During this time of economic upheaval amidst the COVID-19 pandemic, many corporate borrowers are faced with the inability to service debt obligations, and creditors may seek to hold corporate officers and directors accountable as a result. In these uncertain times, it is wise to review the fiduciary duties of corporate directors and officers and the effects of financial distress on such duties.[1] The following Q&A provides guidance on this issue from a Delaware law perspective, as Delaware is the most commonly cited jurisdiction for corporate governance.

As most global markets attempt a return to normal (or a new form of normal) business, it is hard to imagine a sector or an industry that isn’t already reeling from the effects of the past three months. Getting back on your feet is hard enough in the current environment, without having to worry about further setbacks impacting your business. But how would you react if your key supplier called tomorrow to let you know that they were insolvent and unable to provide you with goods or services?

Summary

Retail tenants are experiencing unprecedented difficulties stemming from the COVID-19 pandemic, including government shutdown orders for non-essential businesses and shelter-in-place rules that have virtually stopped all in-person shopping. Even as these restrictions are finally being relaxed to a limited degree, the dramatic effects of the pandemic will long be felt in the retail industry.

Elearning company Skillsoft provided two expedited alternatives to bankruptcy in its first-day filings in the Bankruptcy Court for the District of Delaware.

Businesses that were already struggling before the COVID-19 pandemic hit the United States are now facing the consequences of having to close their doors during the public health crisis.

On June 2, 2020, Judge Donald R. Cassling of the United States Bankruptcy Court for the Northern District of Illinois held that a state executive order suspending dine-in services to address the COVID-19 pandemic (the “Executive Order”) constituted a force majeure event that partially excused performance under the applicable lease agreement. In re Hitz Restaurant Group, No. 20-B-05012, 2020 WL 2924523 (Bankr. N.D. Ill. June 2, 2020).

On June 22, 2020, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued an order concluding that the Commission and the United States Bankruptcy Courts have concurrent jurisdiction to review and address the disposition of natural gas transportation agreements (“FERC-jurisdictional agreement”) sought to be rejected through bankruptcy.

Both commercial landlords and tenants continue to struggle from governmental lockdowns and financial pressures. Recent bankruptcy decisions have added an additional layer of financial distress on commercial landlords by: (i) reducing commercial tenants' rent based on the subject lease's force majeure provision and governmental pandemic orders and (2) ignoring commercial tenants' requirement of timely payment of post-bankruptcy rent and allowing commercial tenants to "pause" payment of rent consistent with the governmental “stay” orders issued because of the COVID-19 pandemic.

NORTHERN DISTRICT OF ILLINOIS BANKRUPTCY COURT HOLDS THAT EXECUTIVE ORDER BARRING RESTAURANT OPERATIONS ON-PREMISES IN LIGHT OF COVID-19 IS A FORCE MAJEURE EVENT THAT PARTIALLY EXCUSES DEBTOR RESTAURANT’S PAYMENT UNDER THE LEASE