Essential points to consider if your company is looking at ways to improve balance sheet strength, whether strategically, opportunistically, or to help repair the damage done by the pandemic.

60 SECOND BASICS

WHAT IS IT

Protecting your business from exposure to supplier and customer insolvency

The risk of unforeseen counterparty customer or supplier financial distress and failure amidst the on-going challenges for businesses from COVID-19 means that pre-emptive legal and operational protections against the risk of heavy financial loss or business disruption from customer/supplier failure are more valuable than ever.

The COVID-19 pandemic has already led to business failures and forced others into negotiations with lenders, landlords and other stakeholders. For many sectors, the crisis has reinforced or accelerated the challenges that they were already facing. Government support measures including loans, furlough and temporary legislative changes have delayed some of the usual pressure points, but as support is eased, many businesses will have to find cash from significantly reduced turnover to satisfy deferred liabilities or repay loans.

The United States Bankruptcy Court for the District of Delaware recently issued an opinion that could mean that directors and officers of insolvent entities face liability for damages caused by the failure to timely file for bankruptcy protection.