The government recently extended the bidding deadline for Air India from March 17 to April 30. That could well be a portent of the shape of things to come in the deal-making world, stuck by the coronavirus
(COVID-19) pandemic. Facing the heat are distressed M&A activities in projects going through the Corporate Insolvency Resolution Process (CIRP).
Travel restrictions and other clampdown measures make time-critical deal-making a challenge, leading to legal and regulatory complications, say experts.
“The committee of creditors of many companies
undergoing the CIRP are contemplating approaching the National Company Law Tribunal (NCLT) for the extension of the time limit, largely owing to delay in the bidder’s diligence process,” says Yogesh Singh, partner, Trilegal. The Insolvency and Bankruptcy Code
sets a maximum time limit of 330 days for the completion of the CIRP.
With courts limiting their functions to urgent matters, this may impact the approval of resolution plans, say experts.
M&A experts point out the impact of the pandemic on supply chains would have a cascading effect on the value of assets, which were changing hands or were set to change hands. “A massive re-look at valuations may need to be undertaken for various deals which are currently underway,” says Rabindra Jhunjhunwala, partner at Khaitan & Co.
While going through M&A deals in such times, buyers should re-assess the financial assessment model of a target for effects on account of the pandemic, say experts. Sellers, on their part, should weigh their business prospects warranties and explicitly disclose any potential business impacts, they add.
“To avoid landing in dispute situations, parties must devote time and attention to assessing the impact on relevant businesses and agree on appropriate risk allocation, valuation and deal certainty aspects,” says Singh.
Buyers would also need to be mindful of the impact of travel restrictions on post-merger integration issues.
Monali Dutta, principal, infrastructure & corporate practice at Advaita Legal, recommends proactive discussions with contracting parties, recognising the importance of longer-term relationships and reality of the challenges faced by many businesses in the current environment.
However, legal teams of companies
must also work in close coordination with insurance providers to ensure minimal loss in case deals go awry.
“It won’t hurt to come up with a strategy to tackle any litigation that comes their way either,” says Jhunjhunwala.
How employers can fight corona crisis
Employers are obligated to ensure a safe and healthy work environment for their employees, including temp and contract workers
An employer has legal right and obligation to prevent an employee suffering from a communicable disease from entering workplace for the protection of other staffers
Ensure that insurance coverage is in place for virus-affected employees and their family members
There is no requirement under the Indian legal system to grant leave more than what is mandated or contractually agreed upon. However, employers can allow affected employees to proceed on paid leave
Respect employee privacy:
Employers should keep an employee’s health information confidential and ensure that private data of those affected isn't breached
Work from home:
While devising a policy that allows employees to work remotely, businesses should be able to hold them accountable for the completion of assigned tasks
Respect data protection rules:
Ensure all employees working from home adhere to obligations under the company’s data protection regulations
Tackling data breach:
Have policies in place to guard against any potential data breach by employees while working remotely