COVID-19 Legal Update: Key points for members of corporate bodies – management board, executive board and supervisory board members

20. März 2020 – need2know

The impact and response to the COVID 19 pandemic is a challenge for members of corporate bodies. Key issues and actions are outlined below.

  • Close coordination and cooperation between the bodies (executive board/management board and the supervisory board) to ensure the safety and health of the company’s employees, customers, contractors and the public as far as possible.
  • Reviewing and addressing the risks posed to the company, its shareholders and stakeholders by the COVID 19 pandemic.
  • Ongoing evaluation and review of the strategy to reduce negative impacts, including examination of government support measures.
  • Examination of short- and medium-term liquidity planning and the financing situation of the company (including covenants), in particular existing financing lines.
  • In connection with liquidity and the capital structure, particular attention must be paid to the obligation to file for bankruptcy in the event of insolvency and/or over-indebtedness (including negative going concern prognosis). The application must be filed without undue delay, at the latest 60 days after the occurrence of the event. Though this has been extended to 120 days, if caused by the pandemic/epidemic (extension in accordance with the 2nd COVID-19-Act). See also COVID-19 Legal Update: Changes to the Insolvency Law with respect of ongoing obligations of the executive/management board members.
  • For regulated companies, ongoing communication on developments and measures with the supervisory authorities.
  • Clear and appropriate external as well as internal communication on crisis measures of the company.
  • Examination based on the developments as to whether market expectations or communicated forecasts with respect to current and future business periods, in particular sales and earnings expectations, may still be achieved. For listed companies, reporting of expected deviations/changed forecasts are usually obligatory on an ad hoc basis (see  COVID-19 Legal Update: Ad-hoc reporting obligations of listed companies).
  • Assessment of the dividend policy. Reduction or cut of distributions if necessary in the interest of the company for capital and/or liquidity reasons.
  • Examination and evaluation of transaction opportunities and possibilities for long-term corporate development.
  • Examination of the company’s business model (short- and long-term perspective) and necessary changes to ensure the long-term sustainability of the company.

Authors: Christoph Nauer, Thomas Lettau

Practice group:
Capital Markets, Banking & Finance

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