The Bench Checklist: Reducing the Impact of COVID-19
Here is The Bench’s quick checklist of legal points to consider to help reduce the impact of COVID-19 on your UAE business.
Assess the Situation and Formulate a Plan
Step back and take a helicopter view of your business: Use this time to take a 360 degree / helicopter view of everyone you interact with as a business – including employees, customers, suppliers, landlords, insurance brokers, lawyers, bankers, accountants, franchisors, hotel operators, etc. and assess where your biggest costs and revenues sit.
Dig out all the relevant contracts / insurance policies / documentation etc: It’s a good time to make sure you have all relevant company agreements and other docs in one place (a contract database) and then sit down and flick through them. Check the basics such as when do they expire? Do they auto-renew unless you give notice? Do you have a right to terminate etc? Do they have a right to terminate? Do you have right to amend orders etc.
Understand your legal position and the risks / opportunities: If needed, talk to your consultants, accountants and lawyers and understand your position with all the various counter-parties and what support is available. Be aware that the position is fast moving and new laws, regulations and initiatives are being issued on a regular basis.
Formulate a plan: Once you have assessed your holistic position you can formulate a plan to reduce your exposure / minimise costs and, where possible, take advantage of any opportunities. Some have recommended putting your business "into hibernation" but we don’t think that correctly reflects the proactive approach that needs to be taken at this time.
Keep the lines of communication open: Not only with your family in your immediate bubble and extended family and friends but also with all those you identified as interacting with. This should include those that you speak to less regularly such as your landlords, insurance brokers, lawyers, bankers, accountants, franchisors, hotel operators, etc because this group often have some good info on what other businesses are doing that may be of use. Most consultants are providing free webinars on the topic (such as our recent one for the Middle East Restaurant Association (MERA) so worthwhile signing-up for these.
Talk to your customers: Keep in regular contact with your clients to see how you can help and how the situation may affect both their business and your own.
Talk to your suppliers and check supply agreements: It will be worthwhile checking your supply agreements for the ability to amend/terminate purchase orders or the agreements themselves. Consider requesting deferred payments, discounts, waiving freight charges, waiving minimum order requirement, increasing cash-backs, rebates etc.
Talk to your landlord / review your lease: It is worthwhile having a fresh review of your leases to remind yourself of the key provisions such as term, termination, force majeure etc. Most leases in the region are heavily in the favour of the landlord so the best option is likely to be to have a sensible discussion about how they may be able to help / come to a fair and commercial agreement. Some landlords in the UAE have already offered to either reduce or defer rent payments and we think it would be useful to look at these first to see what is being offered to benchmark against. Consider requesting rent-free periods, deferral of rent, return of security deposits, reduction in service charges (or a mix thereof) etc.
Talk to your franchisor (if you have one): Franchisors may be willing to make concessions in various ways such as suspension of obligations e.g. royalty fees, defer roll-out obligations, reducing advertising contributions etc.
Assess your workforce structure: The Ministry of Human Resources and Emiratisation (MOHRE) has recently issued a Ministerial Resolution (No. 279 of 2020), which provides some guidance and options for any ‘surplus staff’ who may be redeployed in other sectors.
Talk to your employees: There are various options to save employee costs other than redundancy and certain employees may be willing to take unpaid leave, work reduced hours/part-time due to having kids at home that need to be home schooled etc. Other options to consider are removing non-essential / discretionary benefits and bonuses, taking into consideration the legal framework obviously.
Enable your employees to work remotely. This involves not only setting up the necessary infrastructure but also considerations such as IT security systems and data protection policies to ensure your information and that of your clients is secure out of the office etc.
Talk to your insurance broker / check your insurance policies: There is a huge variety of insurance available (business continuity, employers liability, general All Risks insurance, event cancellation, health, travel D&O etc) and each one has its own COVID-19 considerations.
Talk to your bank / your lenders: The UAE Central Bank has taken steps to support the economy including adjustments to the bank lending criteria, capital buffer relief, liquidity buffer relief, cash reserve relief etc. Banks are participating in the Targeted Economic Support Scheme (TESS) where they can extend customer deferrals of principal and interest etc.
Understand the Government economic stimulus packages: There have been a wide range of stimulus packages announced in the UAE including things such as reduction of municipality fees, reduction in water and electricity bills, reduction in other gov fees etc. Some of these depend on which location (e.g. onshore or in a freezone) you are based in.
Talk to your accountant / tax advisor: There are various tax developments in the GCC designed to help with the effects of COVID-19 such as extension of VAT filing dates. PWC have a very useful dedicated website on this topic here. Use this time to re-assess your aged debts to see if any should be written off and a VAT credit claimed.
Review / invoke / draft your business continuity plan (BCP): If you have a BCP use it, test it and take this opportunity to improve it. If you didn’t have one, now is a great time to write one with lessons learnt from the last few weeks.
Consider restructuring of your business: e.g. refinancing, debt restructuring, group re-organisation, spin-offs, exits, liquidation, raising investment, moving towards online ordering/delivery etc.
Look at opportunities in the downturn: e.g. M&A, joint ventures/mergers with competitors, acquiring key locations that are not normally available etc.
Collaborate with relevant industry bodies such as the Hotel Asset Managers Association (HAMA) or the Middle East Restaurant Association (MERA) to find a common voice / strength in numbers.
Don’t vent your anger on social media: Remember the UAE has strict laws in relation to defamation and there are new regulations re sharing rumours online.
Talk to your lawyer: It goes without saying but your lawyer can help guide you through these issues and hopefully reduce the impact of COVID-19 on your business.
Drink lots of tea, stay safe and stay home.
If you would like any advice please contact email@example.com or your normal team member at The Bench.