Commercial landlords will have fewer enforcement options for debt recovery if the Corporate Insolvency and Governance Bill (published 20 May) is enacted – which is expected by 3 June 2020. The bill introduces the anticipated prohibition on the use of statutory demands for rent recovery in most circumstances, as well as other provisions designed to protect tenants.
In the aftermath of the 9/11 attacks, the Appraisal Institute issued guidance to its MAI appraisers regarding the new challenges and limitations on rendering an opinion of real estate value in the wake of a disaster when markets are unstable or chaotic[1].
This post originally appeared on the Council of Fashion Designers of America website, CFDA.com.
Among the only certainties for the post-COVID lending world is the uncertainty of commercial real estate values. Among the classes of real estate that surely will be immediately diminished in value are hospitality and most brick and mortar retail, but even the value of industrial and office properties will be closely scrutinized as questions are posed regarding changes in how companies conduct their businesses and which types of businesses will recover most fully.
The current COVID-19 pandemic is causing an unprecedented negative impact on businesses around the globe in nearly every sector of the economy. Both the US Government as well as Foreign Governments have and will continue to provide short- and long-term financial support to these businesses. However, this financial assistance will not be available to every business, nor will it be adequate in all instances to offset decreased revenue resulting directly and indirectly from the pandemic.
On 8 April 2020, the Council of Ministers approved Law Decree no. 23, published in the Official Gazette (General Series no. 94, Extraordinary Edition of 8 April, 2020), containing “Urgent measures related to access to credit and tax obligations for businesses, special powers in strategic industry sectors, as well as healthcare and employment interventions, prorogation of administrative and procedural deadlines”.
With a recession appearing to be inevitable, for many companies innovation is more important than ever. Innovating and contracting in times of crisis requires caution, however, and contracts should as far as possible be insolvency-proof. Popular solutions include guarantees, sureties and retention of title. But it may be worth considering a lesser known option, the intercompany settlement clause, which works as follows.
Paying a debt to an insolvent company
The UK Government has announced wide-ranging emergency legislation in response to the Coronavirus crisis, in an attempt to reduce the burden on business and allow them to carry on trading during and after the pandemic. Some of the changes (other than the one on wrongful trading) were already intended following a consultation process that concluded in 2018 but are now being fast tracked.
On March 25, 2020, the Senate passed an amendment to H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act (as amended, the “CARES Act”), which (as of March 26, 2020) is being considered in the House.
The complete text of the current draft of the CARES Act can be found here.