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Sometimes events can be so unprecedented that even the canniest business people fail to comprehend what’s happening until it’s too late.

The COVID-19 “coronavirus” crisis is one such event. Businesses across the world have been plunged into shock dealing with the fall out of lockdowns, plummeting revenues and sales, unpaid bills and new ways of remote working for staff. And some sectors have been hit harder than others.

The first industry to be swept off its feet was tourism and the airline industry. The UKs regional carrier FlyBe was the first big casualty, while Virgin Atlantic applied for hundreds of millions of pounds in UK state aid to stay afloat.

Meanwhile, in the US, United Airlines quickly grounded most of its fleet amid class action brought about by disgruntled passengers and employees. Boeing shut production of its 787 aircraft at its factory in South Carolina and in Germany Lufthansa decommissioned 40 jetliners and ceased operations at its Germanwings discount carrier.

The entire hospitality industry was at risk across North America, Europe and Australia with chains such as British pubs Wetherspoons laying off staff and Italian restaurant chain Carluccio’s going into administration. Countless other famous names were predicted to follow in the next few months. Big and small retail stores across the globe were similarly adversely affected.

But it wasn’t bad news for everyone. Companies that had invested in technology fared better and in some cases business boomed. Companies such as Walmart in the US and Tesco in the UK outpaced European discount chains such as Aldi by investing in online delivery services. Ocado, a UK online grocer, saw such a spike in activity with overloaded servers crashing in early March that the company assumed it was a cyberattack. In reality it was people stocking up for food and drink ahead of the lockdown.

Elsewhere, many firms in all sectors were quick to adopt new technology models for business operations, which included the use of mobile meeting apps, file sharing and using online apps and channels for sales, service delivery and marketing. What would probably have taken years to implement in old-fashioned brick and mortar industries (including the legal sector) suddenly appeared in a matter of days.

To help companies pull through this crisis, governments around the world unveiled packages to help shore up endangered businesses, providing damage limitation to their economies. In the UK, the government unveiled a £330 billion package of loan guarantees and other support for businesses. Meanwhile, the US Federal Reserve was asked by President Donald Trump to provide a $1 trillion economic stimulus package.

Everywhere, however, it was the small and medium-sized companies that were the most exposed. A survey by the US Chamber of Commerce reported 54% of businesses with fewer than 500 employees were closed or expected to close in the coming weeks and months. In the UK the corporate finance network predicted that one-fifth of small and medium-sized businesses were unlikely to survive the first few months of the lockdown despite promises of government support.

Unsurprisingly, legal professionals working in the insolvency sector in all jurisdictions suddenly had to keep up with new legislations being rushed through by different governments.

In March, the UK government announced amendments to various aspects of insolvency law. These were designed to help businesses that had been impacted by the COVID-19 crisis to continue trading, giving them time to explore options for rescue or restructuring. These changes included a temporary suspension of wrongful trading provisions for company directors, intended to allow them to run their businesses and make difficult decisions during the pandemic without the threat of incurring personal liability. The proposals include an interim moratorium to protect companies in difficulty and the creation of a new restructuring plan procedure.

Other territories followed suit with similar legislation as governments and professional services firms tried to find a way to rescue distressed companies.

In Australia, the government introduced similar measures, relaxing the obligations of directors to enable them to continue to incur debts and help avoid insolvency if possible.

The French government declared the COVID-19 pandemic as force majeure, which lawyers had to take into account when assessing the health of a company regarding its creditors and debtors. The move was introduced to help the huge number of small and medium-sized businesses that represent an enormous slice of the French economy. The same was also true in Italy where the government introduced measures to help SMEs with debt relief until September 30, 2020.

In the following pages, x6 of IR Global’s Insolvency lawyers analyse the impact of the COVID-19 crisis on businesses in various jurisdictions. They talk about the different legislation designed to help companies and the wider economies and also predict the possible long-term impact on business culture. Finally, they look at the unique offering a network such as IR Global has to help companies weather the storm of uncertainty in the months and even years ahead.

Asesores colaboradores

  • David Foster
    Insolvency , Real Estate and Trusts & Estates in England

    David Foster

    silverDavid is a silver member
    Partner, Moore Barlow LLP
  • Yves-Marie Ravet
    Insolvency in France

    Yves-Marie Ravet

    silverYves-Marie is a silver member
  • James Conomos
    Litigios Comerciales y Insolvencia en Australia

    James Conomos

    silverJames is a silver member
    Founder and Principal Partner, JCL Law Partners
  • Philippe Termote
    Insolvency in Belgium

    Philippe Termote

    bronzePhilippe is a bronze member
    Partner, Agio Legal