Is your company prepared, from a corporate legal perspective, for the Covid-19 crisis and post-crisis business environment?

As the global economy enters an unprecedented crisis caused by the COVID-19 pandemic, the magnitude of which is yet to be revealed, stakeholders should also pay attention to the legal corporate levers that can help companies successfully navigate this period through flexibilization and optimisation of decision-making processes and corporate- and business-functions in general.

Various companies have encountered difficulties during this period in the decision-making process at the level of directors/board of directors (BoD) and general meeting of shareholders (GMS), or have faced different hurdles entailed by a non-flexible legal framework, all of which impede their proper operation.

Given that during and immediately following a crisis, rapid reaction is of the essence, companies should use this period to take a closer look at the steps that can be implemented to mitigate future legal risks and update their internal corporate housekeeping to be able to hit the ground running once the crisis ends.

As legal advisors assisting our clients at this difficult time, we know that change is never easy. It is best to first plan it. And as this recession is unlikely to be over quickly, it is not wise to delay decisions. In this context, in addition to keeping clients updated with the newest legal and tax developments, we have put together an outline of certain corporate matters and legal tips companies could consider to embed healthy corporate practices and sustain improvements that can help business functions to be both effective and efficient.

1. Prepare your company for the future - review the articles of association

The current financial downturn we are facing requires fast and smart decisions. To be able to react accordingly, a company must have the right provisions in its articles of association. We recommend considering the following measures:


2. Adjust capitalisation responsibly

A responsible company strives to balance the amount of equity and debt in its capital structure according to its needs. Adjusting the capital structure during a financial downturn must keep the interests of the shareholders foremost but should also minimise the financial risk to the enterprise. A set of measures of this type includes:
In addition, in a rapidly changing market, companies should assess whether they could monetise losses by planning for a divestiture or acquisition of underperforming assets.

Distressed M&A is more complicated than traditional M&A; however, history tells us that market shocks do give rise to opportunities and it is a question of knowing where they are and being prepared for them.

4. Improve internal corporate housekeeping

Talk of belt-tightening naturally focuses attention on economy and efficiency in organisations. This is a time to take a step forward and look at effectiveness, and how the organisation can become more fit for purpose as a result of the changes being implemented.

Companies should take advantage of this time to also put in order or update their corporate books and records for: (i) ease of doing business in the future; (ii) potential future acquisitions; and (iii) external financings by banks or new investors in legal areas including:


In general, unless they involve opposition terms or formalities in front of Romanian courts (such as share transfers in limited liability companies, share capital decreases, mergers, etc.), registrations with the relevant Trade Registry of the above operations could have been submitted during the state of emergency as well, as Trade Registries have fully switched their work online through the platform portal.onrc.ro.

5. Be legally equipped, all together

More generally, companies should take advantage of this time to ensure they are legally equipped for seamless performance.

Among many other measures, this entails updating their governance policies around content sharing across collaboration platforms, amending individual labour agreements to reflect the nature of employment relationships post-crisis, e.g. working from home, confidentiality and data protection clauses, and amending certain agreements to better fit the individual needs of the company and its contractual partners.

Of course, based on different starting points and internal strategies, organisations will naturally differ in the attention they give to each lever. All that is necessary is to have the discipline to ignore the crowd and plan and implement measures which would have otherwise perhaps been neglected during times of optimism.
In this climate of unprecedented uncertainty with a duration that is currently impossible to predict, it is also vital to have advisers on your side who are used to dealing with challenging situations. The value of trusted advisers who can calmly and professionally assess which considerations are important, where to prioritise and to help gather and interpret the data to make optimal decisions, cannot be overstated. Our core CMS skill set also revolves around helping businesses in difficulties, helping them work through the current crisis, and being well placed to bounce back after this period of economic and market disruption.