Government measures in key jurisdictions 2nd edition final pages - Flipbook - Page 108
United States of America
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108
Insolvency
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The CARES Act modifies the Small Business Reorganization Act (SBRA) and greatly
expands the restructuring options available to businesses with less than US$7.5
million in debt through March 27, 2021. It is effective immediately. Previously, only
businesses with up to $2.7 million in debt could use the SBRA’s expedited procedures.
Small business debtors have traditionally been wary of a reorganization process
under Chapter 11 of the Bankruptcy Act (which provides for reorganizations), despite
its well-acknowledged benefits, due primarily to the potential cost and disruption it
often causes. For those businesses that qualify, the SBRA is intended to alleviate those
concerns and to make small business bankruptcies proceed under a faster timeline
and at reduced cost.
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We are not surprisingly seeing a major uptick in bankruptcy filings by retailers. Even
when the economy was firing on all cylinders, retailers were facing rising expenses,
changing consumer shopping habits, and stiff competition-leading many iconic
retail brands in the U.S. and around the world into bankruptcy. As the coronavirus
(COVID-19) pandemic and economic crisis have taken hold, it is not surprising that
even more retailers (whether teetering prior to the pandemic or crippled as a result of
state-mandated closures) are considering bankruptcy as a viable strategy for survival.
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For more details, please refer to our client alert here & here.
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The COVID-19 pandemic has significantly affected the global supply chain. In addition
to duties, liabilities, and defenses created by contract, businesses also need to be
conscious of a number of common law duties and obligations that may arise as a
result of what is happening around the globe. These can include extra-contractual
defences and concepts such as force majeure, impossibility of performance, and
frustration of purpose. We are beginning to see litigation begin in earnest, albeit under
different circumstances with virtual hearings and other modified protocols. We are
encouraging clients to be proactive about their possible disputes. Typically, a party
does not have a legally valid breach of contract claim until after a breach occurs. But
that does not mean you have to sit idly by when you can see the writing on the wall.
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For more details, please refer to our client alert here & here.
Has the
government made
any changes
to insolvency
legislation?
Contractual
Issues
What measures
have been taken
to reinforce
contracts?
Property
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The impacts of COVID-19 have led many landlords and tenants to consider their
options under existing leases to determine the best path forward and what actions
to take if someone on the property has contracted the virus. As a result, many states
and local jurisdictions have taken action to prohibit certain evictions based on nonpayment of rent and to delay foreclosures by mortgage lenders. We are starting
to see litigation around these issues; however, many landlords and lessees are still
negotiating resolutions of claims. Additional state and local legislation will also
likely impact leases (and mortgage) obligations by residential and some commercial
tenants.
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For more details, please refer to our client alert here.
Have any changes
been made to
the laws around
property, rent and
enforcement?
Government measures in key jurisdictions
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