In our blog “Coronavirus COVID-19: how your business can weather the storm”, we laid out some aspects for businesses to consider and additionally provided some guidance as to how company officers can prepare during these uncertain times amidst the outbreak of the coronavirus. This blog will address relevant aspects of boardroom counselling.
As an officer, supervisory director or entrepreneur, you may very well end up facing difficult and complex situations due to the coronavirus outbreak. To best handle these challenges it may be prudent to seek independent legal and strategic advice may posed by the virus. Drastic changes are developing rapidly and they require nuanced adjustments to your business arrangements and/or organisation. To quote Charles Darwin: “it is not the strongest of the species that survives, nor the most intelligent, but rather the one most adaptable to change”. We believe this applies with equal vigour to companies experiencing turbulent market conditions.
Many of the questions businesses find asking themselves relate to liquidity issues. Such as: What is the impact on our bottom line? What vital relationships can be identified within the organisation? What flexibility is afforded in our contractual agreements with our creditor? Will it be necessary to sell off divisions or potentially some key business assets?
The dynamics of these complex and difficult situations makes it all the more important to properly document every step of the decision-making process. Officers and supervisory directors are both required by law to account for their decisions. In some cases it is advisable to supplement the documentation with specialist advice. Accurate minutes of meetings must be kept and stored properly together with board resolutions and the explanatory notes thereto.
If your company takes a hit from the coronavirus outbreak, or its consequences, you would do well to conduct a risk analysis, or a supplementary one. In essence, a risk analysis means that you identify all possible risks that may affect the operation of your business. For each risk identified, you should assess the possible consequence for the business in the event the risk materialises. The analysis should include the measures available to mitigate the risks.
If identified early enough, risks can be managed or potentially even averted. A key action in light of current developments is to keep monitoring cash flow projections.
The current Corona virus does not only pose risks for businesses, but it also gives rise to new potential opportunities. Now may be the appropriate time to explore other ways of putting your production capacity or your staff to use.
The board of a company, whether listed or unlisted, is required by law to perform their duties properly. The Corporate Governance Code (CGC) provides officers of listed companies guidance on performance of obligations and corporate governance. It is prudent that officers of unlisted companies observe aspects of the CGC as well as it is of relevance to them and provides good insight.
For instance, the CGC stipulates that when formulating company strategy, the board should (or must) devote sufficient attention to building a sound risk management system. The board is responsible for identifying and managing the risks associated with the strategy and activities of the company (and its associated enterprise). If risks are identified, the board must take adequate steps to ensure the risk is mitigated. These steps should not just be event-based measures; the board must have in place risk management and monitoring systems that are subject to annual review. It is recommended that listed companies, and large unlisted (two-tier) companies, appoint internal auditors. The board is accountable to the supervisory directors for the effectiveness of the risk management and monitoring system. Obviously, if they perceive any defects, the supervisory directors must urge the board to take measures or implement them on their own accord.
We boast ample experience as boardroom consultants and are happy to act as your legal experts. If you have any questions or need assistance, please feel free to contact our distinguished legal experts for assistance.