1. What are the key topics that boards should focus on to ensure proper discharge of their duties as directors, as their businesses return to work following a lockdown?
In addition to being attentive to the legislative changes that have been imposed, it is essential that directors of companies pay attention to global events that may have an impact on the exercise of the companies’ activities.
They must also be aware of the rules to be followed or that their companies are obliged to adopt in relation to the three stages for returning to work. These three stages are:
- from 26 May: up to 50% of the workforce;
- from 8 June: up to 75% of the workforce; and
- from 29 June: full restoration of the workforce.
Hence, it is fundamental not to only comply with governmental measures, but also keep the internal measures that were created in accordance with the indications proposed by the government from the period of State of Emergency to the State of Calamity in force, to better adjust to the transitional phase.
Directors are also advised to comply with the tax plan approved by the government, in order to regularise tax issues, and to perform other legal obligations.
2. Should boards adopt particular governance practices in this context?
Yes, but it should not be limited just to that. Although the return to work is, at this stage, a mixture of undoing the confinement practices established by the government, being implemented in three stages (mentioned above) and with very specific rules, it is necessary to keep adopting internal contingency measures, thus ensuring the security of each employee and the smooth running of the company.
3. To what extent are boards being encouraged to take into account corporate purpose and values in the context of COVID-19 and a return to work?
The Angolan government has adopted practices to protect both (companies and employees), in addition to home working. These include the deferral of the payment of Social Security Contributions (contribution of 8% of the total payroll), referring to the second quarter of 2020. Hence, the contribution is expected to be paid in six monthly instalments (i.e. up to December 2020).
Similarly, as far as tax duties are concerned, the Angolan state approved the extension of the deadline for the final settlement of declaratory obligations for industrial tax and established the allocation of a 12-month tax credit with respect to VAT.
4. Your company is facing liquidity issues as a result of COVID-19:
a. What are the repercussions for continuing to operate your company?
Creditors may take enforcement actions against companies that face liquidity issues. Nonetheless, and considering the widespread difficulties, it is unlikely that hard enforcement will occur in the next couple of months.
Self-application for insolvency will prevent the filing or continuation of enforcement actions.
b. Do you have to file for insolvency if your company cannot pay all its debts as they fall due?
Yes, you do. Whenever it is impossible to meet its obligations, in particular, when there is a suspension of payments by the debtor, the company must file for insolvency with the competent court, requesting the creditors to be convened, within the following period:
- before ceasing payments; or
- within ten days of the suspension of payments.
c. Are there any steps that should be taken to minimise the risk of your actions as director being challenged?
As a rule, directors are under an obligation to avoid any actions that are likely to reduce, frustrate, hinder, jeopardise or delay payments due to creditors.
Directors are subject to the business judgment rule, and therefore, they should avoid any actions that might make the social assets insufficient to meet the respective claims, such as:
- damaging or endangering the company’s assets;
- artificially creating or worsening liabilities and losses, in particular, by means of damaging transactions; or
- managing the company in a way that would foreseeably lead it to insolvency.
d. Will your company be wound up if you fail to make payments when due?
Yes, it may. After the expiry of the time limits set out in question 4(b), and without the company having filed for bankruptcy, the creditors shall be entitled to apply for a declaration of insolvency on the ground of suspension of payments.
This material was prepared by DLA Piper Africa, Angola (ADCA)