Coronavirus – when postponement of payments is required

Unfortunately, the coronavirus outbreak in Denmark may lead to situations in which businesses will not be able to meet their payment obligations on time. Consequently, they will need extension of payments in some form. Plesner’s Coronavirus Task Force outlines the considerations to be made in this connection.

We are pleased that the Danish government, labour market parties and banks are supporting crisis-stricken businesses with a large number of initiatives. The economic impact of the corona crisis gives new relevance to questions about how to navigate proactively and as best as possible – both in the short and long term – through all the new initiatives and business partners, customers and lenders who may also have a lot to cope with.

Situations will arise in which one or more business partners will probably be unable to meet their obligations on time and will therefore need extension of payments in some form. In this connection, you should consider how best to take precautions in relation to:

  • existing debt and new debt arising as a result of continued dealings
  • other creditors of the business partner securing their own outstanding amounts at the expense of the liabilities payable to and incurred vis-à-vis your own business
  • payments you received and act in reliance on not being disputed later on if the current initiatives prove to be inadequate for the business partner to continue its operations
  • potential collateral (prepayments, title, charges, etc.) for future deliverables
  • the risk of management liability if unsecured receivables are built up but not paid

Businesses requesting an extension should also consider how best to safeguard their interests in relation to:

  • the terms applying to any extension or other help and the liabilities for which assistance is provided
  • the relationship to other creditors
  • the handling of assets and activities in order to minimise any subsequent risk of criticism (avoidance)
  • how to ensure that the process does not subject management to a risk of liability

Well-considered decisions made to secure continued operations and continuing and long-term collaboration with business partners should always be based on firm agreements, partly to avoid any legal issues which might have been avoided, and partly to avoid any unnecessary subsequent disputes. When such decisions are made in times of crisis, the requirement for clarity and firm agreements becomes even more pronounced.

Plesner’s Insolvency and Restructuring team stands prepared to assist our clients with the necessary advice in relation to these challenges. For many years, we have provided recognised, competent, results-oriented and innovative advice to businesses in crisis, their business partners and the banks and other financial institutions forming part of the solution in crisis situations.

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