The COVID-19 pandemic has affected business activities across practically the entire world, in a way that is directly proportional to these activities, with a greater impact upon closely-packed communities accustomed to greater interaction. Most countries’ governments have restricted—or completely halted—non-essential activities for a while.
As a result, the economy has seen such a significant slowdown that we cannot be completely sure of its ability to recover. The conditions under which this economic paralysis has evolved, when added to the extraordinary measures implemented in the fight against the pandemic, bodes for an exhausted world when we eventually return to normality.
Governments are preparing to scale back these measures as soon as possible, even at the risk of possible new outbreaks, so as to reduce the time taken to return to normality. Let us hope that this is possible and that they are going about things the right way.
In any case, this period might have been very hard on businesses, particularly small businesses, and any return to normality will be slow and complicated.
As soon as we return to business (more or less) as usual, those that have not already done so will have to gauge the magnitude of the tragedy: in other words, before they do anything else, work out what they can salvage; then decide what cannot be saved.
The above will also depend on market conditions and whether consumers — the end users of product or services — may initially be limited to purchasing products classified as “essential” while “non-essential” retail stores and businesses remain closed. The fact is that, over the course of this period, there has been a surge in online purchasing, a change that is, to a great extent, here to stay. So, there will be a need to adapt, support and help the retail trade in shifting a substantial part of its business online.
When speaking of “businesses”, we should not forget individual entrepreneurs and business professionals, who, under these circumstances, are likely to have suffered even more than companies.
All types of businesses will have to analyse which of their contractual obligations – entered into prior to the pandemic and the subsequent paralysis of their business activities – they can fulfil and which they cannot. They will need to evaluate whether, in the case of the latter, the concept of force majeure may be applicable, and/or whether advantage can be taken of the rules of rebus sic stantibus (when an agreement becomes void due to a completely unforeseeable change of circumstances), in order to avoid liability. Businesses may need to adapt these contractual obligations, as far as possible, in line with the new situation.¡
Turning to what is not salvageable, this period will, unfortunately but inevitably, be very difficult for many businesses. It will be necessary to analyse whether, on returning to their business activities, they will be able to continue with their workforce to the extent they were accustomed to prior to the pandemic, or whether there will be a need to downsize staff numbers.
We will need to think long and hard about how to turn things around and implement measures such as refinancing agreements, or entering specific agreements with creditors, which are always better for all parties concerned than insolvency proceedings.
Unfortunately, we can expect a flood of bankruptcies. We are living in extraordinary times, and the solutions also need to be extraordinary, and I think that it is fair to expect that everyone involved will play their part: we cannot spend months proclaiming we all need to pull together to overcome the problem to then abandon our suppliers and customers to their fate. At least, this shouldn’t happen and, as I have said above, it would not do anyone any good.
We will have to learn to live on the basis of greater solidarity, giving more to and relying more on others—and demanding a little less from life. There will be a need for mutual support. It will not do anyone any good to slam doors shut: the key to any recovery will lie in our ability to reach agreements with fellow-businesses and with financial institutions to turn things around, in combination with operational restructuring measures.
To this end, we really believe that our network of professionals is ideally placed to provide the help required to successfully tackle this phase: ILT is made up of lawyers’ firms used to working hand-in-hand to provide coordinated, constructive business advice on an international level.
Please do not hesitate to contact anyone of us. We will be delighted to be of assistance.