During the Global Financial Crisis, borrowers who needed to refinance their maturing debts faced difficulty. Lenders had neither the appetite nor the ability to lend, save in limited circumstances. The income generated by commercial real estate assets often did not change, however.

On 28 March, UK Business Secretary Alok Sharma announced that the rules relating to ‘wrongful trading’ will be suspended on account of the issues that Coronavirus Disease 2019 (COVID-19) presents.

Both the COVID-19 pandemic and the measures taken by governments have led to unprecedented legal questions that require immediate attention and solutions. These are challenging times. We have therefore prepared the following overview of some of the pertinent legal questions and the answers to consider, in the hope they provide useful preliminary guidance.

Companies are now faced with unprecedented challenges presented by the coronavirus pandemic. In this context, company directors will be trying to do everything they can to protect and preserve the business. However, they do still need to remember their legal duties, so as not to expose themselves to the risk of personal liability if their actions go beyond what the law allows.

Practical steps which directors should be taking now, as explained in more detail below include:

On 23 March 2020, the German Federal Cabinet adopted further urgent measures to mitigate the economic consequences of the COVID-19 pandemic. The package of measures includes an emergency aid programme for micro-enterprises, self-employed persons and freelancers of up to EUR 50 billion and an economic stabilisation fund of EUR 600 billion as well as a Law to mitigate the consequences of the COVID-19 pandemic in civil law, insolvency law and criminal proceedings.

In a unanimous decision written by Justice Neil Gorsuch (Rodriquez v. FDIC No 18-12690), the Supreme Court vacated a decision by the U.S. Court of Appeals for the Tenth Circuit (In reUnited Western Bancorp, Inc., 914 F. 3d 1262 (10th Cir, 2019)) that awarded a federal income tax refund of a failed bank to the Federal Deposit Insurance Corporation as receiver.

Many readers will be aware of the recent, sudden closure during service of Mayfair restaurant “The Square”, which left staff out of work and out of pocket after January’s wages remained unpaid.

Sadly this is by no means an isolated example, as every year thousands of bars and restaurants ‘go under’, but there are steps you can take to protect your position as an employee.

Keep Informed

Not all employers keep their staff updated on the financial health of the company, particularly when its struggling.

A decision this month out of the Bankruptcy Court in Manhattan (SDNY) could have a significant impact on the market for student loan securitizations. Student loan asset-backed securities (SLABS) are unsecured, but market participants typically assume that the underlying student loans are not dischargeable in bankruptcy. A new ruling by the chief judge of the SDNY’s Bankruptcy Court challenges this assumption.

EMPLOYMENT (news)

Diversity in boards of larger companies

Targets (i.e., at least 30% women) imposed by Dutch law for a more balanced composition of the executive and supervisory boards of ‘large’ companies shall cease to exist as of 2020. A ‘large’ company is a company that meets two of the following requirements: (i) EUR 20 mio balance sheet total; (ii) net turnover of EUR 40 mio; and (iii) 250 employees. This does not, however, mean that diversity is no longer on the agenda of the Dutch Government.

In its recent decision in LBI EHF v Raiffeisen Bank International AG [2018] EWCA Civ 719, the Court of Appeal confirmed the wide discretion enjoyed by a non-defaulting party under the default valuation provisions in the Global Master Repurchase Agreement (2000 edition) (“GMRA”) when it comes to determining the “fair market value” of securities.

In particular, when assessing “fair market value”, the non-defaulting party is entitled to have regard to any distressed or illiquid market conditions that were being experienced at the relevant time.