The corona virus – financial problems
We find that more and more people who contact us are particularly concerned about their own financial situation and what should and must be done in this regard. This applies to both businesses and individuals. Financial problems are therefore chosen as the theme of the day.
Companies that themselves are experiencing financial problems
The Board of Directors and the CEO of companies experiencing financial challenges must be vigilant and make ongoing assessments of the financial situation and possible measures to avoid bankruptcy and potential liability.
The Board of Directors shall ensure that the company has sound equity. The Board has a duty to act if the equity is lower than justifiable based on the risk and extent of the company's operations. The Board of Directors and the CEO must therefore closely monitor the company's operations, accounts and submission of public tasks in order to be able to implement measures in time.
Measures that can be taken may include temporary layoffs, terminations, tightening in the collection of accounts receivable, borrowing with possible mortgaging of assets, capital increase and other cost-reducing and income-increasing measures.
In addition, Stortinget (Parliament) has opened up for a number of measures, such as reversing deficits with taxed profits from previous years and postponing payment of wealth tax. It appears that further measures will be forthcoming.
The Board of Directors and the CEO must be careful to document financial assessments and entering into agreements. If the Board considers submitting a petition or the company is close to bankruptcy, the Board and the CEO must be cautious about paying debt. The same applies to the sale of assets and the sale of the business in whole or in part. This is because there is a risk that these transactions will be annulled or required to be replaced by the bankruptcy estate.
If the Board of Directors and the CEO do not act in accordance with what is expected, they could risk being liable for damages, being reported to the police because of criminal offenses or being placed in bankruptcy quarantine, so that they will not be able to conduct business for a period of time to come.
Employees at companies with financial problems
Employees at companies with financial problems may experience uncertainty related, among other things, to temporary layoffs and termination, or that they are not paid the salary they are entitled to. In these situations, it is important that employees are aware of their rights and that they do not stay passive.
Employees may need assistance to overrule temporary layoffs and eventual termination. Employees should also seek assistance early to file an application for execution for payroll claims, take the case to the Conciliation Court or District Court, or file a petition for employer bankruptcy.
Bankruptcy petitions are free of charge for employees and may be necessary if the non-payment of wages persists over time. If the employer goes bankrupt, employees may be entitled to coverage of wages and holiday pay from the NAV Wage Guarantee.
NAV Wage Guarantee does not cover the expenses the employees have had for the employer in connection with, for example, travel. Employees should therefore avoid spending money to be repaid from an employer with financial problems.
Homble Olsby | Littler assists both companies and private individuals in employment law, contractual and monetary law issues.
