Companies should consider the following measures to manage and mitigate potential insolvency risks:
1) Review contracts it is a party to and consider whether an event of default has been or could be triggered. Do also consider the applicability of force majeure and the implications that may have on the company.
2) Review the company’s balance sheet/cash flow position with legal and financial advisors to identify any solvency concerns or the need to seek additional financing, providing the potential for early intervention.
3) Set up alerts to stay attuned to market developments and the financial position of business partners, suppliers and competitors.
4) Communicate with your business partners and customers to attempt to perform contractual obligations. The reality is most parties to a supply chain and most service providers will be adversely affected in some capacity so an upstream or downstream party will likely be accommodating in an attempt to minimise their own disruption.
5) Despite the Corona crisis, regulated businesses will still need to meet regulatory obligations so far as it is reasonable to do so. Companies should assess minimum staffing levels and remote working technology and systems that are required to be put in place so that a company can maintain, for example, compliance standards even in the face of staff shortages or self-isolation, to mitigate the economic impact of staff absences.
6) Bear in mind the risk that your opponent in an ongoing or pending litigation may be insolvent and whether an application for security for costs may be advisable to protect your interests in the litigation.