The consequences of the virus that has the world in its grip are becoming increasingly clear. The coronavirus is creating a more than extraordinary situation. The pressure on healthcare has increased unprecedentedly and it is all hands on deck to prevent healthcare from collapsing, as Prime Minister Rutte confirmed in his speech.
Social life has come to a standstill. Schools are closed, the hospitality industry and restaurants are closed. For entrepreneurs, extremely uncertain and more than challenging times. Below we provide some points of attention that one may encounter as a director of a company.
I foresee that I will not be able to meet my contractual obligations, or I foresee that my customers will not be able to meet their obligations. What are the options?
Communication is of the utmost importance. Consult with important creditors (we call them the bank, the landlord, important suppliers, etc.) and discuss the possibilities. The same applies to important debtors. In the same way that the tax authorities offer possibilities, parties can investigate whether there are possibilities to make partial payments, extend payment terms, temporarily restructure the service provision so that payment is still possible, etc. No one is waiting for such agreements, but the economic and now also the legal reality is that there are few or no alternatives. The courts are closed until April 6 at the latest, except for really urgent cases. A “quick win” via the courts is not in the cards for anyone.
It may also be advisable to investigate current agreements of the company (subscriptions, services, etc.) and assess whether these can be terminated, or at least modified. Every little bit can help to get through this time.
In legal terms, you see many publications on the internet about the question of whether this exceptional situation qualifies as force majeure and/or may even provide a basis for changing the agreement (unforeseen circumstances). Force majeure has the advantage (or disadvantage, depending on how you look at it) that no performance can be demanded and that there is no right to compensation. The content of the contract may provide a handle for answering the question of what the parties meant by force majeure. If the contract does not provide an answer, the law may provide a solution (the non-performance must not be attributable to fault, nor at the debtor's risk). In our opinion, such a legal analysis is step 2; the first step should be: consultation. It is more important to keep the long-term relationship in mind, and to keep it under control yourself, than to legalize the case. If legal assistance really cannot be avoided, we are of course ready to help you.
And once agreements have been made, it is also important to put the agreements down on paper so that discussions about the adjustments are avoided as much as possible.
I foresee that I will not be able to meet my tax and/or pension obligations. What are my obligations?
Report payment inability to the tax authorities immediately. The same applies to pension premiums: report payment inability to the pension provider / pension fund in good time. Please note that if this is not done or done too late, the failure to report can be grounds for directors' liability.
The tax authorities have taken measures for deferral of payment for taxes and amendment of provisional assessments. See the website of the tax authorities for a broader explanation and possibilities. The government says it is thinking more broadly about stimulus measures, so new support measures for entrepreneurs may follow in the coming days.
What should I pay attention to in order to avoid directors' liability as much as possible?
Entering into new obligations in the knowledge that those obligations cannot be met can be a basis for directors' liability. Making selective payments (to a large and important creditor, or to private individuals) in the knowledge that the company is in dire straits can also be grounds for directors' liability.
Directors' liability is however a fine-meshed legal concept. On the one hand, as a director you have the freedom to undertake and take risks, on the other hand, this cannot go so far that the interests of third parties (creditors) are compromised. More generally, the standard applies that a director must act as a reasonable and experienced director would act in the given circumstances.
In addition to directors' liability, we point out the withdrawal of assets from the company with the result that creditors are being harmed. It is sometimes attractive to shift money from one company to another, or to private, with the best intentions, but this can result in creditors being left empty-handed. Creditors can take legal action against this.
To end on a positive note. As a manager, you can of course also make a positive difference. Know what is not possible and allowed, but ultimately focus on what is possible and be creative.
What measures can I take towards my staff?
I would like to refer to the communication of our office about employment law (im)possibilities. Please feel free to contact us via Corona-laborsrecht@fhi.nl
Finally
We hope that all members will emerge from this situation unscathed. It is now clear that they will suffer. Let us investigate, certainly within a trade association such as the FHI, to support each other, to continue to seek solutions and to emerge stronger from this.
During the financial crisis, the situation seemed hopeless for a while, but there too there was light at the end of the tunnel. Exceptional measures were taken then too, aimed at the long term. I know of an example of a company where unpaid leave was prescribed for everyone within the company: from the board to the cleaning staff. Everything was done to prevent forced redundancies. Although unexpected, the measure created solidarity and support within the company. After all, the first step of the board was not to polish up the balance sheet, but to share the pain. The desired savings were achieved. And as a “by-catch” a barter of unpaid leave arose for those who could not actually afford it. Those who could afford it, took longer leave. In this way, you can emerge stronger from a crisis together, as a company and as a person.
We wish everyone strength and wisdom in these uncertain days. If you would like to discuss topics mentioned in this newsletter, please contact: Corona-commercieel@fhi.nl.
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