The COVID-19 pandemic has created a wide range of legal and business issues that entities around the globe must navigate. Outlined below are topics covered by our attorneys in response to these challenges. Click on one of the links to be directed to our collection of thought leadership addressing issues within that particular area.
- Competition Filings
- Contractual Provisions
- Cybersecurity and Privacy
- Deal Activity
- Debt/Equity Repurchases
- Director Duties
- Economic Relief Programs
- Event Cancellation
- Financing and Liquidity
- Restructuring and Debt Obligations
- Securities Trading
- Virtual Meetings
COVID-19’s Impact on M&A Transactions and Material Adverse Effect Clauses
Latin America Dispute Resolution Update - March 2021
The Impact of COVID-19 on Construction and Infrastructure Projects
Latin America Dispute Resolution Update - March 2021
Considerations for Employers Requiring Staff To Get a COVID-19 Vaccine
UK Employment Flash - February 2021
As the focus shifts to a post-pandemic reality with the rollout of COVID-19 vaccines, we consider how UK employers should approach the requirement that their staff be vaccinated.
Further Institutional Investor Guidance for UK-Listed Companies on Impact of COVID-19 for Executive Compensation
UK Employment Flash - February 2021
Pay levels, reward structures and the widening gap between workforce and management pay have come under ever greater scrutiny in the UK. We have summarized the 2020 guidance given by The Investment Association, and recently by proxy advisory firms Glass Lewis and Institutional Shareholder Services, on approaches to compensation in the context of the COVID-19 pandemic.
Despite Pandemic-Related Disruptions, Securities Class Action Filings Remain High With No Signs of Slowing
2021 Insights - January 26, 2021
Despite unprecedented disruptions to the court system from the COVID-19 pandemic, plaintiffs continued to bring securities class actions at elevated levels in 2020 — a sign that filings will remain high in the year ahead.
Uptick in Restructurings May Outlast COVID-19 Pandemic
2021 Insights - January 26, 2021
The COVID-19 pandemic has caused massive disruption across the globe, resulting in a significant uptick in U.S. restructuring activity. But many experts believe we have yet to see the full extent of the surge in filings that will occur in the aftermath of the COVID-19 crisis. The amount of leveraged loans that becomes due in the next five years, combined with the economic impact of COVID-19, may serve as the catalyst for the next wave of restructuring.
US Corporate Governance: The Ascension of ESG
2021 Insights - January 26, 2021
The events of 2020 and their aftermath have made it clear that ESG is not a fad that will recede, even during a crisis. If anything, 2020 made ESG's importance clear and firmly established it as being a more important engagement and voting topic going forward.
On December 18, 2020, French Minister for the Economy Bruno Lemaire announced that the COVID-19 interim rules on foreign investment control, which were initially set to expire December 31, 2020, will be extended to December 31, 2021. The interim rules are part of the French government’s policy response to the economic implications of the COVID-19 pandemic for French strategic assets. On the same day, the French authorities officially confirmed their veto of the proposed acquisition of Photonis, a leading French optronic technologies firm, by the U.S. group Teledyne, setting a precedent for cross-border M&A deals involving highly sensitive business activities in France.
- President Trump Issues ‘Executive Order on Regulatory Relief To Support Economic Recovery’ >
- SEC Extends Relief for Virtual Meetings of Fund Boards >
- No-Action Relief Statement on SEC Filing Signature Requirements >
- Staff Statement Regarding Temporary International Mail Service Suspensions to Certain Jurisdictions Related to the COVID-19 Pandemic >
- SEC Issues Risk Alert: Select COVID-19 Compliance Risks and Considerations for Broker-Dealers and Investment Advisers >
The New Normal: ESG Drivers and the COVID-19 Catalyst
November 12, 2020
In this article co-authored by Skadden attorneys and FTI Consulting, we review the approach companies have taken in relation to environmental, social and governance (ESG) issues during the COVID-19 pandemic. Many companies have continued to intensify their ESG efforts and communications with stakeholders in this important area during the ongoing crisis, and, in fact, in many instances this has accelerated preexisting trends towards greater transparency while underscoring the role of business in confronting wider societal issues.
On October 12, 2020, in Travelport Ltd & Ors v WEX Inc, the English High Court handed down a rare judgment on material adverse effect (MAE) clauses, which WEX invoked in an attempt to pull out of a $1.7 billion acquisition. In ruling on a preliminary issue, the court upheld the MAE clause's natural, broad meaning, thus providing WEX with a foundation upon which to cancel the deal and highlighting the need for careful drafting of such clauses.
A recent government memorandum implementing an executive order that calls for regulatory relief amid the COVID-19 pandemic has the potential to affect federal agencies' approach to investigations and enforcement. The executive order and memorandum reflect a preference for leniency and a desire to ease the burdens placed on companies responding to enforcement activities.
European High-Yield Market Responds to COVID-19
September 30, 2020 - Quarterly Insights
Despite the business interruption COVID-19 has caused, especially early in the year, the European high-yield market remains strong. Adaptation to the current environment and innovation in bond terms and covenants continue to characterize the high-yield market in these unparalleled times.
Planning Ahead: Virtual Shareholder Meetings in the 2021 Proxy Season
September 30, 2020 - Quarterly Insights
Although the future of the COVID-19 pandemic and the prospects for in-person shareholder meetings are unclear, companies have the ability to plan for virtual shareholder meetings in a more orderly and methodical fashion than they did for 2020 meetings. Companies may want to engage with their shareholders now to obtain investor feedback and prepare for “virtual proxy season 2.0.”
Shareholder Derivative Suits Likely To Extend to COVID-19, Racial Equality
September 30, 2020 - Quarterly Insights
Companies can expect to see shareholder derivative litigation related to allegations surrounding COVID-19 and structural racism filed over the next year. Boards are well advised to actively monitor the company’s response to and disclosures on those issues to minimize their risk of exposure to such suits.
Sustainability-Linked Loans on the Rise Despite COVID-19
September 30, 2020 - Quarterly Insights
While COVID-19 represented a shock to the global economy, in the long run the pandemic may become a catalyst rather than a dampener of the growing popularity of sustainability-linked loans, which were developed to promote environmental, social and governance policies and practices. Sustainability-linked loans provide incentives to borrowers to achieve their ESG goals.
When Arbitration Meets Bankruptcy: Considering Arbitration Options in the Wake of a Growing Rise in Corporate Insolvencies
September 30, 2020 - Quarterly Insights
Companies with arbitration clauses in their commercial agreements may wish to consider the impact of insolvency on their options for pursuing pending or future arbitrations, especially as the long-term effects of COVID-19 play out as more companies consider restructurings.
On September 29, 2020, the French government released its 2021 draft budget, which seeks to mitigate the economic impact of the COVID-19 crisis with several proposed tax cuts geared toward businesses. Among other measures, the budget would continue French efforts to lower corporate taxes to 25% by 2022 and introduce a long-awaited VAT grouping regime.
Considerations for Continuing To Work From Home During COVID-19
September 10, 2020
As it becomes clear that working from home was not just for the initial period of lockdown but is likely to continue for at least the duration of the COVID-19 pandemic, UK employers that have not already done so should consider putting in place a more fulsome work-from-home policy. Doing so will provide an effective way to address important considerations for managing employees who continue to work remotely.
Questions and Answers Regarding Collective Redundancies in France
September 8, 2020
As part of its response to the COVID-19 pandemic, the French government implemented a generous furlough system designed to protect companies and avoid redundancies. With the end of that system approaching, many companies will soon need to restructure their workforces. This Q&A addresses 10 questions clients most frequently ask when considering collective redundancies in France.
The French government has issued interim rules that lower the applicable threshold triggering French foreign investment control for investments by non-European investors in certain French publicly listed corporations. The rules are part of the government's policy response to the economic implications of the COVID-19 pandemic for French strategic assets.
Liability Protections in Coronavirus Relief Legislation
July 27, 2020
The SAFE TO WORK Act, introduced on July 27, 2020, would provide relief to American businesses, educational institutions, nonprofit organizations and health care providers impacted by the COVID-19 pandemic. By moving coronavirus-related lawsuits into federal court and codifying what are viewed as common sense liability protections, the proposed legislation would limit the prospect of litigation while preserving the rights of injured individuals to pursue legitimate claims against grossly negligent defendants. This is the long-awaited Senate leadership liability protection proposal that Congress is expected to consider as part of the overall Phase 4 pandemic relief package.
This edition of Employment Flash summarizes key employment law issues related to COVID-19 as well as two seminal U.S. Supreme Court rulings that protect gay and transgender employees from discrimination, and clarify the standard for age discrimination suits against the federal government. We also discuss other labor and employment-related developments in the U.S. — including from the EEOC, DOL and NLRB — as well as in the U.K., France and Germany.
FDA Announces That Domestic Inspections Will Resume
July 13, 2020
On July 10, 2020, the FDA announced plans to resume domestic facility inspections after suspending most foreign and domestic inspections as a result of the COVID-19 pandemic. FDA-regulated domestic companies should prepare for the resumption of on-site inspections, while entities abroad should continue to follow good manufacturing practices in anticipation of an eventual resumption of foreign facility inspections.
In the second edition of our series of mailings on political law issues that take on greater importance during presidential elections, we examine what companies and individuals need to know to avoid violating campaign finance and pay-to-play laws when hosting virtual and in-person fundraisers in the lead-up to the election.
On June 23, 2020, the SEC's Division of Corporation Finance issued guidance on disclosures focusing on the impact of COVID-19 on operations, liquidity and capital resources. The SEC's chief accountant also issued a statement on the same day regarding significant accounting, auditing and financial reporting issues in connection with the pandemic.
On June 23, 2020, the Delaware General Assembly adopted amendments to the Delaware General Corporation Law to, among other things, address certain issues corporations have encountered during the COVID-19 pandemic.
Since the onset of the COVID-19 pandemic, European states have been implementing protections against opportunistic acquisitions of key local businesses by foreign buyers. Most recently, the U.K. announced amendments to the Enterprise Act that will allow the government to intervene when a U.K. business considered important to efforts to combat a public health emergency is the target of a takeover. The government's powers to intervene in mergers also will be increased in three sectors deemed important to national security — artificial intelligence, cryptographic authentication technology and advanced materials.
Updated Guide to the Main Street Lending Program
As of June 10, 2020
The Main Street lending program administered by the Federal Reserve will facilitate hundreds of billions of dollars of low-interest loans to a wide range of businesses in an effort to support the economy during the pandemic. This guide explains how the program will work, who is eligible, and the key restrictions and conditions that will apply to its participants.
The FDA has offered a temporary solution to the challenge of distributing drug samples during COVID-19. The new guidance, which allows drug samples to be shipped directly to patients’ homes and permits alternative forms of receipt and verification, is welcome news for manufacturers and authorized distributors.
During this time of increased economic uncertainty, the CFTC is providing regulatory flexibility with respect to initial margin rules and non-U.S. commodity pool operators.
On May 28, 2020, the Commission unanimously approved an interim final rule extending the Phase 5 compliance deadline for its initial margin requirements for uncleared swaps by one year to September 1, 2021, in response to the operational challenges for compliance caused by the COVID-19 pandemic.
The CFTC also unanimously approved a proposed rule allowing non-U.S. commodity pool operators to claim the “3.10 Exemption” from registration on a pool-by-pool basis with respect to commodity pools for non-U.S. investors and concurrently with other available relief from registration.
In light of the ongoing economic uncertainty, many companies are considering amending their credit agreements and other debt instruments, either to minimize the likelihood of breaching financial covenants or to rework payment schedules. However, companies should keep in mind that amending a debt instrument which is trading at a discount to par in the secondary market can result in cancellation of indebtedness income that is currently includible for tax purposes without any associated cash — even in situations where the principal amount of the debt remains unchanged.
Developers of renewable energy facilities that could experience construction delays due to the COVID-19 pandemic may receive important tax relief from the IRS’ recent relaxation of certain “begun construction” requirements. Learn more about how Notice 2020-41 may allow taxpayers to claim production and investment tax credits despite these delays.
On 20 May 2020, U.K. government proposed the Corporate Insolvency and Governance Bill, which features temporary measures to help businesses affected by the COVID-19 pandemic, as well as permanent reforms to the nation's restructuring law.
On May 3, 2020, Mayor Eric Garcetti signed into law two COVID-19-related ordinances regarding worker recall and retention rights. The ordinances apply to certain workers employed by or contracted to provide service to covered businesses, including airports, event centers, commercial properties and hotels operating in the city of Los Angeles.
The Takeover Panel has confirmed again in the Brigadier Acquisition Company/Moss Bros case how difficult it is for bidders to invoke material adverse change conditions and lapse offers in the UK. Potential suitors for UK public companies should stay alert to the significant hurdles they face in trying to walk away from an offer once they have made a firm intention announcement.
While Congress deliberates whether to further expand the Paycheck Protection Program or other small business initiatives, lenders may wish to assess their fair lending compliance management systems and consider fair lending testing for such programs, to satisfy regulatory expectations and mitigate risk. This article summarizes recent agency guidance regarding consumer compliance issues in connection with PPP loans, as well as the fair lending legal background, and identifies key matters to consider in these areas when making small business loans.
Enforcement Risks and the CARES Act
May 14, 2020
Businesses that receive assistance under the CARES Act may be subject to enhanced scrutiny of their actions, even if not directly related to CARES Act assistance. Veteran authorities are already reviewing use of the Paycheck Protection Program as well as the relevance of the False Claims Act, while new agencies, including the Pandemic Response Accountability Committee, the Congressional Oversight Commission, the Special Inspector General for Pandemic Response and the House Select Subcommittee on the Coronavirus Crisis, are beginning oversight measures. Congress, the DOJ, inspectors general, federal regulators, state authorities, private litigants and the media can all be expected to take a view on facets of CARES Act programs; and the regulatory enforcement investigations that could result may last after relief assistance is terminated. Both financial institutions involved in administering CARES Act programs and companies receiving program assistance should ensure that they have appropriate measures in place to maintain compliance with all applicable rules and regulations.
As Germany begins to relax the restrictions implemented in response to the COVID-19 pandemic, companies are preparing for employees who have been working from home to return to their offices. Managers and Directors should consider a range of legal and logistical issues in order to limit potential liability.
On 11 May 2020, the UK government published its COVID-19 recovery strategy and sector-by-sector guidance on returning to the workplace. In accordance with the government’s plan for exiting the lockdown, employees who can work from home should continue to do so; however, those who cannot work from home should “travel to work if their workplace is open.” With the risk of COVID-19 still present, employers must carefully consider how to adapt their workplaces and working practices to protect their employees as they plan to reopen. We consider the main employment law and other practical issues they should take into account.
Skadden partner Edward Micheletti, who heads the litigation practice of the firm’s Wilmington office, answers common Delaware law questions facing boards of directors during the COVID-19 crisis.
While Delaware’s “stay at home” order remains in place amid the COVID-19 pandemic, the Delaware Supreme Court and Court of Chancery are still operational and legal services providers may continue to conduct business. Corporate litigation pending in Delaware continues with relatively minimal interruptions.
On April 28, 2020, the French government, in conjunction with its plan to end the lockdown measures on May 11, 2020, announced rules for employers and employees to guide the return to workplaces, and on May 3, 2020, the French Ministry of Labor published a protocol to protect the health and safety of workers and will further produce approximately 60 sector-specific guides defining health directives to be implemented in workspaces. Required employer measures include documenting exposure risks, reducing employees' physical density both on-site and in transit, providing protective equipment and collaborating closely with works councils to design evolving practices.
In response to the COVID-19 pandemic, the French Minister of the Economy recently announced changes to foreign investment rules intended to protect French strategic assets. The measures include lowering the threshold that triggers French foreign investment control for investments by non-European foreign investors in certain French public companies. The minister also issued an administrative order that added biotechnology to the list of critical technologies subject to French foreign investment control.
Employers seeking to bring their employees back to the workplace in the wake of the COVID-19 pandemic now face a range of federal, state and local guidance and regulations. Companies and organizations should be mindful of the policies and procedures they need to follow to enable workplaces to be in compliance with these changes. The enclosed material provides a user-friendly guide to help employers tackle these challenges.
Compliance in a Time of Crisis
April 30, 2020
The COVID-19 pandemic has companies facing unprecedented financial and operational challenges. Many may consider shifting stretched resources and attention away from key units, including compliance. However, past crises illustrate the importance of maintaining an ethical culture and focusing on heightened areas of risk, because regulators seeking to protect the market, consumers and businesses from misconduct will expect more — not less — from companies in crisis.
On April 27, 2020, the Committee on Foreign Investment in the United States (CFIUS) issued an interim rule on filing fees. The interim rule makes filing fees effective on May 1, 2020, and follows CFIUS' March 2020 notice of proposed rulemaking regarding filing fees, largely maintaining the proposed rule, including its fee structure, which ranges from zero to $300,000, depending on the value of the transaction.
On April 13, 2020, the French government announced that the lockdown measures in force since March 16, 2020, will remain in effect until at least May 11, 2020. Correspondingly, the government expanded the budget for the state of emergency; specified further employer options to manage temporary layoffs and related tax, social security and sick leave provisions; and, despite recent trial delays, issued emergency order enforcement actions to protect the health and safety of warehouse employees.
This article focuses on employment law issues that German companies may face during the pandemic, specifically in respect of short-time work benefits, home office work, salary payments during work absences, vacation time and medical information regarding COVID-19.
In crises such as the COVID-19 pandemic, companies' management boards and directors are tasked with making significant, high-pressure decisions regarding the company's operations. In Germany, these decisions should be made while keeping certain aspects in mind, including the country's Business Judgment Rule, documentation requirements, potential additional safeguards and recent, pandemic-related legislative changes.
As the coronavirus pandemic impacts European companies, the EU and various national governments have begun to take steps to prevent foreign investors from taking advantage of the crisis to acquire companies of strategic importance. Acquirers should consider the possibility that governments will review and challenge acquisitions of companies they perceive to be strategic national assets, through such measures as foreign investment reviews, committee inquiries, state defensive stake-building or even nationalisation of vulnerable companies.
To mitigate the risks faced by French financial markets during the unprecedented disruption caused by the COVID-19 pandemic, the French Financial Markets Authority announced on April 15, 2020, that it will renew the ban on net short positions until May 18, 2020. Before selling any securities subject to the ban, investors must ensure that the quantity of securities sold does not create or increase a net short position.
As a consequence of the COVID-19 pandemic, civil litigation in many U.S. commercial centers has been disrupted, potentially creating a future backlog of matters, and new disputes are arising between commercial parties. In the circumstances, parties may want to consider entering into an arbitration submission agreement, which can be used after a dispute arises to have it resolved through arbitration — even if the parties had not previously contemplated arbitrating their disputes.
COVID-19: How To Prepare for Potential Future Disputes
April 15, 2020
As the COVID-19 pandemic continues to develop, guiding a business through this time of crisis means making decisions that gravely impact the company and its employees. With this in mind, companies should be aware of the methods and levels of record-keeping they will need in advance of a potential future litigation or arbitration dispute.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act into law. The CARES Act provides financial relief to businesses in the United States. While most of the aid is intended for U.S.-based businesses, U.S.-incorporated subsidiaries of foreign companies also appear to be eligible.
This article focuses on financing issues and opportunities for German companies during the coronavirus pandemic, specifically in respect of existing loans, new loans supported by KfW (the German state-owned development bank) and equity measures of the German Economic Stabilization Fund (Wirtschaftsstabilisierungsfonds).
The U.S. Securities and Exchange Commission has issued an order enabling business development companies that meet certain conditions to borrow under their existing credit agreements and issue new debt and preferred stock. The order also makes it easier for those companies and their affiliated private funds to make follow-on investments in portfolio companies. The temporary relief is available only through December 31, 2020.
The Federal Reserve has announced a series of emergency programs to provide more than $2.3 trillion of loans and financing to support the U.S. economy during the COVID-19 pandemic. These include the Main Street programs, which will provide Federal Reserve financing for direct, low-interest loans by banks to medium-sized business across industries. This guide summarizes the Federal Reserve's Main Street and other emergency lending programs, including their eligibility criteria, basic structures, key economic terms and important conditions associated with participation.
As the COVID-19 pandemic has impacted M&A activity around the world, sellers and buyers will need to assess the landscape for completing deals once the effects of the pandemic begin to subside, including analyzing how the process might change going forward given the altered business circumstances.
SEC Chairman Jay Clayton and Division of Corporation Finance Director William Hinman released a joint statement on April 8, 2020, emphasizing the importance of disclosing current and forward-looking financial information to investors and market participants during an uncertain earnings season resulting from the COVID-19 outbreak.
ISS, Rights Plans and the Impact of the COVID-19 Pandemic
April 10, 2020
This week, ISS acknowledged that in the current environment, implementing a rights plan can be an appropriate action to protect against the threat of opportunistic acquisitions. This acknowledgment provides useful guidance to companies considering a rights plan adoption in light of the risks posed by the pandemic and the resulting market dislocation.
NYSE Partial Waiver of Shareholder Approval Rules
April 10, 2020
On April 6, 2020, the New York Stock Exchange filed an immediately effective rule change with the Securities and Exchange Commission that waives the application of certain shareholder approval requirements through June 30, 2020. The change removes impediments to raising capital in private offerings and increases companies’ ability to access liquidity directly from a few significant investors for a limited time. The waivers temporarily align the NYSE’s and Nasdaq's shareholder approval exceptions for certain private financings and related party transactions.
Many countries around the world are being forced to watch as the only tool they have to suppress COVID-19 — social distancing — causes unprecedented damage to their economies. The UK and other countries are developing less economically damaging techniques, chiefly systems of testing and contact tracing, similar to those deployed in South Korea, Singapore and China. In this article, we discuss this technology and consider the data protection and cybersecurity concerns it may raise.
In response to coronavirus pandemic-related business challenges, the U.S. Securities and Exchange Commission has issued guidance and several exemptive orders to provide regulatory flexibility to registered open-end funds, registered closed-end funds, business development companies and unit investment trusts, as well as to market participants generally in a manner relevant to these types of funds. Such relief includes measures relating to board and shareholder meetings, delivery of prospectuses, proxy materials and shareholder reports, the timing of certain Investment Company Act and Exchange Act filings, and temporary interfund lending arrangements. Each measure is subject to specific conditions.
French companies’ annual general shareholders’ meetings season has begun, in the midst of the ongoing COVID-19 pandemic. Directors must take into account a wide range of recommendations, requests and regulations when determining whether, under the circumstances, distributions to shareholders are in the best interests of their companies.
Institutional Shareholder Services and Glass Lewis recently issued guidance regarding the impacts of the COVID-19 pandemic, which included several notable compensation-related points that compensation committees may want to consider as they navigate the challenges created by the current environment.
With the intention of mitigating the effects of the COVID-19 pandemic, the obligation of companies in Germany to file insolvency applications was suspended if the company is illiquid or over-indebted. The suspension applies until September 30, 2020, and may be extended until March 31, 2021, by the German Federal Ministry of Justice and Consumer Protection.
COVID-19: Russian Capital Markets Update
April 9, 2020
In response to the COVID-19 pandemic, the Russian government has taken steps to ensure the continued operation of securities markets, ease certain reporting and disclosure obligations, and simplify share buybacks by public companies.
Debt Repurchasing Considerations in an Uncertain Market
April 8, 2020
This mailing details the legal considerations for companies considering making debt repurchases during the COVID-19 pandemic.
COVID-19: Russia Introduces Bankruptcy Filing Moratorium
April 8, 2020
A moratorium on bankruptcy filings and certain security enforcement has been imposed by the Russian government for at least six months with respect to many categories of companies. During this period, the ability of creditors to enforce their existing rights will be restricted significantly.
The Federal Reserve has established a number of market stability and liquidity programs in response to the market upheaval caused by the coronavirus/COVID-19 pandemic. Many of the programs may be of interest to funds, both registered investment companies and private funds, and business development companies.
On April 6, 2020, the governor of Delaware issued an executive order addressing the notice requirement for public companies that switch their stockholders’ meetings from a physical location to a “virtual” meeting by means of remote communications, as a result of the public health threat caused by the COVID-19 pandemic.
Courts Rule on Financial Services Antitrust Suits
April 7, 2020
Even as courthouse activity has slowed due to COVID-19 social distancing efforts, federal courts in New York handed down significant decisions in four separate antitrust cases involving the financial services industry. These decisions address such recurring issues as standing, personal jurisdiction and the sufficiency of pleadings alleging violations of the Sherman Act.
State and Local Tax Considerations in Light of COVID-19
April 7, 2020
In conjunction with federal tax provisions included in the CARES Act and workplace changes as a result of COVID-19 stay-at-home directives, businesses should be aware of the ways individual states may choose to address a variety of concerns involving tax reporting for 2020.
As corporate boards of directors and management teams confront the daily challenges arising from the coronavirus/COVID-19 crisis, they also should be considering the issues that may come up in the near future, including the increased vulnerability of many public companies to shareholder activist campaigns or unsolicited takeover activity. History suggests that the risk of such actions increases following significant market dislocations, such as those caused by the ongoing pandemic. Therefore, it is particularly appropriate in the current environment to refresh preparedness planning.
The CARES Act authorized $349 billion for the Small Business Administration to guarantee loans under the Small Business Act. Importantly, the CARES Act amended the Small Business Act by creating the Paycheck Protection Program and provides for forgiveness of up to 100% of the full principal amount of the qualifying loans guaranteed under the program. Businesses considering applying for a loan under the new program should understand the eligibility, terms and other considerations of the Paycheck Protection Program before applying.
On March 27, 2020, Germany passed the act on Reducing the Impacts of the COVID-19 Pandemic on German Civil, Insolvency and Criminal Procedure Law, which includes temporary measures to ease the consequences of the pandemic on German corporations. Included in the law are provisions facilitating virtual general meetings for German stock corporations. Companies and directors should be aware of the requirements and practical considerations of doing so.
Given the economic and capital markets impacts resulting from the U.S. government’s response to the COVID-19 outbreak, it appears inevitable that many commercial mortgage REITs will need to develop strategies to modify their capital structures, finance their operations and engage with distressed borrowers. This client alert highlights key tax issues that commercial mortgage REITs should bear in mind as they develop those strategies.
COVID-19: Russia Update
April 3, 2020
In our first update on the impact of COVID‑19 in relation to the Russian market, we consider contract implications, changes to Russian corporate and securities laws, recent response measures adopted by the Russian government and general trends.
UK Directors COVID-19 Update
April 3, 2020
As directors of U.K. companies consider their options for confronting the challenges stemming from the coronavirus/COVID-19 pandemic, they should keep in mind the U.K. government's recent suspension of laws that could hold them personally liable for certain decisions if their companies enter an insolvency process. Nonetheless, given the heightened uncertainty and rapidly changing environment, directors should continue to take such precautions as maintaining a disciplined process of recording the reasons for key decisions.
The outbreak of coronavirus/COVID-19 has caused numerous companies and event organizers to postpone, reschedule or even cancel public events, including sporting events, concerts and conferences. We provide a summary of key principles and possible considerations in evaluating the host of commercial concerns raised by these postponements and cancellations, including whether performance may be excused under a force majeure provision or a common law doctrine, the extent of each party’s insurance coverage and whether the event organizer must provide refunds to ticket purchasers.
On March 28, 2020, the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) issued updated guidance for identifying the “Essential Critical Infrastructure Workforce,” which state and local governments may use in making decisions about how best to address the COVID-19 pandemic. The update incorporates significant input from other federal agencies, state and local governments, industry groups and the private sector to address particular COVID-19 needs and synchronize guidance with state priorities.
CARES Act Tax Considerations
April 2, 2020
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020, and included tax relief provisions intended to ease the financial burden on many companies affected by COVID-19. However, numerous issues remain unaddressed, and some issues that were included may benefit from future legislation or regulatory action.
In the rapidly changing global investment environment, the Committee on Foreign Investment in the United States remains fully operational. Although some COVID-19 delays are possible, CFIUS is, for now, maintaining its continued focus on China-related transactions and will likely increase scrutiny of health and pharmaceutical sector deals. Simultaneously, foreign direct investment controls are beginning to intensify in Europe, and certain pandemic-related economic responses by governments around the world may themselves implicate some of CFIUS' most recent reforms.
After initially invoking the Defense Production Act in response to the COVID-19 outbreak on March 18, 2020, President Donald Trump has now begun to formally deploy its authorities, including by ordering General Motors Co. to prioritize certain contracts for the production of ventilators. As the extent to which the government uses the DPA continues to evolve, so will the legal questions posed by those uses.
Impact of COVID-19 on White Collar Enforcement
March 31, 2020
The COVID-19 crisis will likely create disruptions in enforcement activity for the time being. However, there may be a post-crisis uptick in activity focused on how companies reacted to the market displacement caused by the virus. Companies should continue to focus on their compliance and governance processes, particularly in areas where COVID-19 may increase risk.
The French government, in response to its publication of the Emergency Bill To Combat the COVID-19 Crisis, further released three labor and employment-related ordinances on March 26, 2020, to protect French economic and social continuity. The temporary regulations allow companies in certain key business sectors to modify paid leave days as well as schedule additional working hours and adopt voluntary ones. The new rules also permit employers, regardless of their business sector, to access increased reimbursements when temporary layoffs are required.
In this series, “Critical Thinking in the Time of COVID-19,” Skadden’s European tax practice examines the next stage of analysis for corporates that have begun digesting the economic and legal impact of COVID-19 on their businesses. In this edition, our London-based tax team covers the area of UK tax litigation and enforcement.
In response to potential job losses as a result of the COVID-19 pandemic, the U.K. announced measures to help employers and employees receive financial assistance.
The COVID-19 pandemic may make complying with certain statutory or contractual deadlines materially or physically impossible. To address this situation, Ordinance No. 2020-306, which was passed by the French government on March 25, 2020, enacts a “moratorium” on such deadlines that would have otherwise expired between March 12, 2020, and one month after the end of the state of health emergency declared by the government.
The Coronavirus Aid, Relief and Economic Security Act, enacted on March 27, 2020, provides individual and corporate taxpayers with increased charitable contribution deductions for cash contributions made to most public charities during the 2020 calendar year. Most individuals can deduct an amount equal to their adjusted gross income, and the allowable deduction for corporations is more than doubled.
The CARES Act includes a variety of compensation restrictions and payroll relief measures for employers and employees. This mailing reviews and analyzes those provisions.
Merger Review Procedures Undergo Global Modifications
March 30, 2020
Competition authorities across the globe have adjusted timetables for merger review procedures in response to evolving working conditions resulting from the coronavirus pandemic. While the State Administration for Market Regulation of China has resumed a near-usual pace, the U.S. Department of Justice has requested that parties add 30 days to existing timing agreements, the European Commission has asked parties to postpone formal notifications, and the U.K. Competition and Markets Authority announced potential extensions of statutory calendars. Most authorities continue to accept merger filings, investigate deals and apply the same substantive analysis of transactions; however, parties should factor delays in merger review into deal timing.
French courts are closed for the unknown duration of the COVID-19 lockdown. Businesses facing immediate difficulties may still file for emergency or restructuring proceedings. Filings must be made electronically and hearings will be conducted remotely.
In this series, “Critical Thinking in the Time of COVID-19,” our European tax practice examines the next stage of analysis for corporates that have begun digesting the economic and legal impact of COVID-19 on their businesses. This edition covers the area of European fiscal state aid.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law on March 27, 2020. The economic stimulus package in the CARES Act includes federal funding for business stimulus across three broad categories: (i) grants and direct lending dedicated to specific sectors, such as airlines and national security businesses; (ii) expanded eligibility and payroll support for small businesses through programs administered by the Small Business Administration (SBA); and (iii) Treasury funding for several lending programs administered with the Federal Reserve. More than $450 billion of the allocated funds is directed toward this last category, which is the focus of this summary. The table below summarizes eight programs recently announced, expanded or expected by the Federal Reserve in response to the COVID-19 pandemic.
In light of the impact of COVID-19, the SEC has offered further conditional relief to public companies by extending due dates for filings that would have become due from March 1 to July 1, 2020. The SEC staff also issued related guidance on disclosure and other securities law obligations, as well as no-action relief regarding manual signature and document retention requirements.
On March 25, 2020, the French government adopted governmental ordinance No. 2020-321 adapting the rules regarding shareholders’ and board meetings to address concerns raised by the coronavirus pandemic. The ordinance implements several temporary measures to help ensure that listed companies are not paralyzed by the current lockdown.
As the coronavirus/COVID-19 pandemic continues to have major repercussions across the entertainment industry, companies are finding ways to navigate the storm. There is no single playbook for mitigating the impact of the crisis but rather a wide range of strategies and approaches for boards and management teams to consider.
On March 27, 2020, Congress approved the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to provide financial assistance to individuals and businesses, which in aggregate greatly exceeds the financial package Congress previously enacted to address the 2008 financial crisis. The act, which is the third major piece of bipartisan legislation to address the crisis created by the COVID-19 pandemic, includes approximately $2 trillion in assistance to individual and businesses. A total of $500 billion is authorized for direct loans and guarantees, of which $454 billion is provided to the Federal Reserve to support its lending facilities and $29 billion will be for direct lending to passenger and cargo air carriers. An additional $367 billion is available to assist small businesses through the Small Business Administration (SBA). In addition, the act contains a number of provisions aimed at granting temporary regulatory relief. Despite the enormity of the assistance provided by the CARES Act, additional financial assistance legislation is expected if the duration of the national emergency extends beyond a short period of time.
To protect businesses impacted by the coronavirus pandemic, the European Commission has issued new guidance on screening foreign investments in EU companies and a more lenient approach to state subsidies, while the U.K. and EU member states have likewise adopted measures to protect domestic industry from predatory foreign acquirers and to support it through subsidies. Additionally, relaxed antitrust rules will permit companies to explore new collaborations to manage shortages or joint procurement, but companies must ensure these efforts comply with safeguards preventing collusion and carefully assess any changes to distribution arrangements. Companies must also make sure loans, grants or tax relief fit within the EU revised temporary framework.
As the COVID-19 pandemic fosters increased market volatility and uncertainty, companies are facing novel issues and opportunities in the uncertain environment. This Q&A covers some of the questions companies are confronting.
In response to the COVID-19 outbreak, New York state has temporarily amended certain ethics laws, while a range of other jurisdictions have modified their reporting requirements.
As companies transition to a remote workforce in response to the coronavirus pandemic, they are exposed to new cyber vulnerabilities that cyber attackers are poised to exploit, including increased network access points, reliance on unsecured Wi-Fi networks, and use of unpatched virtual private networks and devices. Many companies have taken steps to secure these vulnerabilities, but companies also need to reassess their incident response plans and adapt them to the current environment.
Answers to AGM Questions Raised by the COVID-19 Pandemic
March 25, 2020
We answer some of the key questions being asked by U.K. public companies as they prepare for this year’s annual general meeting season while facing a number of unprecedented challenges caused by the COVID-19 pandemic.
March 24, 2020
Anticipating an economic slowdown following the recently announced lockdown, the French Parliament approved the Emergency Bill To Combat the COVID-19 Crisis, on March 22, 2020. The law seeks to help companies deal with the economic, financial and social consequences of the pandemic, with a particular focus on addressing and preventing the cessation of business activity and limiting its impact on employment. The law utilizes a broad approach, authorizing the government to take action via ordinances within three months of the law's publication.
As part of its response to support the flow of credit to consumers and businesses in the face of the COVID-19 pandemic, the Federal Reserve announced the establishment of the Term Asset-Backed Securities Loan Facility. The TALF makes government financing available to private investors to purchase consumer asset-backed securities. The new TALF is being built upon the framework of the original TALF program established in response to the financial crisis in 2008 and will make up to $100 billion of loans available in the form of nonrecourse, three-year loans fully secured by eligible ABS.
As many upstream and midstream companies grapple with the prospect of severe liquidity constraints due to the rapid deterioration of the commodity and debt capital markets, borrowers evaluating approaches to capital structure management should consider the current tax landscape before embarking on a plan, particularly if that plan involves transactions such as a debt modification, sale/leaseback transactions involving real estate investment trusts, joint ventures and volumetric production payments. Distressed companies will need to carefully consider the significant consequences outlined here as they reevaluate their capital structures.
Many companies are in the middle of compensation review season, with compensation levels and performance targets being determined and proxy disclosures being prepared in the midst of the COVID-19 crisis. Previously granted awards already may have been severely impacted by market conditions. During this time, there are a number of specific issues compensation committees should consider.
UK Announces COVID-19 Job Retention Scheme
March 23, 2020
In response to potential job losses as a result of the COVID-19 pandemic, the U.K. announced measures to help employers and employees receive financial assistance.
On March 18, 2020, the French government published a legislative package of emergency measures aimed at tackling the COVID-19 crisis. It is composed of:
- an Amending Finance Act for 2020, which includes a state guarantee of up to €300 billion to secure the repayment of loans made by banks between March 16, 2020, and December 31, 2020, which was voted into law today;
- a bill providing for certain emergency measures; and
- a bill extending the review period for priority preliminary rulings on the issue of constitutionality, which are being rushed through Parliament under an emergency procedure.
In addition, the government separately announced an array of measures aimed at helping taxpayers.
On March 18, 2020, President Trump announced his intention to invoke the Defense Production Act of 1950 in response to the coronavirus pandemic. The DPA grants the executive branch of the federal government broad authorities to enlist private companies to assist with meeting the demands of a national emergency, including by ordering companies to prioritize contracts and by incentivizing private production through loans and loan guarantees. It is not yet certain which of the statute’s authorities the president intends to use and how broadly he intends to use them amid the evolving uncertainties created by the outbreak.
Thoughts for Boards of Directors on the COVID-19 Crisis
March 20, 2020
The global COVID-19 pandemic will test the oversight skills of boards of directors of companies of every size in every industry. Boards should be engaging in a discussion with their management teams about a wide range of issues stemming from the outbreak, both financial and operational, including liquidity issues, employees, customer and supply chain threats and impacts, increased cybersecurity vulnerabilities, and activism and takeover preparedness.
REIT and RIC Cash Management Strategies for Uncertain Times
March 19, 2020
Despite developments in the equity capital markets stemming from the pandemic-related economic downturn, REITs and RICs looking to preserve liquidity still have a number of options available to them, including deferring quarterly distributions, satisfying distribution requirements with stock-based dividends, and pursuing various types of taxable and tax-deferred asset dispositions. Entities should consider that the IRS currently allows any publicly traded REIT or RIC to take advantage of certain of these cash management strategies without obtaining a private letter ruling.
On March 17, 2020, two CFTC divisions issued eight no-action letters outlining temporary and targeted relief for commission registrants facing compliance challenges in light of the COVID-19 virus outbreak.
March 18, 2020
The question is no longer whether the volatility created by the COVID-19 pandemic will deepen the difficulties businesses and other institutions face in the coming months, but by how much and in what ways. In the past few weeks, we have offered client mailings and webinars on COVID-19-related topics, and we will work to keep you informed of important developments as these issues evolve. Included below are updates to our recent commentary, with answers to questions we have been receiving.
This mailing offers guidance for entities interacting with federal, state and local officials in the context of the unprecedented governmental response to the COVID-19 crisis.
As COVID-19 continues to spread throughout France, the government has adopted lockdown measures limiting the movement of individuals throughout the country, as well as ordering the temporary closure of certain businesses. The government also has announced financial measures aimed at helping businesses cope with this unprecedented situation.
UK Employment Flash
March 17, 2020
In this edition of our UK Employment Flash, we examine tribunal rulings on whether covert recordings constitute misconduct and whether ethical veganism is a "philosophical belief." We also look at guidance for U.K. employers concerning the COVID-19 outbreak, employment issues arising from the use of artificial intelligence in recruiting and the U.K.'s updated IR35 tax regime.
COVID-19: FTC Implements Temporary HSR E-Filing System
March 13, 2020
As a result of developments relating to the COVID-19 coronavirus pandemic, the Premerger Notification Office (PNO) of the Federal Trade Commission has announced that it will implement a temporary e-filing system for Hart-Scott-Rodino (HSR) filings.
The SEC issued an order on March 4, 2020, that provides certain publicly traded companies with an additional 45 days to file certain disclosure reports that would otherwise have been due between March 1 and April 30, 2020.
March 4, 2020
As health organizations and governments around the world work to contain the coronavirus (COVID-19), businesses should be mindful of the various ways the virus may impact their operations and employees. The wide range of potential issues includes complications in transactions and contracts, incidents that trigger regulatory obligations, and personnel concerns stemming from illness or remote workforces, among many others. While we don’t yet know the full extent to which the coronavirus will impact us on a variety of levels, we offer the following considerations for those navigating coronavirus-related legal challenges.
As the spread of the coronavirus (COVID-19) impacts manufacturing and supply chains around the world, companies have begun to assert that the outbreak excuses nonperformance under commercial contracts. Companies that are affected by the coronavirus should undertake a review with their counsel of the rights and obligations under various agreements and applicable law, including with respect to notice requirements, the potential impact on other agreements, insurance coverage and disclosure.
On June 23, Skadden held a webinar titled “A Candid Conversation With Investors: Expectations for Executive Compensation During Uncertain Times,” in which representatives from Institutional Shareholder Services (ISS), Glass Lewis and BlackRock joined Skadden attorneys to discuss appropriate and timely responses for handling compensation challenges during the pandemic, as well as market trends and best practices for addressing the crisis with creativity and flexibility.
On May 28, Skadden held a webinar titled “Safe Harbors: Potential Federal and State Protections Against COVID-19 Litigation.” Topics included possible statutory and regulatory safe harbors against exposure claims, protections against product liability claims and measures that could discourage meritless filings. Skadden participants included mass torts, insurance and consumer litigation head John Beisner, co-deputy securities litigation head Susan Saltzstein, and partners Jessica Miller and Geoffrey Wyatt.
Litigation, Exposure and Insurance During the COVID-19 Pandemic On May 18, Skadden and Marsh held a webinar titled “Litigation, Exposure and Insurance During the COVID-19 Pandemic,” focusing on litigation trends stemming from the pandemic, insurance-related issues that may arise from these claims and strategies for advocating through these issues to maximize coverage. Panelists included Skadden litigation partners Marcie Lape and Amy Van Gelder, as well as Machua Millet, chief innovation officer, financial and professional liability, at Marsh.
On April 29, Skadden held “Electronic Discovery and Technology Challenges During the COVID-19 Pandemic,” a webinar focused on several unique discovery and technology challenges that have emerged as the COVID-19 pandemic continues to disrupt the conduct of litigation. Speakers from Skadden’s E-Discovery Committee discussed managing deadlines and expectations in the current climate; court experiences during the pandemic; the future of video depositions, witness interviews and trials; working with e-discovery vendors; and legal technology tips. Speakers included partners Richard Bernardo and Peter Morrison, counsel Robin Shah, discovery counsel Patricia McNulty and assistant director Steven Shankroff.
Preparing Securities Disclosures During the COVID-19 Crisis
April 16, 2020
On April 16, Skadden held a webinar, “Preparing Securities Disclosures During the COVID-19 Crisis,” addressing a range of topics on preparing for adjustments related to reporting obligations amid the COVID-19 pandemic and answering some of the most frequently asked questions about the potential reporting implications of the coronavirus. The discussion included, as moderator, Skadden partner Brian Breheny and, as panelists, Skadden partners Laura Kaufmann Belkhayat and Colleen Mahoney and Ernst & Young partner Steven Jacobs.
On April 1, Skadden presented “Special Political Law Considerations When Interacting With Government Officials Regarding COVID-19,” a webinar focused on the importance of complying with the numerous rules that regulate interactions with public officials and other issues arising out of the COVID-19 crisis. Speakers included partner Ki Hong and counsel Charles Ricciardelli and Tyler Rosen.
On March 31, Skadden presented a special COVID-19 edition of “This Month in Intellectual Property,” our monthly webinar for IP practitioners and in-house counsel. The webinar focused on the status of IP court and administrative proceedings in light of the outbreak, the disease’s impact on licensing and other IP agreements, issues concerning the virus itself and patenting of COVID-19 treatments, and guidelines for employers on protecting their trade secrets. Speakers included partners Anthony Dreyer, Douglas Nemec and Anthony Sammi and associate Leslie Demers.
CARES Act: Governmental Relief Programs for Businesses
March 30, 2020
On March 30, Skadden presented “CARES Act: Governmental Relief Programs for Businesses,” a webinar on the series of lending programs that are a central component of the Coronavirus Aid, Relief and Economic Security Act. Speakers included partners John Beisner, Jamie Boucher, Brian Christiansen, Seth Jacobson and Eric Sensenbrenner.
COVID-19: The Mass Torts and Consumer Class Action Horizon
March 27, 2020
On March 27, Skadden presented “COVID-19: The Mass Torts and Consumer Class Action Horizon,” a webinar on the threat of tort- or statute-based lawsuits in the coming months and years as the impact of the coronavirus expands. Topics included personal injury litigation, class actions alleging economic loss, and emerging legislative and regulatory developments that could help limit liability for companies whose businesses have been disrupted by the pandemic or that are responding to the spread of COVID-19. Speakers included partners John Beisner, Allison Brown, William McConagha, Jessica Miller and Geoffrey Wyatt.
COVID-19: Assessing Services and Outsourcing Agreements
March 26, 2020
On March 26, Skadden presented “COVID-19: Assessing Services and Outsourcing Agreements,” a webinar on assessing rights and obligations under commercial contracts, including services and outsourcing agreements, during the COVID-19 pandemic. The webinar covered unique issues stemming from the pandemic regarding contract interpretation and implementation. Speakers included intellectual property and technology co-head Stuart Levi, partner Jose Esteves, and counsel Ken Kumayama and James Talbot.
On March 23, Skadden presented a webinar titled “COVID-19: Assessing Decisions on Performance and Exposure in Commercial Agreements and Credit Facilities.” The program focused on the factors companies must consider regarding their and their counterparties’ performance under many different types of agreements as the COVID-19 virus continues to affect the world. Speakers included Skadden partners Julie Bédard, John Beisner, Seth Jacobson and Scott Musoff, as well as Deloitte partners Kirk Blair and Bryan Foster.
COVID-19: Employment and Cybersecurity Considerations
March 17, 2020
On March 17, Skadden held a webinar, “COVID-19: Employment and Cybersecurity Considerations,” on the employment- and cybersecurity-related issues that companies may encounter as the coronavirus increasingly impacts the workforce. Topics included cybersecurity risk, remote work and impact on compensation programs in the current climate. Speakers included partners William Ridgway, Erica Schohn and David Schwartz, of counsel Helena Derbyshire and associate Anne Villanueva.
The Impact of COVID-19 on Mergers & Acquisitions
March 12, 2020
On March 12, Skadden held a webinar, “The Impact of COVID-19 on Mergers & Acquisitions,” on the challenges that could arise in mergers and acquisitions amid the economic uncertainty in the wake of the coronavirus’ spread. Speakers included partners Alexandra McCormack, Sonia Nijjar and Paul Schnell.