Role of members of the statutory body in the time of COVID-19

08 April 2020

Almost every member of a statutory body knows they are obliged to act with due care, i.e. to take all steps inside and outside the company prudently, with the necessary knowledge, loyalty to the company and in its defensible interest.

But what does this mean to those in the statutory bodies of companies affected by COVID-19 and their responses to the situation? Let us go over a few fundamental tasks that each member of a statutory body should fulfil in line with their duties and the requirements imposed on them by the due managerial care rule.

Aware of the effects of the crisis on businesses, the state is taking a range of measures to mitigate the effects of COVID-19 and to adapt the business environment so that the most vulnerable companies can cope and resume business immediately after the effects of the crisis have faded away. To what extent the state succeeds in this policy is a question for another discussion. In this article we focus on the current topics which each member of a statutory body should concentrate on right now.

Company employer entitlements (Antivirus programme): As a member of the statutory body of a company that acts as an employer, you should be familiar with the Antivirus programme and, in accordance with the due diligence principle, apply for the relevant contribution. For details, see the article by our cooperating law firm Šmatlák Legal.

Tax reliefs (liberation packages): You should also focus on possible tax reliefs. Vít Křivánek discusses this issue in his article Coronavirus Tax Reliefs.

Financial support (e.g. Covid II, support for larger companies through EGAP): You should also identify available options for state financial support. A comprehensive list of individual options is provided in the article by our colleagues Vladimír Veleba and Stanislav Klika. For example, the Czech-Moravian Guarantee and Development Bank has prepared a programme for small and medium-sized enterprises, which consists in the provision of a guarantee for their loans of CZK 500,000 to CZK 15 million. Two waves of these programmes (COVID I and COVID II) have already been rolled out, and the second round of COVID II should be opened in the near future.

Deferment of rent (bill on certain measures to mitigate the effects of the SARS CoV-2 coronavirus epidemic on tenants of business premises): The Chamber of Deputies approved a bill to "postpone" rent. Practically, this would mean that landlords will not be able to terminate a lease agreement simply because the tenant does not pay the rent on time. The package of laws should cover both commercial and residential properties. If the bill is approved by the Senate in its current form, this will mean that although the rent can be paid later, it will generate interest. More information can be found in our articles here.

Postponement of loan repayments (bill on certain repayment measures in connection with the COVID-19 pandemic): The Senate is discussing a bill that should allow companies and others to request loan repayments. The proposal provides for the suspension of mortgages, consumer loans and business loans for three months or six months. Entrepreneurs who are natural persons can defer payment of both principal and interest. Legal entities may postpone only the repayment of principal; interest must be paid.

Insolvency test (amendment to the Insolvency Act): The Chamber of Deputies also approved a bill that would help businesses in the event of insolvency and give them time to resume operations. If the law is passed in the submitted form, it will mean that members of statutory bodies will not have to file an insolvency petition immediately if the company is in bankruptcy. We discussed this in detail here.

Compensation: The Crisis Act establishes the state's liability for damage caused in connection with emergency measures. Although at present it is not possible to anticipate how the state will stand up to the legal interpretation of these legal provisions, it is more than appropriate to document the damage incurred in case it could be claimed in the future. We wrote about it in detail here.

Although we are aware of the wide range of responsibilities and problems that companies must face in this extraordinary period, we still recommend that you keep an eye on current developments. Many measures, including the aforementioned bills, are being dealt with in an accelerated process, so they can give rise to rights and obligations for their addressees in the coming days.

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