COVID-19 REMEDIES AND TOOLS FOR SMALL AND MEDIUM SIZED BUSINESSES
As the Coronavirus spreads across the United States, small and medium businesses operating in the New York City metropolitan area are facing unprecedented challenges, and some of them see their very existences at risk.
New York’s flurry of economic activity came to a sudden halt, thus causing revenues to fall dramatically, while several fixed costs (for instance, rents obligations) are unaffected, unless privately waived. Financial obligations may be excused by contractual or court remedy:
Some leases and other commercial agreements have a “force majeure” clause, which excuses and suspends contractual performance during the occurrence of an unforeseeable event. A “force majeure” clause is typically designed to protect against an “act of god” (for example, a hurricane) or an “act of war”. An unusually broad interpretation from a court of law would be needed to include the coronavirus within the “force majeure” category. In any event, it is predictable that in the near future these clauses will be further expanded and detailed as to include pandemics.
Many agreements either do not have a “force majeure” clause, or the latter is very narrowly defined. In these cases, the party invoking non-performance might look into the common law doctrines of “impracticability” and “impossibility”. An unforeseen event, not caused by the non-performing party, makes a contractual obligation impracticable. (To play the devil’s advocate, in a prospective dispute, the party expected to receive the performance will likely argue that a pandemic is not an unforeseen event.) With respect to “impossibility”, although New York courts interpret this defense narrowly, the types of government orders recently issued in order to fight the coronavirus outbreak are in fact making contractual performances objectively impossible.
Additionally, below are some recent updates regarding tools that might avail New York business owners:
New York State’s Governor Cuomo recently issued two executive orders intended to offer protections to businesses in order to facilitate transactions, such as:
Public notaries are allowed to notarize documents by utilizing audio-video technologies.
There shall be no enforcement of evictions or foreclosures for a period of ninety days.
Abatements of interests may be authorized for a period of 60 days for taxpayers who were required to file returns and remit sales and use taxes by March 20, 2020.
The statute of limitations (time limit) on the start or filing of any legal action notice, motion or “other process or proceeding” is suspended until April 19, 2020.
Mandatory shareholder meetings that might be required by certain provisions of the New York Business Corporation Law are waived until April 19, 2020.
New York City is also taking the first steps to offer immediate and direct assistance to business owners by launching the NYC Small Business Continuity Loan Fund, a program introduced to provide zero interest loans of up to $75,000 for those small-medium companies (fewer than 100 employees) that can show a decreased revenue of 25% or more. Applicants will have to disclose updated financial documents, tax returns, payroll statements, corporate documents and details on existing debts.
Similarly, the U.S. Small Business Administration is offering low-interest federal disaster loans with long-term repayment terms to small businesses that are suffering an adverse financial impact caused by the coronavirus outbreak.
Additional financial assistance programs are expected to be released in the near future. For instance, if bailout funds were to be granted to insurance companies, business interruption claims filed by companies on the brink of bankruptcy may have a higher chance of approval.
At Cea Legal, we are very sensitive to the struggles that many of our clients are facing. To help businesses stay afloat during these unprecedent times, we are happy to offer free consultations and discounted legal fees through the end of April 2020.