidance: Antitrust Merger Reviews in the Time of COVID-19: How the Pandemic Is (and Is Not) Affecting Process and Timing (U.S. and Europe) - March 31, 2020

Capital Markets

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.

Read our guidance: AIM Temporary Measures (UK) - March 26, 2020

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.

Read our guidance: Bond Issuer Considerations (Global) - March 23, 2020

Contract Performance

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.

Read our guidance: How to deal with private law contract enforcement issues under French law? (France) - April 6, 2020

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.

Read our guidance: Impacts of COVID-19 on the Performance of Contracts Under German Law (Germany) - March 25, 2020

Corporate Governance

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.

Read our guidance: Meeting Together… Separately: Virtual Board and Stockholder Meeting Considerations (U.S.) - April 10, 2020

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.

Read our guidance: Holding General Meetings Under COVID-19 (Hong Kong) - April 8, 2020

Data Privacy

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.

Read our guidance: ICO Confirms Approach to Data Protection Enforcement (UK) - April 24, 2020

The shift towards working remotely has created a unique opportunity for cyber-attackers and criminals – the European Union Agency for Cybersecurity has already reported an increase in phishing attacks. Dechert’s Data Privacy and Cybersecurity Group has produced an infographic of key security issues to bear in mind to keep your data secure.

Read our guidance: Cybersecurity and Remote Working (UK) - April 3, 2020

Dispute Resolution

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.

Read our guidance: Russia's Supreme Court Provides Clarifications on the Impact of COVID-19-related Measures on Contract Performance and Dispute Resolution (Russia) - April 23, 2020

Employee Benefits and Executive Compensation

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.

Read our guidance: DOL and Treasury Defang COBRA's Deadlines in a Time of National Emergency (U.S.) - May 13, 2020

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.

Read our guidance: Care To Elaborate? – Interpretive Issues Under The CARES Act Compensation Limits (U.S.) – April 21, 2020

Estate Planning

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.

Read our guidance: Historically Low Interest Rates are Ideal for Estate Planning (U.S.) - April 23, 2020

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.

Read our guidance: Estate Planning in a COVID-19 Environment and Relevant CARES Act Relief Provisions (U.S.) - March 30, 2020

Finance

As the impact of the COVID-19 coronavirus continues to play out, many entities need to rapidly assess their liquidity availability. As part of that, the UK government has introduced a number of funding and support measures intended to address the potential impact of COVID-19 on businesses operating across a range of industries. There has now been announced the Coronavirus Job Retention Scheme, various business rate and grant reliefs, an extension of the HMRC time to pay tax arrangements, statutory sick pay relief for small and medium sized businesses and deferral of VAT payments.

Read our guidance: UK Government Funding and Other Liquidity Options (UK) - May 25, 2020

Following up on a previous OnPoint, a foreclosing lender filed an opposition memorandum asserting that a mezzanine "foreclosure" pursuant a non-judicial UCC sale is not subject to the restrictions on foreclosures in New York. In this particular case, the Borrower's defaults pre-date the COVID-19 situation by months. For other lenders, however, a new Executive Order 202.28 could have more significant implications as it explicitly prohibits the "initiation of any proceeding" as well as the enforcement of any foreclosure.

Read our guidance: Mezzanine Foreclosures in the Time of Coronavirus: Chapter 2 (U.S.) - May 12, 2020

Financial Services

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.

Read our guidance: COVID-19 Economic Crisis: Protecting International Banking and Finance Investors and Their Investments (Global) - April 30, 2020

Financial services providers that have non-U.S. affiliates should evaluate whether they are required to file the Benchmark Survey of U.S. Direct Investments Abroad (BE-10). Citing the disruptions caused by the COVID-19 coronavirus pandemic, the Commerce Department's Bureau of Economic Analysis recently reiterated that U.S. Reporters may request extensions of the applicable filing deadline.

Read our guidance: BEA's 2020 BE-10 Benchmark Survey of U.S. Direct Investments Abroad and COVID-19 Coronavirus-Related Guidance: Implications for U.S. Asset Managers (U.S.) - April 28, 2020

Global Governmental Responses - CARES Act, etc.

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.

Read our guidance: German Government COVID-19 Stimulus Package for Private Equity and Venture Capital-financed Companies (Germany) - April 20, 2020

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.

Read our guidance: Financial Support for Nonprofit Organizations Pursuant to the U.S. CARES Act (U.S.) - April 7, 2020

Intellectual Property

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.

Read our guidance: Expect Already-Instituted IPRs & PGRs to Move Forward in a Time of COVID-19-Related Delays (U.S.) - April 3, 2020

International Arbitration

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.

Read our guidance: Impending Sovereign Bond Disputes and the International Investment Protection System (U.S.) - May 15, 2020

The SPC's COVID-19 opinions unify the adjudication standards of Chinese courts and provide more clarity to parties of potential disputes in assessing the outcome of their cases. Notably, the COVID-19 opinions are issued as the first in a series of judicial interpretations by the SPC. It is expected that more SPC judicial interpretations relating to similar subjects will be issued in the near future.

Read our guidance: China's Supreme People's Court Recently Issued Its Judicial Guidance Opinions on Adjudication of COVID-19 Related Cases (China) - May 8, 2020


International Trade

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. 

Read our guidance: International Trade Roundup: PPE Export Exemptions, Import Duty Postponement and Border Closures (U.S.) – April 22, 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.

Read our guidance: U.S. Prohibits Exports of Personal Protective Equipment (U.S.) - April 10, 2020

Labor and Employment

The Information Commissioner's Office has issued guidance for UK employers on COVID-19 testing as a condition for returning staff to the workplace. This guidance looks at testing in the context of employee consent, GDPR compliance, the use of thermal cameras and testing alternatives, among other areas.

Read our guidance: ICO Issues Guidance on Workplace Testing (UK) - May 20, 2020

UK employers will need to continue to monitor and address workers' holiday arrangements carefully as the longer that restrictions on attending work and travelling generally stay in place, the greater the potential for disputes and HR issues more generally in relation to holiday. How employers encourage or require workers to take holiday during lockdown or furlough and how they manage the pent up demand for holiday once travel and other restrictions are lifted, will need careful planning, management and communication.

Read our guidance: Further Guidance on Holiday Entitlements (UK) - May 15, 2020

Life Sciences

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.

Read our guidance: In the COVID-19 crisis, our operations in the UK, France and Germany can’t buy hand sanitiser. Can we make our own? (UK and Europe) - April 1, 2020

With protective face masks becoming a scarce resource during the COVID-19 pandemic and authorities stepping up public requisitions and export controls on these products, businesses who require this equipment for global manufacturing operations may have concerns about supply reliability over the coming months. While there is no current indication a public requisition is likely to be launched in the UK, existing emergency powers legislation could enable confiscation measures to be taken swiftly.

Read our guidance: We need respiratory face masks for our business operations in the UK and France. Can the UK or French Governments requisition them? (UK and Europe) - March 24, 2020

Litigation

Class action lawsuits over tuition refunds have been filed against universities in at least 15 states. These putative class actions present significant challenges for colleges and universities. We will continue to monitor these actions and hope to periodically share our thoughts, which we hope will be helpful to you and your institutions in these difficult times.

Read our guidance: COVID-19 Tuition Refund Class Actions Against Colleges and Universities (U.S.)
May 26 UpdateMay 8 UpdateMay 1 Update

The COVID-19 pandemic finds nursing homes and other senior living facilities confronting unprecedented operational challenges and risks. The highly vulnerable population served, combined with the near impossibility of both caring for residents and practicing extreme social distancing, has made them easy targets for the spread of contagion. Owners, operators and administrators can proactively reduce their litigation risk, applying lessons learned from other crises to help navigate these unprecedented times.

Read our guidance: Nursing Homes and Other Senior Living Facilities Can Take Practical Steps to Reduce Litigation Risks (U.S.) - May 1, 2020

Mergers and Acquisitions

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. 

Read our guidance: Implications for Due Diligence (U.S.) - March 31, 2020

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.

Read our guidance: Valuation Gaps and Due Diligence in M&A Deals (Global) - March 30, 2020

Permanent Capital

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.

Read our guidance: Repurchasing Equity and Debt: Potential Techniques and Pitfalls for BDCs and CEFs (U.S.) - May 18, 2020

COVID-19 has presented novel issues for public companies, including business development companies, with respect to their disclosure obligations under federal securities laws. This OnPoint discusses recent SEC relief in connection with COVID-19, and provides guidance regarding public companies’ ongoing disclosure obligations.

Read our guidance: SEC Disclosure Obligations for Public Companies (U.S.) - April 15, 2020

Private Equity

Our lawyers discuss structures used by private equity funds to take advantage of investment opportunities in the current environment, and some of the practical and legal considerations involved in forming such vehicles. 

Read our guidance: COVID-19 Coronavirus Business Impact Broadcast Series: Fund Structures for Opportunistic Investing - May 22, 2020

We discuss how the decline in the trading prices of bank loans and corporate bonds resulting from the COVID-19 pandemic may present opportunities for companies to deleverage their balance sheets by buying back their own debt and for PE sponsors to shore up the stability of their portfolio companies while maintaining their liquidity by reducing or restructuring debt within their investment portfolio.

Read our guidance: COVID-19 Coronavirus Business Impact Broadcast Series: Is Your Debt Trading Below Par? Have You Thought About Buying it Back? - May 15, 2020

Real Estate

The COVID-19 crisis has raised questions on whether insurance will help businesses mitigate losses suffered as a result of the pandemic. This OnPoint looks at the position in the UK and the U.S., with a particular focus on business interruption insurance.

Read our guidance: The Impact of COVID-19 on Insurance of Real Estate (U.S. and UK) - May 22, 2020

Since the UK's mandatory lockdown at the end of March, landlords and tenants have been considering the implications for commercial leases and, in particular, obligations relating to the payment of rent. This OnPoint takes a closer look at some issues for both parties and provides an overview of the recently introduced Coronavirus Act 2020 in the context of business leases. 

Read our guidance: The Impact on Commercial Leases in the UK (UK) - May 18, 2020

Restructuring

This alert focuses on notable features of Dubai's DIFC Insolvency Law, while also looking at the recent temporary suspension of the wrongful trading rules introduced as a result of the COVID-19 pandemic.

Read our guidance: Revisiting the DIFC Insolvency Law in the Context of the COVID-19 Crisis: An Innovative Toolkit for the Turnaround of Troubled Enterprises (UAE) - April 30, 2020

The UAE overhauled its bankruptcy regime on December 29, 2016 with the introduction of the Bankruptcy Law. Until now, the Bankruptcy Law has only been anecdotally applied to a fairly small number of low profile insolvencies, but is now likely to be tested on a larger scale both in terms of numbers and size of debtors affected by insolvency proceedings. This alert is a refresher of some of the key features of the Bankruptcy Law and potential areas of concerns for debtors, their directors and their shareholders.

Read our guidance: The UAE Bankruptcy Law: Stepping up to the challenges raised by the COVID-19 crisis (UAE) - April 9, 2020

Tax

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.

Read our guidance: EU Commission Proposes Extension of the DAC6 Reporting Deadlines (Europe) - May 12, 2020

A new IRS initiative will temporarily allow RICs and REITs to conserve capital and enhance their cash liquidity during the current COVID-19 coronavirus pandemic.

Read our guidance: Reduced Cash Requirement in Part Stock and Part Cash Dividends: New IRS Guidance on RIC and REIT Distributions (U.S.) – May 11, 2020

Transportation

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.

Read our guidance: Running on Empty: A 10-Point Plan for the Aviation and Transportation Industry as It Meets the Challenges and Opportunities Presented by the COVID-19 Coronavirus Crisis (Global) - March 31, 2020

White Collar, Compliance and Investigations

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.

Read our guidance: FCA Enforcement Risk: The Year Ahead (UK) - May 7, 2020

Corporates and asset managers will need to update their financial crime risk assessments as a result of COVID-19 and take particular preventative steps to mitigate the risk of related misconduct. Companies bidding for EU funded work should take particular care to ensure that the business-specific risks of operating in the current environment are identified and incorporated into their compliance and mitigation steps.

Read our guidance: European Anti-Fraud Office Remains Active During COVID-19 Crisis and Targets Increase in Investigation and Prosecution of EU Fraud (Europe) - May 1, 2020