Guest Blog: COVID-19 Lessons Learned!
Covid 19- Lessons learned!
Covid-19 has thrown up many unusual, complicated and unprecedented legal issues!
From what I have seen, Covid-19 has had a huge negative impact on businesses. But being the optimist that I am, I am hoping that the business community can use these lessons to review their practices and put certain safeguards in place in the event of another “un-precedented” event.
Here are my top six tips and recommendations which are largely based on my recent professional experience:
Now is the time for your business to review governance practices and documents. That includes reviewing or preparing a constitution in the light of Covid-19. Consideration needs to be given to the form of annual general meetings, voting, and the use of electronic signatures.
The recently passed Covid-19 Response (Further Management Measures) Act 2020 (“the Act”) only provides temporary relief to allow an entity that is affected by Covid-19 to use electronic means of doing things if its rules or constitution do not allow for that.
The Act will allow your business to modify its rules/constitution. This includes the calling for meetings/processes at meetings, method/form of voting and others. However be aware that, if you take advantage of such modifications, certain conditions are imposed on entities (i.e. resolutions to be passed, notifying the companies register etc.), and the timeframe within which you can take advantage of such a modification is currently only available until 30 November 2020 (unless extended further).
2. Existing Contracts
Review all your contracts and agreements. Consider from a financial cash flow perspective if your business will benefit from having short term arrangements with suppliers with a right to renew. While you are at it, check the other party’s ability to exit the contract so that there are no surprises.
Consider the value of negotiating into your existing contracts, detailed and exhaustive “no fault” termination and/or force majeure/Act of God provisions (if there are none in the contracts already) and make sure to have those provisions in future contracts. It is best to engage your lawyer to advise you on these.
Aside from the above, there is a common law doctrine of frustration, which may allow parties to be released from their contracts. The courts generally apply a high threshold in those instances, so an event must have such an effect that the performance of the contract is either impossible or radically different.
3. Health and Safety
Under the Health and Safety at Work Act 2015 (HSWA), you, as a business, must take reasonable care of the health and safety of your staff/ other persons in the workplace.
For outbreaks like Covid-19, you must minimise the risk of the spread of the disease in the workplace. Equally, you must tell your staff to look after their own health (i.e. use of hand sanitizer, directives to wash hands etc).
If staff are working remotely then you must address workplace health and safety risks related to working from home.
Remember, ongoing communication with staff is also key together with the provision of information from authorities and regulators.
You must have stringent health and safety policies in place to help guide your business through such situations.
You need to understand your employees’ leave entitlements under the Holidays Act 2003.
You should review your current employment agreement templates going forward in light of Covid-19. For example, redundancy clauses are key. Covid-19 has caused cash flow constraints on businesses. If your employment agreement requires a redundancy payment to be made, consider deleting this (as redundancy compensation is not required by law).
One of the most important things to remember when dealing with HR/Employment matters, is that process is key.
Revisit your insurance policy and understand what it covers. Check whether you are covered in the event of a pandemic and the extent of your cover. Update your insurance if necessary.
Make sure your business interruption insurance is exhaustive and includes cover of loss of rents, redundancy payments, payroll, wages, and redundancy payments, reinstating records, gross profit, additional costs of working and claim preparation costs.
If exhaustive insurance is not available, then, if possible, think about setting up a contingency fund for a “rainy day”.
If you are leasing premises for the purposes of running your business, check that your lease is on the latest ADLS form or negotiate with your landlord for the lease to be updated.
The recent ADLS form incorporates a “No Access during Emergencies” provision. This clause allows for a fair portion of abatement of rental and outgoings in certain instances such as not being able to access premises (i.e. lockdown). If you wish to activate that provision discuss this with your landlord to agree what a fair portion is in the circumstances. Do not just stop paying rent and outgoings unilaterally- this will constitute a breach of lease.
To provide you and the landlord the most certainty, discuss with the landlord drafting in a provisions that provides for clear machinery in such circumstances and/or an agreed fair portion abated during that time.
The above are only some of the considerations for you to be aware of. Completely futureproofing your businesses is impossible because we don’t know what can potentially happen. But you can take steps to try to mitigate some fallout, and learn from your experiences.
About the Author
Dasha Kovalenko-Gormack, is an Associate at Shieff Angland (a firm specialising in commercial law, property and litigation) https://www.shieffangland.co.nz/
If you need any legal advice on the above matters, feel free to contact Dasha via the enquiry form below and her colleagues will be happy to assist you. This article gives a general overview of the topics covered and is not intended to upon as legal advice.
Posted: Thursday 11 June 2020