I have recently bought or sold a business. How will earn outs and deferred consideration be affected by coronavirus?
A common feature of corporate acquisitions is that part of the consideration is paid on deferred terms or by way of earn out over a period of years following completion. Where deferred consideration is payable, this is either on the basis that outstanding payments will be made on scheduled dates or, less usually, subject to certain agreed (typically financial) objectives being met. These objectives almost always relate to a period before completion of the deal and are dealt with as part of a completion accounts mechanism.
Related FAQs
Transparency is considered to be central to the philosophy of the COP. The guidance provides details on issues concerning transparency of proceedings and involvement/attendance of P. Whilst there will be some difficulties with ensuring that remote hearings are accessible to the public as an ‘open court’, provisions have been made for the continued presence of the press where the facilities can accommodate this.
The Construction Leadership Council (with backing from the Government) has issued practical guidance and draft pro-forma documents to enable all parties involved in the construction supply chain to enter into collaborative and open dialogue about applications for extensions of time and additional payment and to minimise potential disputes. The guidance can we downloaded here
The draft letters and notices included in the guidance have been prepared on the basis of the standard JCT Design and Build 2016 and NEC 3/4 Engineering and Construction Contract (Option A) and parties will need to make sure that they are completed/adjusted to comply with their own specific contracts.
The Cabinet Office has also issued a general statement calling on parties to contracts adversely affected by C-19 to act responsibly and fairly and to support national efforts to protect jobs and the economy.
The Chief Coroner supports the position, communicated by NHS England and the Chief Medical Officer that Covid-19 is an acceptable direct or underlying cause of death for the purposes of completing the Medical Certificate of Cause of Death (MCCD) and is considered a naturally occurring disease. This cause of death alone is not a reason to refer a death to a coroner under CJA 2009.
If the cause of death is believed to be due to confirmed Covid-19 infection, there is unlikely to be any need for a post mortem to be conducted and the MCCD should be issued, and guidance is given on how this is delivered to the Registrar in the event of the next of kin/informant being in self-isolation.
In a hospital setting the MCCD process should be straightforward because of diagnosis and treatment in life. This may be more complex in a community setting. The Coronavirus Act 2020 however expanded the window for last medical review from 14 to 28 days. Outside of this, the death will need to be reported to the coroner.
Although Covid-19 is a naturally occurring disease, there may be additional factors around the death which mean it should be reported to the coroner; for example, the cause of death is unclear, or where there are other relevant factors. Guidance is given to coroners on how to manage such reported deaths, particularly where post mortem examinations may not be readily availability.
Changing to shift working may give employers the opportunity to change hours / pay whilst also focusing work when it is needed. Like the other provisions, this should be done fairly, either across the board or by selecting teams/individuals based on objective business reasons. Imposing without agreement would create significant risk, therefore would require fair selection and consultation.
This is likely to be a common situation and employers and employees are going to have to take a pragmatic approach. You could enter into a temporary flexible working arrangement perhaps agreeing to vary working hours/days or reducing targets or agree to use some annual leave.
Employees could ask to take a period of unpaid leave, asserting their right to time off to care for a dependant but the lack of pay is likely to be unappealing.
Alternatively employees who are unable to work because they have caring responsibilities as a result of COVID-19, which includes childcare responsibilities, can be furloughed.