Law firm advisors and corporate counsel continue to face significant legal challenges in the wake of the novel coronavirus (COVID-19). Complex rules, regulations and legislation have hit the industry left, right and centre.
Amidst the chaos, how are we to keep up? Subject matter experts examined such issues in a recent Thomson Reuters webinar, Practical Solutions to COVID-19 Legal Challenges. Areas of discussion include corporate governance, supply chains and contracts, as well as ensuring business continuity. In-house professionals can also tune in to hear tips on maintaining cyber risk awareness and other considerations top of mind for General Counsel at this time.
6 COVID-19 legal challenges to consider
1. Managing the supply chain
Michael Milnes is Head of Competition and Consumer Protection – Practical Law and Principal Lawyer at Supplied Legal. Since the COVID-19 outbreak, Michael has been following developments in the supply chain with great interest. He shared the observation that the impact on supply chains was one of the earliest issues for business to contend with.
“Initially, when the virus was still contained within China, we had manufacturing facilities closing and then travel restrictions kicking in. And then very quickly, we’ve had a ramp up of restrictions happening around the world – different speeds for markets – making it very difficult to keep up with where those restrictions were,” he said.
Other implications for supply chain and demand patterns, according to Michael, have included the behavioural pattern of ‘panic buying’. In the mix are countries acting in their own interests, in order to secure the goods and services they need to adapt to the virus.
“COVID-19 has the whole world thinking about supply chains and risk. It is staggering to think that so much has changed within this short period of time“– Michael Milnes, Head of Competition and Consumer Protection – Practical Law and Principal Lawyer at Supplied Legal
Suppliers examining their contracts are looking for ways to fulfil their obligations or recoup their losses. This might involve examining whether they can claim ‘frustration’ or assert ‘force majeure’ in relation to the contract.
Among those attending this particular webinar, 20% of poll respondents said that their clients, or their company has declared ‘force majeure’ on any of their contracts due to COVID-19. Listen in on the webinar for a rundown on overcoming these challenges in the supply chain.
2. Navigating e-signing and deeds
Grappling with the challenges of e-signing? Shan-Ree Tan, Practical Law at Thomson Reuters has provided a timely update on e-signing and deeds during COVID-19.
E-signing remains top of mind for legal professionals amid the pandemic. Nearly 50% of webinar poll respondents have had to arrange signing of documents in a way that was not anticipated by their firm’s policy on proper execution and witnessing.
Legal counsel and advisors may wonder how we ought to get our documents validly signed in the face of social distancing requirements. Shan-Ree provided some best-practice tips.
“At the moment, we’re still getting used to the idea of documents being exchanged electronically for speed and convenience. COVID-19 has meant that now even getting one party to successfully execute a formal instrument like a deed has its own challenges”– Shan-Ree Tan, Senior Writer, Practical Law
A range of emergency laws and regulations to facilitate the remote signing and witnessing of documents have been rapidly introduced, and are being updated, at the Commonwealth and state and territory levels. Shan-Ree’s tip is for legal professionals to keep up to date with the latest legislative and regulatory responses to ensure they are across the scope and interaction of these changes. One way to stay on top of developments is to make use of legislative trackers such as those offered by Practical Law.
To hear the Senior Writer’s presentation in full, join the webinar on-demand. (Please note that this webinar was recorded prior to the issue of the Commonwealth Corporations (Coronavirus Economic Response) Determination (No. 1) 2020 on 5 May 2020 and other subsequent state and territory responses.)
3. Impact of the Foreign Investment Review Board (FIRB)
Practical Law invited Charles Bogle on to the program, who is Partner – Corporate at Hogan Lovells, a global law firm. Charles spoke on the impact of the Foreign Investment Review Board (FIRB), which has implemented two major changes to rules regarding foreign investment.
“There have been some pretty significant changes just in the last few weeks, both monetary thresholds that require further approval, and also the time that it takes to get approval from the FIRB,” he stated.
“Fundamentally, the purpose of FIRB is to ensure that foreign investments into Australia work generally for the benefits of the Australian people and the Australian economy. There was a particular concern around the current crisis, that many Australian assets might be sold off at fire sale prices. And because of this, FIRB has changed the threshold of the transactions”– Charles Bogle, Partner – Corporate, Hogan Lovells
In fact, FIRB has changed the threshold to $0, dividing opinions along the way on whether this was the right decision to make. Charles polled the audience on this, with less than half of respondents saying they thought FIRB was right to enforce a $0 threshold on foreign investment. However, only 16.1% said “‘no”, with the rest of the audience admitting they were undecided at 38%.
Now that FIRB has opted to lower the threshold, what does this tell us about their decision to do it in the context of COVID-19? As Charles explained, they’re effectively treating all foreign investors the way they used to treat foreign government investors for any investment.
“The investment may or may not be good for the economy, so FIRB wants to have a look at it before it’s approved,” said Charles.
The second change that FIRB has introduced may raise concerns for some. Not only has FIRB lowered the threshold to zero, the time it takes for the board to make a decision on whether or not to approve a particular acquisition can be lengthy.
“It used to be 30 days to make a decision, that has now gone to six months. So clearly a very long time, and that will make overseas investments into Australia difficult, or at least difficult to do quickly,” said Charles.
Kate Merrifield, Head of Corporate – Practical Law, also raised concerns during the presentation regarding the potential for smaller entities such as start-ups to incorrectly apply – or not apply at all – the foreign ownership tracing rules for the purpose of determining who is a foreign person.
Following the discussion of the impact of the FIRB amendments, Charles invited Laura Bacon, Policy Adviser at the Australian Institute of Company Directors, to speak on the new temporary safe harbour provisions for directors.
To hear more insights and how to overcome these COVID-19 legal challenges, tune in on-demand.
4. Being across regulatory responses
During the webinar, Kate provided an overview of some key regulatory responses to be mindful of. These include the relief regarding the statutory deadlines by which an Annual General Meeting (AGM) must be held.
“The question for these companies is, given our current restrictions on non-essential gatherings and closures of venues, how can they comply with their obligations to hold an AGM when the options for holding these meetings are severely restricted,” explained Kate.
“ASIC has adopted a formal two months “no-action” position for entities that are required to hold an AGM on 31 May 2020, but are unable to comply with this obligation.”
As restrictions throughout the country are slowly lifting, it is expected that companies will start to see an easing of the logistical issues that come with social distancing. However, Kate noted that some organisations have announced that – despite it being unclear whether the Corporations Act permits entirely virtual meetings – they will host AGMs using entirely online means.
“We’re aware of several companies that have embraced virtual AGMs. One insurance company, for example, will hold an entirely virtual meeting with voting either by proxy or direct voting”– Kate Merrifield, Head of Corporate – Practical Law
As well as the above, listed and unlisted entities have another key consideration during COVID-19, and that is their financial reporting obligations. Although ASIC has announced certain financial reporting relief for unlisted entities, this relief has not been extended to listed entities, although they may apply for an extension of reporting deadlines on an individual basis, and ASIC will consider these applications in appropriate circumstances.
Laura Bacon, Policy Adviser at the Australian Institute of Company Directors, argued that ASIC’s approach to regulation during the global pandemic has been inconsistent.
“As you pointed out Kate, there’s actually been an inconsistent approach from the regulators around the relief that’s available for unlisted and listed companies, not to mention the exclusion of those 30 June balance date companies. Notably, ASIC has the power to make both individual and class exemptions for financial reporting deadlines, but has declined to do so at this time,” said Laura.
“The AICD is talking to ASIC about using its class exemption power to provide a blanket extension of two months for all reporting entities for balance dates between 31 December and 30 June. Our concern and reason for advocating for a class exemption is that entities will struggle to gain relief in a timely manner, particularly listed entities who have to go through a two-step process with both ASIC and the ASX”– Laura Bacon, Policy Adviser, Australian Institute of Company Directors
For best-practice tips on preparing for an AGM, serving contractual notices and changes to director’s duties during the global health crisis, look no further than Practical Solutions to COVID-19 Legal Challenges.
Note: Subsequent to the date of this webinar:
- The federal Treasurer registered the Corporations (Coronavirus Economic Response) Determination (No 1) 2020, one of the effects of which is to permit entirely virtual meetings and electronic notices of meeting until 5 November 2020.
- ASIC extended its no-action position, so that public companies with balance dates up to and including 7 July 2020 may also postpone their AGM by two months.
- ASIC extended the deadline for both listed and unlisted entities with balance dates between 31 December 2019 and 7 July 2020 to lodge financial reports.
For more information, see Checklist, COVID-19: Corporate FAQs and AICD article, ASIC extends reporting deadlines and ‘no action’ position on AGMs.
5. Complying with competition law regulations
The second part of Michael Milnes’ presentation, who is Head of Competition and Consumer Protection – Practical Law and Principal Lawyer at Supplied Legal, was on competition and consumer law.
With businesses coming together and coordinating activities – either by themselves or through their industry association during the time of COVID-19, competition law regulations can become an issue.
“Industry associations are having to approach the local competition regulator, the ACCC, and seek authorisation for this conduct that would otherwise be illegal behaviour,” said Michael.
“They are assessing whether there is a public benefit, and the ACCC has been very quick to grant interim authorisations, and allow these different agencies and industries to work together.”
But what are the implications of these instances, and have there been time when things have gone awry? Find out over at the online webinar presentation.
6. In-house considerations
Tyrilly Csillag, Head of Commercial and In-House, Practical Law, outlined some major challenges facing in-house legal departments during this unprecedented era. One of them is none other than the issues to come out of remote working environments.
“The COVID-19 pandemic has created a sudden, massive and unprecedented change towards whole workforces working from home,” said Tyrilly.
This is not a typical remote working situation, so what challenges are legal counsel having to deal with as a result?
“In-house legal teams are supporting their organisation through the legal issues that come with maintaining privacy compliance, ensuring cybersecurity and protecting confidentiality,” explained Tyrilly.
This comes as the APP and the notifiable data breaches scheme will continue to apply when an organisation has employees working remotely.
In addition to working from home issues, another major hurdle for in-house counsel at the moment, Tyrilly outlined, is dealing with employment law issues.
“A primary concern for organisations and therefore their in-house counsel is obviously employee well-being and employee’s duty of care to its employees. As businesses scramble to cut costs, in-house lawyers are advising on pay cuts, statutory stand downs and redundancies in circumstances where the legislative goalposts are moving daily and often throughout the same day”– Tyrilly Csillag, Head of Commercial and In-House – Practical Law
Tyrilly also pointed out the opportunity for entire legal teams to show their value by stepping up into the trusted adviser space.
“The current pandemic circumstances give in-house legal teams an unprecedented opportunity to build goodwill with the C-suite and demonstrate value,” she said.
Hear the Head of Commercial and In-House at Practical Law provide a more detailed update on how General Counsel can achieve this by joining the webinar on-demand.
Our next on-demand webinar by Practical Law features a panel of guest cyber security experts. Enjoy the session highlights of Cyber Risks and Data Threats for Virtual Workforces on Legal Insight.