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Coronavirus and your business

ARTICLE BY

  • Edward Nathan Sonnenbergs

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Law firm ENSafrica (Edward Nathan Sonnenbergs) published a legal update on their website (www.ensafrica.com) on ways the Coronavirus may affect your business and how you can manage and mitigate certain risks:

Coronavirus: legal update

In the context of the Coronavirus outbreak worldwide, business and entrepreneurs are busy developing strategies and practical ways to mitigate and manage the risks associated with disruptions that may be caused as a result of the outbreak.  Below are some important considerations and measures that businesses and entrepreneurs should bear in mind in managing the impact of the Coronavirus:

Insurance

Businesses should review the current terms of their insurance policies, particularly those concerning business interruption, contractors’ all risk policies and travel cancellation insurance, to determine if potential disruption caused by the Coronavirus is covered.  Some policies that cover physical property damage also apply to interruption caused by non-physical events. 

Commercial transactions

A majority of commercial agreements contain a force majeure clause. These clauses include a number of events beyond the control of the parties that can have an impact on their ability to perform their obligations, and  may suspend or terminate the affected party’s obligation to perform, or extend the time period in which to perform. A force majeure clause may explicitly provide for “plagues” or “serious epidemics” or it may provide a more general category of events beyond the reasonable control of a party.

In particular, operators in the construction industry, businesses who are heavily reliant on importation of construction materials, as well as shipping and logistics operators, should verify the force majeure clause in their contracts in order to ascertain the extent to which, if at all, such clauses would find application in the context of the Coronavirus outbreak. 

In agreements that do not contain a force majeure clause, the principles on supervening impossibility may apply (either by virtue of the common law or in terms of legislation or codes in civil law jurisdictions). These typically provide that if performance has become objectively impossible due to no fault of the non-performing party and as a result of an unavoidable and unforeseen event, that party will be released from their obligation to perform and the contract will as a general rule be terminated.

Accordingly, the question of whether or not the Coronavirus may trigger a force majeure clause in a particular contract or give a party the right to withhold performance due to supervening impossibility will require a detailed analysis of both the contract, applicable laws and the facts and circumstances of the particular case.

Businesses should verify their commercial arrangements to help develop strategies to mitigate business disruption. When negotiating new transactions, the impact of global pandemic such as Coronavirus should also be carefully considered to ascertain whether it may somehow, in the context, amount to a force majeure event or may, again context dependent, have a “material adverse effect” on a transaction or the implementation of a transaction e.g. M&A, property developments or supply chain. 

Public listed companies

Public listed companies need to assess the impact that the Coronavirus may have on their financial results and, as a result thereof, on required public disclosure. 

In addition, all companies planning meetings e.g. annual general meeting, and/or holding large gatherings should consider contingency plans e.g. postponement, holding the meeting by video-conference; and other precautionary steps to be taken.

Employment

Employers have a legal obligation to provide and maintain a safe, healthy work environment and to use reasonable endeavours to limit risk to their employees. In the context of the Coronavirus, employers should be looking to do as much as is reasonably possible to ensure that its workforce is not susceptible to outbreak. 

To manage the Coronavirus epidemic effectively in the workplace, it is important that employers take a proactive approach acquaint themselves and stay updated referring to the World Health Organisation (www.who.int) information sheets so that they can anticipate, plan and develop strategies such as the ones outlined herein to manage the serious risks impacting their business. 

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