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.
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.
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.
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 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.