December 9th, 2020
Business Agreements and COVID-19
Author: Andrew L. Schwartz
Have You Reviewed Your Business Agreements Lately?
One of the lessons COVID-19 has taught us is that serious events, with significant consequences, can occur quickly and without warning. During this time, all businesses have faced unique challenges and have had to pivot as a result of COVID-19. Many business owners have discovered that their neglect of having their business documents reviewed and updated could have substantial unanticipated consequences. Now that we have learned that unanticipated events can arise without notice, it is certainly an appropriate time to have all of your all your business documents and agreements reviewed and where appropriate updated, in order to be proactive and properly prepared for the future.
This is especially true if your agreements and contracts were drafted more than a few years ago. At that point in time, many of those documents were created for one set of circumstances, which may no longer appropriately apply. With the passing of time, laws (such as the application and enforcement of restrictive covenant provisions), taxes and circumstances surrounding a business (such as valuation, succession planning, and buy-sell circumstances) change, sometimes dramatically. These changes can mean that your agreements may no longer adequately address your current and future business needs or may no longer be enforceable.
At a minimum, it is likely that your current ownership agreements may be outdated, but with the changes that COVID-19 has brought us, they may also no longer reflect the current state of the business. Additionally, your business should review and update its policies and procedures in order to make sure that they are compliant with recent employment law updates as well as new policies you may now wish to implement.
The following is a partial list of typical contracts and agreements that you should review at least once a year, regardless of significant events such as COVID-19:
- Shareholder/Buy-Sell or Limited Liability Company Operating/Partnership Agreement
- Methods or formulas for the valuation of an ownership interest
- Governance and management
- Restrictions on transferability of ownership interest
- Succession and transition
- Changes in tax laws
- Corporate Documents
- Articles of Organization/Incorporation/Charter
- Corporate resolutions/minutes
- Registrations and Licenses
- Client/Customer/Vendor Contracts and Agreements
- Employee Handbook
- Sexual harassment and discrimination policy and procedure
- Social media and computer use policies
- Paid Time Off/Sick Leave policies
- Employment Agreements
- Restrictive covenants
- Employee vs. Independent Contractor
- Commercial Lease
- Term of lease
- Options to renew
- Office expansion
- Lease Amendments as a result of COVID-19
- Office Space Sharing Agreements/Licenses
Successful business management means proactively reviewing and maintaining the necessary and appropriate legal documents to protect and sustain the viability of your business and permit you to pivot your business as a result of changes brought about by COVID-19. Regular review of these documents will help your business anticipate changes in a business and be able to adapt to unique circumstances.