As the world grapples with the new reality of the COVID-19 pandemic and make important adjustments to their everyday movements and actions, businesses with global interests must also act to mitigate risks to their operations.
Indeed, the crisis has potentially far reaching implications on legal compliance, taxes, corporate governance and, most importantly, employee health and safety.
This article explores critical compliance considerations for U.S. businesses with global interests during the COVID-19 crisis.
Staying on top of ongoing compliance tasks
Due to the evolving dynamic of this pandemic, it’s critical that global businesses stay informed of changing guidelines issued by official local authorities. Businesses should establish a streamlined communication channel to ensure they receive compliance updates from local jurisdictions in a timely fashion.
To minimize potential exposure to liabilities, now is also the time to review all legal obligations in each jurisdiction and consider potential compliance tasks that may be impacted, such as tax filing requirements. In Canada, the government is deferring tax payments until August 31, 2020 to free up business cash flow. Meanwhile, in the Netherlands, tax authorities have passed sweeping actions to help businesses including deferring tax payments, reducing interest on taxes due, and more.
Due to social distancing guidelines, businesses will also need to make compromises as they seek to meet their annual meeting compliance requirements. Are virtual meetings an option? If members are sick, can they be excluded? The answer may vary by jurisdiction. In some jurisdictions, annual meetings for corporations are optional and can be completed via a resolution signed by all members or directors. Others allow virtual meetings and conference calls. Stricter jurisdictions, however, require that one-third of attendees are in the same place or, in the case of Thailand, that all directors are physically present.
Finally, businesses should consider what information they should be reporting to state and federal authorities at this time such as member and director changes, updated registered agent contacts, and so on.
On a positive note, businesses with Chinese interests can benefit from shortened timelines for business license approvals. These are being enacted by local governments to support foreign investment and improve business confidence.
Ensuring corporate governance
Even during times of uncertainty, it’s critical that legal counsels keep the board informed and ensures it satisfies its fiduciary duties. To safeguard continuity of business, succession plans should also be put in place for every board member and director in each locality should they fall ill. Companies may also want to consider using directorship services from providers.
Keeping employees safe and healthy at this time is also crucial. Policies must be put in place to handle absences and ensure a safe environment for workers. As more businesses allow employees to work remotely, technology and collaboration tools can help minimize disruption and maintain operations and communication. For employees who can’t work remotely, companies may wish to review their policies in order to offer protections such as sick leave.
Because government labor policies are changing rapidly, companies must understand how these laws impact their global business compliance standing. In Spain, the government has implemented a Royal-Decree-Law that includes employment measures for companies affected by COVID-19. These include exemptions for employer social security contributions, remote working recommendations, rights for employees who care for ill family members, a reduction in working hours, and actions to preserve employment.
Transaction considerations and disclosures
Legal counsels who handle global transactions for their clients, such as M&As, should consider the impact of the pandemic on due diligence conducted on upcoming deals. Is the impact of the crisis on a company a “known trend or uncertainty” that requires disclosure? Is the timing of a deal completion beneficial?
Due diligence review requirements may also change as a result of the outbreak. To assess the impact and ensure potential liabilities are discovered, counsels should check what documents will be required to address those concerns and if any delays in obtaining those documents could impact the assessment process.
The COVID-19 pandemic has forced businesses and governments to move quickly to contain the impact. It’s a fluid situation and rife with uncertainty. Rather than navigate these challenging times alone, legal counsels and law firms can benefit from a trusted provider who can provide market-specific insights and guidance to help mitigate the impacts of an unprecedented crisis like this one.
To learn more about how CT can help you navigate your compliance needs during and after the COVID-19 pandemic, contact a CT representative at (844) 322-6993 (toll-free U.S.).