The Pandemic, Nonperformance, and Bankruptcy
Could the coronavirus excuse nonperformance or increase the number of business bankruptcies? Certain contract clauses may impact the daily operations of your businesses.
Force Majeure Provisions
The impact of recent COVID-19 events may cause certain force majeure provisions to apply, especially because the World Health Organization classified the virus as a pandemic. Your business or other businesses you work closely with could be considered excusable in terms of nonperformance due to the outbreak.
However, simply because COVID-19 has been defined as a pandemic, this doesn’t mean that your business is automatically covered. This largely depends on whether your contracts specifically includes or excludes the proper clauses and language.
Bankruptcy & Insolvency
Businesses and individuals are at a greater risk for filing bankruptcy because of the global economic impacts of the coronavirus. Businesses with a gap or sharp decline in revenue are increasing. Employees may be laid off or going without pay.
If your business is at risk for bankruptcy due to the economic consequences of COVID-19, you may need legal assistance for reorganization or liquidation. Chapter 11 reorganization may be useful for reorganizing small, medium, and large businesses. Bankruptcy liquidation, including Chapter 11 and Chapter 7, may be another route necessary for filing once a business no longer generates revenue and needs to cease operations. If you have already filed or need to file, it’s possible that your hearing could be delayed due to an influx of cases.
If you need legal assistance to guide you through a bankruptcy related to the impacts of the coronavirus, reach out to us today for more information.