Adapting (to) circumstances – the CFO crisis management checklist
The precise impact of the COVID-19 pandemic on global and regional economies remains far from certain. On the other hand, it is more or less accepted that most, if not all corporations will need to adapt to new market circumstances.
In terms of corporate finance management, chief financial officers and corporate treasurers essentially have two complementary ways to adapt to the looming market uncertainty:
- on the one hand, they can steer their organisations to adapt their conduct given the circumstances of financial turmoil – so as to comply with the relevant (pre)insolvency rules and avoid potential personal liability of directors; and
- on the other hand, they can work towards adapting the organisations' financial circumstances so as to reconcile the shifts in cash flows with the existing terms of fixed sources of corporate financing (financial debt).
To address these points, we have prepared a CFO crisis management checklist – an executive summary-style overview of applicable national laws across our jurisdictions – responding inter alia to the following questions:
Adapting to circumstances - What are my legal duties in the context of general financial uncertainty?
- Do I face any special duties in the vicinity of insolvency?
- Must I perform a formal reorganisation feasibility assessment, and must I involve other stakeholders (such as company shareholders)?
- May I continue to make all payments (to suppliers and financiers) or must these be restricted?
- When must I make a formal filing for opening of insolvency proceedings?
Adapting the circumstances – What are my options in terms of adjustment/restructuring of my organisation's financial liabilities?
- How can I amend the terms of my financial indebtedness (without consent of all affected creditors)?
- Which creditors must/can be affected – may I treat trade creditors differently to financial creditors?
- Will I keep control of the company during restructuring?
- Must the company formally declare insolvency in order to obtain recourse to majority-based reorganisation mechanisms?
You are kindly invited to review the checklists here.