The recent outbreak of the novel coronavirus has caused disruption across the world. Containment measures, including lockdowns of cities, extensions of public holidays, closures of public services (e.g. courts), cancellation of events, unprecedented “work from home” arrangements, international travel restrictions and quarantine measures are having worldwide impacts.

Businesses and their legal teams will be directly affected by challenges presented by the outbreak. This is particularly the case for companies operating in, dependent on supply chains in, or having close trading links with China or other affected countries. We have highlighted some issues that Boards and General Counsel should be aware of.

To read about what Linklaters is doing to manage the impact of Covid-19, click here.

A checklist of issues to consider

  1. Crisis management: review existing policies and ensure key employees and management are familiar with them. Who has authority to make immediate decisions with respect to the crisis? Develop a consistent and effective communication plan.
  2. Employment issues: employers generally owe a duty to ensure that reasonable care is taken to safeguard the health and safety of employees at work. Review and assess what changes may be necessary or appropriate for your HR policies, such as absenteeism, leave, flexible work and overseas travel.
  3. Business continuity: are you prepared for the possible implications on the business of travel restrictions and quarantines? How will you keep the business operating on skeleton staff, or will you have to shut up shop? For example, businesses in the retail and hospitality industries may be particularly affected by a lack of customers and staff in the event of widespread quarantine arrangements.
  4. Dispute resolution: any event that leads to public disruption can be a fertile breeding ground for disputes to arise. Consider carefully commercial contract terms, including force majeure and notice requirements, and be alert to inadvertently agreeing to a contractual variation/waiver.
  5. Communication is key: clear communications will be needed with key stakeholders as to the impact of the spread of coronavirus on the business. Investors, customers, suppliers, and staff will all need to be informed about how the business is dealing with the issue and what it means for them.
  6. Listed companies need to bear in mind disclosure obligations: a material disruption to the company’s business; material impairment of business performance or outlook; a material change in the company’s business plan; or a pending transaction likely to be cancelled or delayed as a result of the outbreak might all necessitate an announcement.
  7. Financial reporting: companies need to consider whether to refer to the possible impact of COVID-19 on their business in their reporting of principal risks and uncertainties, and, potentially, in the carrying value of assets and liabilities and should ensure that they provide up-to-date and meaningful disclosure. The Stock Exchange of Hong Kong has issued guidance for companies due to publish their results in March 2020 and US regulators have urged issuers to consider their audit processes in the light of disruption which may limit access to information or personnel.
  8. Capital markets and loan financing: issuers or underwriters working on international offerings may need to consider the impact on: diligence and disclosure, consents, approvals, termination and settlement dates.
  9. Financial regulatory: the Securities and Futures Commission and the Hong Kong Monetary Authority have previously issued guidance on business continuity planning where there has been a serious communicable disease. This guidance covers issues such as delays to “business as usual”, treating customers fairly, notification obligations, record-keeping requirements and keeping senior management updated.