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Navigating Legal issues in response to COVID-19: What's next?

In the context of the COVID-19 outbreak, many organisations are facing unprecedented corporate challenges which they have to respond to rapidly to ensure business continuity. We have identified a number of topics that you need to consider:

Corporate Governance & Insolvency risks

The Board of directors can be held personally liable for a company’s inability to pay its debts and its consequential dissolution and winding up: 

  • Have you undergone a board evaluation process for the purpose of monitoring how the crisis is being handled? 
  • Have you gone over your business continuity and disaster recovery plans and determined whether any processes should be implemented or revised? 
  • Have you thought about reviewing the company’s overall organisation design to determine whether any transformation needs to take place, possibly to make the organisation more cost effective?
  • Have you considered whether and how restructuring your business may help sustain it?

Real Estate

The COVID-19 pandemic has led to a sudden need for deferrals or cancellation of obligations (including rental payments) without leaving much time for conclusive discussions between landlords and tenants and vendors and purchasers:

  • Have you considered negotiating and formalising the terms and payment schemes which will regulate the repayment of deferred rent?
  • Have you considered drafting provisions which cater for the (likely) occurrence of similar circumstances in the course of time to include in future lease or purchase agreements?
  • Have you considered reviewing lease or purchase agreements currently in force to include essential provisions?
  • Are you aware of government incentives and subsidies which could be applicable to your business? 
Real Estate

Employment

Employers have been pushed to resort to extreme measures to save their business such as redundancies and changes in employment terms and conditions.

  • Redundancies - Are collective redundancies or reduced salaries a factor to be considered?  Have you assessed whether the back-to-work measures implemented  in the last weeks are adequate for the longer term? Have you set your hiring policies in line with any measures you have already taken?
  • Health and Safety - have you taken into account the health and safety measures which may need to be implemented at work or taken into account in case of home-working in the event of a longer term second wave?
  • Conditions of work - have you contemplated the required steps in order to alter or revert back to your employees’ original conditions of work and what this may mean for your organisation?
  • Have you considered what other options may be available to re-establish your business without having to resort to drastic measures which may have anegative impact on your business relationships in the long term? Is your business suitably protected in case employees are working or will continue to work remotely? 
Real Estate

Data Protection 

Many businesses have reacted by transferring most of their activity online.

  • Have you considered what weaknesses result from such transition? Does your business continuity plan cater for an increase in security threats? Is it enough to sustain secure online services? Are you aware of the material fines applicable?
  • Have you considered what may be required to up-keep any of the measures introduced during the initial stages of the COVID-19 pandemic?
  • Although remote working may have been a very recent new normal for many businesses, it may not necessarily end with COVID-19. Have you considered what measures may be needed to sustain safe and secure remote working, even if partial? Have you considered re-visiting your incident response plan now that due to remote working, business communications are at their most vulnerable?
Real Estate

Deals and contracts

The current situation has brought about uncertainty, which has led to delay in performance of contractual obligations. 

  • Parties who due to unforeseen circumstances were unable to carry out their contractual obligations might now be in a position do so, but the delay may have resulted in defaulting on those obligations and other implications. Have you considered reviewing, negotiating or updating the terms of agreements in order to safeguard the performance of any obligation or to be granted contractual protection for failing to carry out an obligation which had been delayed through force majeure clauses or otherwise?
  • The pandemic and its adverse implications might have also rendered the carrying on of a particular obligation impossible or subject to severe implications. Have you considered looking into possible adjustments and negotiations?
Real Estate

The impact on Market Abuse Regulation (MAR) obligations 

Disclosure obligations have become stricter and issuers must disclose any knowledge of a significant impact on their business, performance or prospects due to COVID-19. 

  • Are your teams aware of these requirements and have you contemplated whether you are equipped to adhere to them?
Real Estate

Key corporate tax issues relating to the Impact of COVID-19

Employees are working outside their normal territories, which could lead to a taxable presence risk. Board meetings held electronically may cause a tax residence risk, exposing entities to significant income tax liabilities and potential exit taxation. Projects are also taking longer than expected which might trigger withholding tax obligations:

  • Are these new behaviours in line with what is written in your statutory documents (e.g. in the Articles of Association)?
  • Have you considered whether any of the measures implemented by your business lead to tax implications and how to address them? Are you familiar with the work the OECD has done on the COVID-19 implications for the interpretation of Tax Treaties and how this can help you?
  • Tax issues may persist even if COVID-19 measures start to become less stringent (e.g. any tax losses that you may be generating). Have you considered your strategy for the long term?
  • Is Transfer Pricing a reality for your business? Have you reviewed your intra-group pricing to cater for the COVID-19 disruption?
  • Are you paying non-residents for goods or services? Have you considered whether you need to withhold tax from such payments (default in which would involve substantial penalties)?
Real Estate

Contact us

Neville Gatt

Neville Gatt

Head of Tax, PwC Malta

Tel: +356 2564 6791

Mark Lautier

Mark Lautier

Partner, PwC Malta

Tel: +356 2564 6744

David Ferry

David Ferry

Tax Partner, PwC Malta

Tel: +356 2564 6897

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