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COVID-19 – Commercial Contracts and Counterparty Financial Distress

United KingdomScotland
03/04/2020
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These are unprecedented times of uncertainty. The outbreak and continuing rapid worldwide spread of the novel coronavirus (and the associated Covid-19 disease) (“Coronavirus”) is having a considerable global impact, providing a severe test of the robustness of businesses across all sectors. The full impact of disruptions to the workplace and business operations are as yet unknown, but are expected to be enormous.

Following our earlier article Coronavirus – key considerations for outsourcing agreements, goods and services supply and other commercial contracts, which summarised some practical steps that organisations in the UK can take to mitigate, or be better prepared to mitigate, the impact on their business of disruption to the performance of services by key suppliers as a result of Coronavirus, this article provides a high level summary of the steps you should consider taking when you suspect a UK corporate customer or supplier may be in financial distress, insolvent or about to go into administration, and what steps you should take when you become aware they are in administration.

Steps to take when you suspect a customer or Supplier may be insolvent or a formal insolvency procedure is likely to be initiated

In addition to maintaining regular communication at an operational level and through the governance forums, closely monitoring your customer’s/supplier’s performance of the applicable contract and seeking confirmation of solvency from its directors, you should monitor the markets, press, rating agency announcements etc. for news of its circumstances.

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