GUIDE - COVID-19: IMPACT ON BUSINESSES AND INVESTMENTS IN SOUTH AFRICA - Savca
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GUIDE - COVID-19: IMPACT ON BUSINESSES AND INVESTMENTS IN SOUTH AFRICA
BOWMANS 2 2
Guide - Compliance with the Data Protection Act 2019: How We Can Help You
Contents
3
BOWMANS
Introduction
T he World Health Organisation (WHO)
categorised the severe acute respiratory
syndrome novel Coronavirus 2 (COVID-19)
To assist our clients, we have highlighted
below certain areas and issues to be
considered by businesses, investors and
as a pandemic. Pursuant to this, on 15 March transaction teams during this period.
2020, President Cyril Ramaphosa declared
a national state of disaster in South Africa For more information regarding the legal
in terms of the Disaster Management Act, effect of a National State of Disaster, what
2002, as amended (DMA) and on 18 March, regulations may and have been issued
Regulations in terms of section 27(2) of the pursuant to the National State of Disaster
DMA were published with immediate effect, and a summary of the regulations, directions,
with subsequent amendments published on ministerial statements and key regulatory
25 March, again on 26 March and most recently statements and publications pertaining
on 2 April (the Regulations). A twenty one to COVID-19, please see our COVID-19 –
day national lockdown, restricting freedom of Key Regulatory Changes in South Africa
movement and other rights, was announced Guide and for more detailed sector specific
by the President, effective from midnight on newsflashes, please see our COVID-19 client
Thursday 26 March 2020 to 16 April 2020, facing portal (accessible at https://www.
which period may be extended if required. bowmanslaw.com/coronavirus-pandemic/).
Government has announced bold measures to
contain the spread of the virus in South Africa.
We live in increasingly turbulent and
unpredictable times and whilst it is early,
the impact on our economy and businesses
will be significant.
4
Guide - COVID-19: Impact on Businesses and Investments in South Africa
5BOWMANS
Abstract
I n this note, we discuss the following potential
legal issues that may arise as a result of the
COVID-19 crisis on businesses operating in South
• Insolvency and restructuring - *new
(financial distress, operational restructuring,
financial restructuring, director duties,
Africa. We have reflected next to each topic where business rescue and liquidation)
it is new or updated since our last publication • Procurement - *updated (a full overhaul to
dated 19 March 2020. cater for numerous changes)
• Tax considerations - *updated (full overhaul
• Business continuity - *new (the concept of to outline considerations arising out of the
essential service providers, ongoing corporate Draft Disaster Management Tax Relief Bill
actions and good practice) and Draft Disaster Management Tax Relief
• Contractual considerations - *updated Administration Bill)
(for electronic signatures) • Insurance considerations - *updated (for
• M&A and capital markets considerations - new regulatory guidance)
*updated (for MOI amendment considerations • Cyber-crime - *new (cautioning against
and dividend requirements for JSE cyber-attacks)
listed entities) • Intellectual property - *new (transaction
• Corporate action considerations and business considerations due to shut
• Disclosure requirements for JSE listed down of the registration office)
companies - *updated (for financial reporting • Financial Services Regulatory Sector
and auditing time concessions, further price considerations - *new (regulatory guidance)
sensitive information and trading statement • Telecommunication
clarification and REIT information) considerations - * updated
• Banking and finance considerations (for new regulations and directives)
• Commercial property considerations • Shipping, aviation and logistics
• Employment considerations – *updated (a full considerations - * updated (a full overhaul
overhaul to cater for numerous changes) to cater for numerous changes)
• Remuneration considerations • We will continue to track these and
• Employee benefit considerations other developments through our specific
- *new (retirement fund and medical scheme newsflashes on the topics and intermittently
considerations) updating this note.
• Access to courts - *updated (a full overhaul to
cater for numerous changes)
• Data protection considerations
• Consumer law considerations
• Competition/ Antitrust considerations
- * updated (for prioritisation of matters
before the Commission, restrictions on
excessive pricing and exemptions from
restrictive horizontal and vertical practices)
6Guide - COVID-19: Impact on Businesses and Investments in South Africa
7BOWMANS
Summary of Key Legal
Considerations for Businesses
Impacted by COVID-19
In this briefing, we discuss the following dispensing or transportation of liquor and
potential legal considerations that may be the closure of retail shops, etc. It is advisable
relevant as a result of the COVID-19 crisis that you contact your attorney if there is any
on businesses operating in South Africa: question of whether or not your business falls
within this exemption to the Regulations.
1. BUSINESS CONTINUITY
Although whether or not you fall within the
Essential service providers exceptions set out in the Regulations is the
determining factor as to whether or not your
As mentioned above, pursuant to the business may operate within the category of
Regulations issued under the DMA, South exempted businesses, the Minister of Trade and
Africa has been placed under national Industry has announced that all businesses that
lockdown, restricting freedom of movement consider themselves exempted (i.e. involved
and other rights, effective from midnight in the manufacturing, supply, or provision of
on 26 March 2020 to 16 April 2020, which an essential good or service) are required to
period may be extended if required. Among seek approval from the Department of Trade,
other things, these Regulations provide Industry and Competition in order for them
that during the lockdown, all businesses to trade during the period of the lockdown.
and other entities must cease operations, Such businesses are required to apply to
except for any business or entity involved the Companies and Intellectual Property
in the manufacturing, supply, or provision Commission (CIPC) Bizportal website at
of an essential good or service, save where www.bizportal.gov.za and obtain a certificate
operations are provided from outside of from the Commission confirming that they
South Africa or can be provided remotely by do in fact fall within the exemption. The
a person from their normal place of residence. certificate can then be used as evidence
to authorities. Certain sectors also have
As to what constitutes an essential good industry specific requirements in this regard
or service has been the subject of much (i.e. the mining sector is required to apply
debate and is an evolving area of law. to the DMRE instead of the CIPC).
There is a specific list of these goods
and services which is attached to the It is important to note that false applications
Regulations, supplemented by numerous to the CIPC will be taken as a fraudulent
Ministerial directives. There are also specific application and will render a business, as
exclusions stipulated in the body of the applicant, liable to criminal prosecution and
Regulations, such as those limiting the sale, sanction. Further, the office of the Minster has
8Guide - COVID-19: Impact on Businesses and Investments in South Africa
subsequently released further communications regulations (i.e. the telecommunications sector),
which clarify that no companies will be some of which are discussed in more detail
prejudiced by any delay in the system and in the body of this note. It is critical that each
that it is not a requirement that companies business is aware of its corporate responsibilities
complete registration before lockdown. and regulations in its particular sector. If you
require guidance in this regard, please reach out
The Regulations also provide that the head to your attorneys for assistance.
of an institution providing essential services
must determine essential staff to provide 2. CONTRACTUAL CONSIDERATIONS
those services and authorise them in writing.
For certain sectors, this requires additional COVID-19 threatens the ability of contracting
approvals from the relevant regulatory body parties to meet their obligations or perform
(i.e. persons performing essential services as required under the relevant agreement
in the agricultural sector will also need regulating their relationship. Faced with a
approval from the nearest agricultural centre, public health crisis largely beyond their control,
etc.). This is dealt with in more detail below contracting parties may find it impossible to
in the chapter dealing with employees. fulfil those obligations on time or at all. At the
same time, those parties may themselves face
Other corporate actions non-performance or delayed performance by
counterparties. The impact on businesses in
Extensions have been given for many corporate these uncertain times may be significant.
actions (i.e. the filing of certain annual
returns, audit requirements for listed entities, Parties should review their agreements
etc). Our recommendation is to make every to assess their risks and seek to limit the
effort to comply with all ordinary regulatory risk of their non-performance or non-
requirements and corporate actions. If you performance by a counterparty and, in
are faced with obstacles in doing so, reach doing so, should consider the following:
out to your attorney to understand whether
or not a dispensation has been provided for • Breach of agreement:
that corporate action and the recommended Businesses should assess which of their
course of action. We have dealt with some of obligations are potentially affected/disrupted,
the corporate actions that are most materially which might result in a potential breach of an
impacted by the COVID-19 lockdown in agreement. The consequences of such breach
more detail in the body of this note (i.e. the must be considered and a plan implemented
calling of meetings, - under the Corporate to ameliorate such consequences. For
Proceedings heading, the declaration of instance, a party might be liable for damages
dividends - under the M&A Considerations suffered by the other party. The type of
heading, and audit requirements for listed damages must be assessed as they may
entities - under the Disclosure heading below). be too “remote” to claim as such loss was
never, at the time of entering the agreement,
Good practice considered by the parties. There is also a
responsibility for a party to take reasonable
Several sectors have released codes of steps to mitigate its losses. Another result of
good practice (i.e. for agro processing, etc.), breaching a term of an agreement might be
directives (i.e. for hygiene related matters) and that a party may have the right to terminate
9BOWMANS
the agreement as an event of default may • Variation and waiver of obligations:
be triggered. Businesses must be aware of As a consequence of COVID-19, parties
clauses with unforgiving time constraints that are unable to fulfil their contractual
for certain actions, where any delay will be obligations in strict conformity with the
significant and may entitle the other party to contract may ask their counterparty to
terminate the agreement. A breach of contract accept defective performance or to waive
may be countered with several defences, the obligation completely. A party facing
such as limitations of liability or force majeure such requests should be careful to ensure
clauses contained in the agreement or that in granting an indulgence that it is
supervening impossibility, discussed in not inadvertently varying the contract
more detail below. or waiving its contractual rights. By
contrast, a party seeking an indulgence
• Suspension, variation or termination of should ensure that any variation or waiver
contractual obligations: is effective and binding on the counter-
Parties seeking to be excused for non- party. In both instances, the parties must
performance can rely on either the general carefully consider whether the contract in
common law defence of supervening question contains a non-variation clause
impossibility of performance or on a force requiring any variation to be reduced to
majeure clause included in their contract writing and proceed accordingly.
• Supervening impossibility of • Mitigation of loss: A party suffering
performance is a common law defence damages as a consequence of breach
that suspends or in some cases terminates not excused by a force majeure clause or
a party’s obligations where an irresistible the common law defence of supervening
force (vis major) or unforeseeable impossibility is under an obligation to
accident (casus fortuitous) has made mitigate its losses. For example, should
fulfilment of its contractual obligations a customer breach its obligations to
impossible. The defence applies generally purchase from a supplier, the supplier
to all contracts and may be relied upon must attempt to sell its product
in the absence of a force majeure clause. elsewhere. If no attempt is made to do
In general, our courts have restricted the so, the supplier may be precluded from
scope of this defence so that it applies claiming damages.
in very limited circumstances. However, if
the alleged impossibility of performance • “Material Adverse Change” provisions:
is a consequence of COVID-19 and When reviewing their agreements, business
compliance with government directives should be alert as to whether any “material
and norms such as social distancing, adverse change” (MAC) or “material adverse
a court might find that public policy effect” (MAE) provisions are triggered as a
dictates that parties should be relieved of result of the outbreak. Such clauses ensue as
their obligations so that they can comply a result of specific negotiations between the
with these directives. In the event of a parties and might permit a party to avoid, or
supervening impossibility of performance, otherwise alter, the terms of an agreement
the risk of being placed in breach and should the outbreak or its effects be
facing a possible damages claim (whilst categorised as a MAC or cause a MAE.
the event continues) is mitigated.
10Guide - Compliance with the Data Protection Act 2019: How We Can Help You
The MAC clause usually also covers MAE this stage, only LawTrust and the South
and vice versa. MAE are usually defined as African Post Office are accredited providers
any material adverse effects on the business, of advanced electronic signatures.
assets, properties, results of operations or
financial conditions of a particular company. Essential service providers
MAC or MAE provisions are mainly found
as a condition precedent to an agreement • New Contracts: Depending on your
or to qualify the seller’s representation and contractual position (for example, as a supplier
warranties in an agreement. Such clauses may or a customer), make sure to include a force
trigger a price review and thus fundamentally majeure clause if you intend to suspend either
impact the value of a deal. parties’ obligation to perform should COVID-19
prevent such performance. Consider including
A significant challenge will be negotiating in the definition of “force majeure” epidemics,
MAC or MAE provisions in new transactions. pandemics or other events that may result
from an epidemic or pandemic, including
• Electronic signatures: In terms of the mandatory quarantines or any restrictions on
Electronic Communications and Transactions the importation of goods into the country.
Act, 2002 (ECTA), an electronic signature Ensure that the clause provides for a
is legally binding whether or not the parties notification requirement and deals with the
have expressly agreed to the use of an issues that may arise if a force majeure event
electronic signature and provided they have (such as COVID-19) occurs e.g. care of the
not specifically excluded the application of project pending completion works. Negotiate
the principles in the ECTA. It is also possible clear MAC or MAE provisions carefully
for contracting parties specifically to agree to considering whether or not the outbreak, its
use electronic signatures. Where the parties possible duration and its forecasted effects for
agree to use electronic signatures, then an the business should fall within the provisions.
ordinary electronic signature may be used
unless the parties have stipulated that only an • Commercial Mitigation: Parties should take
advanced electronic signature can be used. pro-active steps to mitigate their commercial
An electronic signature can be any type of risks as a result of the COVID-19 event and
digital marking that is used by a person to prepare for the interruption of their operations
be bound by a document or to authenticate or those of their commercial counterparties
a record, and can be any sound, symbol or arising from impossibility to perform existing
process attached to or associated with an contracts or the eventuating of a material
electronic record by the person intending to adverse change/effect.
sign the record. Where signature is required
or prescribed by law (i.e. where legislation Note:
requires that a document be “signed”), • Cancellation of consumer contracts and
but the law does not indicate the type of associated insurance considerations are dealt
signature to be used, then only an advanced with below.
electronic signature may be used in order
to comply with the signature requirement. • A proper assessment of the impact of
An advanced electronic signature can only COVID-19 on the contractual obligations of
be obtained from a provider accredited by parties requires a case-by-case/contract-
the Department of Communications. At by-contract analysis and companies should
11BOWMANS
conduct a full review of their contracts to agreements. In addition, it would be useful
assess their risk. Bowmans have an artificial to bear in mind that regulatory bodies
intelligence (AI) tool, Kira, which we have may undergo closure, at which stage the
trained to identify force majeure clauses in implementation of many transactions,
agreements. If you would like the assistance which are often dependent on successfully
of our AI in the review of your agreements, making regulatory filings, may be delayed.
please reach out to your attorney. Some of these regulatory closures are
dealt with in more detail in the body of this
3. OTHER M&A/ CAPITAL MARKETS note (i.e. as it pertains to amending the
CONSIDERATIONS constitutive documents of the company,
filing merger filings and intellectual
• Boards will need to actively evaluate property registrations).
opportunities for transactions not
previously available, be prepared to • Memorandum of Incorporation (MOI)
respond to potential activist attacks or amendments cannot be filed during the
other offers or actions by those capitalising lockdown period. This is because the CIPC
on the current situation, actively engage is closed for the filing of documents that
with regulators, each other, shareholders cannot be processed automatically. This
and other stakeholders and act quickly to may impact the timing and implementation
implement changes within the organisation of transactions that are dependent on the
necessary to mitigate risks, manage liquidity acceptance by the CIPC of an amended
and align corporate strategies. MOI. Parties to an agreement of this kind
should contact their attorneys to discuss
• Due diligences may need to be reworked alternative options.
logistically, particularly where physical data
room restrictions apply or on-site visits • Warranties and indemnities in transaction
are required for accuracy and verification. agreements will need to be carefully
In addition, the focus of ongoing due considered and negotiated, with detailed
diligences is likely to shift towards the disclosures and a considered approach to
ability of the target to conduct business the concept of “knowledge” and exclusions
optimally, in relation to the ability of associated with that concept.
employees, service providers and suppliers
performing at the expected efficacy • Access to funding either as conditions to
rate, and the appetite of customers in the agreement or otherwise will need to be
changing times. considered understanding the entity’s lines
of credit its ability to satisfy obligations.
• Regulatory or third party approvals which
have been granted in respect of specific • Roadshows which are usually held in
time periods may no longer be sufficient person will need to be reconsidered. It
to conduct all activities which need to be should be possible to hold the roadshows
completed within the available timeframes. electronically as virtual meetings,
In this case, discussions should be arranged depending on any applicable underlying
with such parties in order to decide documentation which may direct the
whether or not amendments are required content to be shared and the manner of
to the applicable approvals and related presenting it to investors.
12Guide - Compliance with the Data Protection Act 2019: How We Can Help You
• Where Solvency and liquidity resolutions must allow shareholders to communicate
are triggered as part of a transaction, the concurrently and to participate effectively in
anticipated impact of COVID-19 will need to the meeting, and the notice of the relevant
be taken into consideration in the directors’ meeting must inform shareholders of the
assessment of the forecasted financial availability of that form of participation,
position of the relevant company. including necessary information.
• Plans to declare dividends and dividend Annual general meetings (AGMs) of public
policies may need to be reconsidered companies are generally held in person,
by boards if the liquidity available to the where only shareholders physically present
company is constrained. The Johannesburg in person or by proxy may vote, although
Stock Exchange Limited (JSE) has shareholders may otherwise participate
pronounced on the topic of cancelling electronically. Where notices convening
payment, postponing or changing to the a physical meeting have already been
value of declared dividends, confirming issued, companies might wish to consider
that dividend announcements in respect converting that meeting to a virtual meeting,
of JSE listed companies must comply with and may need to issue an announcement
the corporate actions timetable. After the or fresh notice to shareholders postponing
finalisation announcement has been made the meeting to a later date and providing
and the last day to trade has passed, a details on how shareholders may access the
dividend variation will not be permissible. meeting (at that later date) electronically.
Changes to pertinent details between the
finalisation date and the last day to trade The question of whether a general meeting
(which do not include cancelling dividends) or an AGM may be held electronically or not
will result in starting the corporate action will have to be determined depending on the
timetable afresh. Issuers may only cancel a constitutional documents of the company
dividend and the resultant payment prior as well as the circumstances around the
to the finalisation date. A process has been company in question, with particular regard
set out for certain dividend variations to to, inter alia, the jurisdiction of any relevant
be made for JSE listed companies. Please regulators, including the Companies Tribunal
reach out to your attorney for more detail. (in respect of potential Companies Act
breaches), the JSE (for listed companies)
4. CORPORATE PROCEEDINGS/ and the Takeover Regulation Panel (where
HOLDING MEETINGS an affected transaction is involved).
One of the measures introduced to combat There are a number of service providers who
the spread of COVID-19 is the prohibition of provide virtual meeting platforms which enable
gatherings. This prohibition should be taken a meeting to be conducted entirely through
to include shareholder meetings. In terms of electronic means, including over the internet.
the Companies Act of 2008 (Companies Act), Companies would do well to start the process
a shareholders’ meeting conducted entirely of selecting the appropriate service provider
by electronic communication (i.e. virtual and testing the suitability of that service
meeting) is permissible, unless prohibited by provider’s technology for the company’s
the company’s MOI, but key parameters apply. needs. In choosing a suitable virtual meeting
In particular, the electronic communication platform, a board will have to consider the
13BOWMANS
nature of its shareholder base and whether its content; variation on the timing and nature
shareholders are likely to have the resources of the assurance report; and/or other
to meaningfully participate through the unusual reporting variations on a case by
chosen platform. For instance, if a company case basis.
wishes to employ a virtual meeting platform
that requires high speed internet access, it is On 3 April 2020, in consultation with
important to consider whether the majority the JSE, the Financial Sector Conduct
of the company’s shareholders are likely to Authority (FSCA) granted several blanket
have access to the internet at the optimal dispensations, subject to conditions. Please
speed required by the platform in question. reach out to your attorney if you require
any guidance in this regard.
Ultimately, companies will need to balance
their obligations to conduct shareholder • Price sensitive information and trading
meetings in a manner that complies with statements: Companies listed on the
their duties under the law, on the one JSE are required to make an immediate
hand, and, on the other hand, to protect announcement to the extent that any
the health and safety of their shareholders unpublished specific or precise sensitive
and other members of the community in information exists, which, if made public,
the context of the COVID-19 outbreak. would have a material effect on the price
of that company’s securities, amounting to
5. DISCLOSURE REQUIREMENTS price sensitive information. The impact of
COVID-19 on specific circumstances of the
The effect of COVID-19 may trigger several JSE listed company may amount to price
disclosure obligations for JSE Listed entities sensitive information and would necessitate
under the JSE Listings Requirements and an announcement. Similarly, the JSE Debt
the JSE Debt Listings Requirements. The Requirements also require disclosure
JSE has released a number of clarification of price sensitive information, including
communications in this regard. Certain of these consideration of the ability of the debt
requirements and clarifications are listed below: issuer to service the debt.
• Financial reporting obligations: IFRS Trading statements must be published
measurement and disclosure in relation by JSE listed companies as soon as
to equity and debt listed companies may such companies are satisfied that (a) a
be impacted by COVID-19 with regard to reasonable degree of certainty exists that
fair values, impairment assessments and for the period to be reported on next, the
accounting estimates. financial results will differ by at least 20%
The JSE has, through several (or 15% for property companies under
communications, acknowledged the specified circumstances) from recent
challenges regarding timeous publication financial results or a recent profit forecast
of financial results during this time, provided in relation to such period; or (b)
encouraging engagement with the JSE the aforementioned difference is less than
through sponsors in this regard. It has the percentages set out herein, but are
undertaken to consider, among other viewed by the company to be important
things, extensions; variations of the content enough to warrant release of a trading
of financial information relating to minimum statement. COVID-19 may well have an
14Guide - Compliance with the Data Protection Act 2019: How We Can Help You
impact on the anticipated financial results up holistically in order to cover
of a JSE listed company and may need to the impact of international COVID-19
be disclosed as such. resultant restrictions. Panic buying,
shortage of goods usually imported from
On 25 March 2020, the JSE stated that China or the EU, inefficiencies and the like
price sensitive information and trading may have severe global economic impact.
statements are key at this time, requesting Risk factors have always been disclosed
additional information. Trading statements as a matter of practice, but are even more
should be considered where the relevant important after amendments to the JSE
differences are less than 20% but Listings Requirements in recent times,
sufficiently important. Prescribed minimum making them mandatory. Amplified risk
information must be provided to the JSE via factor disclosures works will be beneficial
the sponsor for a reporting variation. The towards providing investors with adequate
reporting variation should be followed up background in coming to settling on
by a SENS announcement. informed investment decisions.
• Annual report: Material risks must be • Audit procedures and internal controls will
disclosed in the annual report pursuant require coordination, as audit personnel
to paragraph 8.63(s) and 7.F.7 of the JSE may face restrictions from access to on-
Listings Requirements. All material risks site facilities required in the auditing
which are specific to the issuer, its industry process. It would be prudent for audit
and/or its securities must be specifically committees to meet more frequently
disclosed and grouped together in a under the current circumstances.
coherent manner. On 25 March 2020, the
JSE provided transitional provisions with 6. BANKING AND FINANCE CONSIERATIONS
regard to Section 8 disclosures in the
annual report, based on the preparation COVID-19 may have a significant impact
involved in the publication and distribution upon the ability of borrowers to meet their
of annual reports. obligations under their existing funding
arrangements. This may particularly be the
• REITS: The JSE has expressed concern case for borrowers whose earnings derive from
for REITS who may lose REIT status due industries which have been most impacted
to temporary inability to fully comply by measures imposed by the Government
with the JSE Listings Requirements, but or otherwise by changing public behaviour
has not proposed a solid solution at this in light of COVID-19, for instance the leisure
stage. Issuers are encouraged to engage and hotel industry and the logistics industry
with their sponsors to assess the impact of (including airlines). Borrowers whose funding is
Covid-19 on its business and its ability to secured by securities, the value of which may
comply with Section 13 of the JSE Listings continue to be impacted by market volatility,
Requirements, and engage with the JSE if will likely also have cause for concern.
they will not have the continued ability to
comply with such requirements.
• Risk factor Disclosures in pre-listing
statements and circulars should be ramped
15BOWMANS
Faced with the default or potential undertakings) will depend upon the breadth
default of borrowers as a result of non- of the concept as negotiated by the parties.
performance or delayed performance, Care should be taken to consider whether the
parties should consider the following: MAE concept applies to individual members
of the Group or the Group taken as a whole
• Financial covenants may be adversely and which underlying metrics are being tested
impacted by COVID-19, particularly should in asserting this clause. Which party falls to
they be based on underlying earnings and/ make any determination of the occurrence of
or liquidity of the borrower or borrower a MAE will also vary on a case by case basis
group. Lenders may seek to exercise any (or clause by clause). Even if the ramifications
rights relating to more regular or ad hoc of COVID-19 could be interpreted to result in
reporting and certification of financial an MAE, whether such clauses would be relied
covenants, in order to monitor financial upon to call a default is uncertain as lenders
performance and borrowers may seek a have historically been cautious of relying upon
temporary loosening of such covenants the concept.
in order to alleviate pressure during this
period of uncertainty, particularly if long • With the exception of those discussed above,
term projections of underlying company other events of default typically contained in
performance remain strong. standard finance documents and which may
also be relevant, include:
• Transactions which are backed by
securities, the value of which may be • cross default to other financial
adversely impacted by the volatility of indebtedness and/or underlying
markets, may also see share cover ratios material contracts of the borrower;
slip towards default, with lenders potentially • insolvency and financial distress (as
seeking additional or alternative financial distress is forward looking,
qualifying security. over the next 6 months, this may be
a particularly sensitive trigger);
• Funding arrangements do not typically include • actions or steps taken with regard to
force majeure provisions that contracting any compromise with creditors;
parties may otherwise seek to rely upon • cessation of (all or a substantial part of)
to excuse non-performance due to events a borrower’s business.
outside of their control. In addition, it would
be extremely difficult to rely upon any • Borrowers should also be conscious of their
common law protection that a concept such information undertakings and any positive
supervening impossibility may otherwise obligations they may have to inform lenders
provide as, in the absence of a collapse of of circumstances which may result (or might
underlying financial systems, the repayment reasonably be expected to result) in a default
of money could not be said to be impossible. or MAE or of any other information material
• Most facility agreements should contain a to the funding and any security. Pro-active
MAE concept and whether lenders seek to rely engagement with lenders on potential
upon such clauses in order to limit utilisations issues that may arise may be advisable in
of facilities on the basis that an MAE is a the circumstances.
draw-stop event or call events of default
(or trigger thresholds for representations or
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• To the extent that financial covenants may subdivision, consolidation and leasehold
be breached or other defaults continuing, diagrams and sectional plans will be
borrowers may be unable to satisfy drawdown impaired. This will have a knock effect
conditions under their revolving facilities and on the implementation and timing of
may therefore seek to draw down before such transactions.
circumstances exist.
• The contractual relationships between
Some agreements may include market flex landlords and tenants: Undoubtedly, retail
provisions which may be called upon by lenders trade will be adversely effected – simply
if the conditions required to exercise the rights put, consumers will be reluctant to visit
under the such provisions have been met. retail centres and retail trade will suffer.
Similarly, the downturn in the economy
7. COMMERCIAL PROPERTY resulting from COVID-19 will impact the
turnover of commercial tenants. All of
The effects of COVID-19 will undoubtedly this will constrain the ability of tenants
be felt in the Commercial Property to service their rental obligations and,
sector. Principally, we envisage that in turn, effect the ability of landlords to
issues may arise with regard to: meet their corresponding debt obligations.
There is a lot of law in this space and it is
• The functioning of the Deeds Registries: recommended that you reach out to your
Like many other businesses, the effective attorneys for contextual advice.
functioning of our Deeds Registries is
dependent upon the staff and officials of • The implementation of developments:
the Deeds Registries. Deeds Registries The ability of developers and contractors
being closed or operating on skeleton staff to deliver developments on time will
or physical access to Deeds Registries be hampered by the effects which
being restricted will undoubtedly impair the COVID-19 will have on their workforces
ability of the Deeds Registries to register and the availability and delivery of
transactions. Registration is critical to goods and materials to sites.
Commercial Property transactions closing
and this will delay the implementation of Guidance of Business
transactions.
• Transactions which are already in the
• The functioning of Municipalities: The process of being implemented will need
comments made in relation to the Deeds to be reviewed to assess any delays in
Registries apply equally with regard to implementation which may arise from
Municipalities and other Governmental any of the considerations referred to
Departments (including the office of the above. Where applicable, the parties to
Surveyor General). The ability of such such transactions should endeavour to
Municipalities to issue rates clearance agree realistic extensions to cater for any
figures and certificates, approve building delays which may be experienced which
plans, subdivisions, consolidations and are outside of the control of either party.
other town planning procedures will Guidance should be sought from our
be impaired. Similarly the ability of the Commercial Property team in this regard.
office of the Surveyor General to approve
17BOWMANS
• Landlords should have regard to their reasonably practicable to eliminate or mitigate
existing leasing arrangements and should any hazard or potential hazard to the safety
begin engaging with tenants who are or health of employees, before resorting to
most at risk. Leasing arrangements personal protective equipment; b) the provision
should also be reviewed to assess the and maintenance of systems of work, plant
extent to which reliance can be placed and machinery that is as far as reasonably
on force majeure provisions. In the same practicable, safe and without risk to health;
vein, tenants should also begin assessing c) providing such information, instructions,
their positions. Ultimately, landlords and training and supervision as may be necessary
tenants will need to engage constructively to ensure, as far as reasonably practicable, the
with one another to find commercial health and safety at work of its employees;
solutions to the challenges which may be and d) enforcing such measures as may be
experienced – strict reliance on contractual necessary in the interests of health and safety.
provisions in the context of COVID-19 will If faced with an allegation that an employer
undoubtedly result in reputational harm. has failed to provide and maintain a working
Where applicable alternative arrangements environment that is safe and without risk to
will need to be reduced to writing and the the health of its employees, the employer
guidance of our Commercial Property team would need to be able to demonstrate that
can be sought. it has done everything that is “reasonably
practicable” in the circumstances.
• Developers and contractors should similarly
consider projects which are underway and/ • Restricting access to the workplace: The
or which are being planned and allowance General Safety Regulations published
should be made for any delays likely to be under OHSA prohibit an employer from
experienced. Discussions with counter- permitting a person to enter a workplace
parties to projects should begin sooner where the health and safety of such person
rather than later. is at risk. An employer is entitled to post up
a notice to its premises, if necessary in the
8. EMPLOYMENT CONSIDERATIONS interests of health and safety, prohibiting
the entry of unauthorised persons, and
Considerations outside of the lockdown period no person may enter or remain at the
premises without the permission of the
Specific provisions apply during the employer. Employers may impose rules
lockdown period. These are dealt with on their employees in order to ensure a
below. We first consider the position safe working environment and, in addition,
outside of the lockdown period. it may place conditions on entry to its
premises. Employers may exclude persons
Ensuring a safe and healthy work environment from their premises if they do not abide
by those rules. The employer should then
The Occupational Health and Safety Act, take appropriate steps, such as requiring
1993 (OHSA) imposes a duty on employers all entrants to the premises to sanitize
to ensure, as far as reasonably practicable, their hands and feet, requesting that they
a safe and healthy working environment complete an information register (see
for their employees. This duty includes, for below), requiring persons to submit to a
example: a) taking such steps as may be temperature test (see below) and, on the
18Guide - Compliance with the Data Protection Act 2019: How We Can Help You
basis of the aforegoing, and if deemed the person has disclosed recent travel to
necessary, require the person concerned to a location where COVID-19 incidents have
leave the premises. been reported or there exists a reasonable
apprehension of exposure etc.) to determine
• Logging and recording all access to whether or not to allow the person
the workplace: Any third parties who concerned into the premises.
enter the workplace including, but not
limited to, clients, service providers, and/ • Sanitisation facilities: In terms of the
or contractors, should be required to Facilities Regulations issued in terms of
complete an information register detailing, OHSA, employers must provide sanitary
among others, their names, telephone facilities in accordance with the National
numbers, address, e-mail address, and Building Regulations and, importantly: a)
identity number, as well as disclosure/s on provide soap or a similar cleansing agent
recent international travel as well as any free of charge to its employees. While this
other reasonable apprehension of having must be provided in the sanitary facilities,
been exposed to COVID-19. If there exists a it is advisable to make tissues and hand
reasonable apprehension that the individual sanitizers available in boardrooms and
has been exposed to COVID-19, or that s/ other public spaces at the workplace; b)
he has tested positive for COVID-19, then provide disposable wipes so that commonly
the employer may exclude the person from used surfaces (for example, doorknobs,
entering the premises or require the taking keyboards, remote controls, desks) can be
of a temperature test, but would need to wiped down by employees before use; c)
obtain the person’s informed consent in provide running hot and cold water (or pre-
doing so (see below). mixed hot and cold water) for wash basins;
d)maintain all rooms and facilities in a
• Temperature checks: If there exists a clean, hygienic, safe, whole and leak-
reasonable apprehension that the individual free condition; and e) routinely clean
may have been exposed to COVID-19, all frequently touched surfaces in
temperature checks may be conducted. the workplace, such as workstations,
The privacy of the individual should be countertops, and doorknobs/ handles.
respected in conducting the test, and the
test must be done with the individual’s • Ventilation: The Environmental Regulations
informed consent. Such consent does issued in terms of OHSA provide, inter alia,
not need to be given in writing, but it is that the employer must ensure that the
advisable to obtain written consent for premises are ventilated in such a way that
purposes of proof. The manner in which the the air breathed by the employees does
test is conducted must be as non-invasive not endanger their safety. Where there is
as possible, and the use of temperature a danger of unsafe air, the employer must
scanners, as opposed to thermometers provide the employees (and must ensure that
placed in a person’s ear or mouth, is they correctly use) respiratory protective
recommended. If the individual objects to equipment of a type that reduces their
the test, the employer may legitimately rely exposure to a safe level. Businesses are
on other relevant information at its disposal therefore required to ensure that the air-
(e.g. an observation test for excessive conditioning systems at their premises do not
sneezing, coughing, and/or whether or not expose the employees to the risk of infection.
19BOWMANS
Must the employer notify the authorities? Employees must accordingly obey the
health and safety rules and procedures laid
While COVID-19 amounts to a Notifiable down by the employer and carry out any
Medical Condition (NMC), this obligation falls lawful instructions given in this regard.
on health care providers and not employers.
Every doctor or nurse, laboratory, and medical In terms of section 14(d) of OHSA, if an
scheme in both the public and private health employee becomes aware of a situation that
sector who diagnoses a patient with any one is unsafe or unhealthy, s/he must report
of the NMC must report the case. Failure the situation to the employer as soon as
to report a NMC is a criminal offence. practicable. This may include a suspicion
that a fellow-employee or customer/client
What are an employer’s legal obligations exhibits flu-like symptoms or is running a
towards people who are not employees fever, or any other information which would
in the context of COVID-19? give rise to a reasonable apprehension that
the fellow-employee or customer/client
Section 9 of OHSA provides that every may have been exposed to and/or infected
employer shall conduct its undertaking by COVID-19. (A reasonable apprehension
in such a manner as to ensure, as far as may exist where an individual has recently
reasonably practicable, that persons other travelled internationally, has been in contact
than those in its employment that may be with someone who had tested positive for
directly affected by its activities are not COVID-19, or who displays flu-like symptoms.)
exposed to hazards to their health or safety.
In addition, every self-employed person What if an employee disobeys the
must conduct her/his undertaking in such employer’s rules on health and safety?
a manner as to ensure that s/he and other
persons affected by her/his activities, are not Employees who act in violation of an
exposed to hazards to their health and safety. employer’s health and safety rules or who
disobey reasonable and lawful instructions
In so far as there exist service level agreements in relation to health and safety rules may
between employers and clients, and/or service be subjected to appropriate disciplinary
providers, the employer should be cognisant action. Blatant disregard for such rules or
of the terms contained in these agreements instructions could potentially be a ground
and how the presence of COVID-19 in the for a dismissal on the basis of misconduct.
workplace may impact these agreements
e.g. force majeure and breach clauses etc. Can the employer be legally
What are an employee’s legal obligations liable if an employee contracts
in the context of COVID-19? COVID-19 at the workplace?
OHSA imposes a duty on employees to take It is important to remember that “reasonably
reasonable care for her/his own health and practicable” measures must be taken by an
safety and that of other persons who may be employer to provide and maintain a working
affected by her/his actions or omissions; and to environment that is safe and without risk to the
co-operate with the employer to enable a duty health of its employees. A proper assessment
imposed by the employer to be complied with. of what would be reasonably practicable must
accordingly be made in the circumstances
20Guide - Compliance with the Data Protection Act 2019: How We Can Help You
of each case. If taken too far, such measures Employee-absence
could be challenged on the basis of being
unreasonable but, if not taken when necessary If an employee is able to work remotely, s/he
to safeguard the health and safety of the would not require leave. S/he would continue
workplace, an employer may be found to have to work and would continue to be paid.
been negligent and liable for the consequences.
The Basic Conditions of Employment
The Compensation for Occupational Injuries Act (the BCEA) recognises certain forms
and Diseases Act, 1993 (COIDA) protects of leave, which may, depending on the
the employer from delictual liability in circumstances, be applicable to the
respect of an employee who contracts employee’s absence as a result of COVID-19.
an illness during the course and scope of
her/his employment. An employee who • Sick leave: In the event that an employee
contracts an occupational disease can claim displays flu-like symptoms or runs a fever,
compensation from the Compensation Fund the employee may be required to take
without having to prove the employer’s sick leave. BCEA entitles employees to
negligence. However, if the employer was 30 (thirty) days’ paid sick leave in every
in fact negligent, the employee may receive sick leave cycle. Where an employee has
increased compensation and the cost of such exhausted her/his sick leave entitlement,
increased compensation may be passed on the employee may be required to take
to the employer in the form of increased annual leave. If no annual leave is available,
assessment rates. COIDA only protects then absence due to illness may need to be
employers against claims arising out of injuries unpaid.
or diseases contracted by their employees
in the course and scope of employment. • Annual leave: Employees are entitled
to 15 (fifteen) working days’ statutory
Can the employer be liable if a third party annual leave per annum on full pay. This
contracts COVID-19 through contact with entitlement may be increased by agreement
the employer’s premises or employees? between the employer and the employee.
In terms of section 20(10)(b) of the BCEA
As stated above, COIDA only protects in the absence of agreement between the
employers against claims arising out of employer and employee, the employer may
injuries or diseases contracted by their require that annual leave be taken at a time
employees in the course and scope of determined by the employer.
employment. Customers or clients who
contract a disease due to their contact • Family responsibility leave: Employees
with an employer’s workplace and/or are entitled to 3 (three) days’ family
interaction with the employer’s employees responsibility leave per annum, which may
would have to institute a civil claim, and be taken to care for a sick child, or that
the normal delictual principles will apply. may be taken in the event of the death of a
close family member. Family responsibility
leave is not applicable where the employee
needs to care for a child who is not sick, but
who, as a result of school closures, must
be looked after. In such circumstances, the
21BOWMANS
employee may need to take annual leave. potentially be the case if, with the help of
This is subject to the employee having technology, employees are able to work from
annual leave available, and is subject to home. In these circumstances, the employer
the business needs of the employer. would continue to pay the employees who
are working remotely in the ordinary course.
• Special leave: While an employer may not
grant employees less favourable leave than Where remote working is not possible or
what is contained in the BCEA, they may feasible (e.g. in the case of teachers, pilots,
provide more favourable entitlements. In or public-facing staff etc.) the employer will
instances where a reasonable apprehension need to consider whether the employee’s
exists and an employee is self-quarantined, absence will be paid or not. This is because
the employer may decide to regard the the absence would not be as a result of any
absence as a form of “special leave” in of the recognised reasons for employee-
respect of which the employee would be absence, such as annual leave, sick leave, family
entitled to be paid. Special leave is not a responsibility leave, parental leave, or maternity
legislated form of absence and an employer leave. Rather, the reason for the absence is
is not legally required to offer such leave. the employer’s obligation to establish and
This is because the absence would not be maintain a safe and healthy work environment.
as a result of any of the recognised reasons
for employee-absence, such as those listed If the temporary closure is for a short
above. Rather, the reason for the absence period only, the employer may decide to
is the employer’s obligation to establish regard the absence as a form of special
and maintain a safe and healthy work leave in respect of which the employees
environment. would be entitled to be paid.
• Unpaid leave: Where an employee has In certain instances, the employer may wish to
exhausted her/his entitlement to statutory consider unpaid absence, or temporary lay-
paid annual leave, sick leave, and/or family offs. In these circumstances, the employment
responsibility leave, then any further leave relationship remains in place, but the employee
taken (in the absence of being able to work is not required or permitted to attend at work
remotely and/or special paid leave granted and is not entitled to be paid. The first thing to
by an employer) would need to be unpaid. consider here is whether or not there are any
applicable collective or industry arrangements
Business closures regulating the issue. In particular, parties to
some bargaining councils (like the Metal and
If alternative preventative measures are Engineering Industry Bargaining Council)
inappropriate or prove insufficient to ensure the have concluded collective agreements that
safety of employees or visitors at the workplace, permit employers to lay-off staff or initiate
employers may need to consider a temporary short-time measures where unforeseen
closure of the workplace. This should only be circumstances halt production. It may also
a measure of last resort, after the employer be that the individual employment contracts
has considered all other options. Where it of the employees contain appropriate
is possible for employees to work remotely, provisions that would entitle the employer
the employer may require that employees do to suspend the contract due to unforeseen
so for the duration of the closure. This could circumstances and not to pay the employee.
22Guide - Compliance with the Data Protection Act 2019: How We Can Help You
employer may refer a dispute to the CCMA.
Outside of these arrangements, the general After a certificate of non-resolution is issued, or
rule is that an employer may not unilaterally a period of 30 days has lapsed, the employer
suspend and/or vary an employment contract may give notice of a lock-out. The employees
and stop payment and/or change the terms would then be denied access to the premises
and conditions of employment. There is, and the employer’s IT systems, without pay,
however, an argument that unforeseen until they agree. In these circumstances, the
circumstances that expose the employer and employer may not utilise replacement labour.
the employees to significant and severe risk to
health and safety, may entitle the employer to Unilateral changes
temporarily close operations and stop payment
on the basis of “supervening impossibility” The general rule is that changes to terms and
of performance. These are unchartered conditions of employment may not be effected
waters in the employment context and, unilaterally and employees’ consent is required.
ideally, the employer should try and attempt The risk in the case of unilateral implementation
to reach agreement with the employees is that the employees may continue to tender
on how such absence would be treated. their services on their agreed terms and
sue the employer for specific performance.
Section 189 / 189A Process Alternatively, employees may require restoration
of the status quo in terms of s64(4) of the
If alternative measures (such as remote Labour Relations Act; or they may embark on
working) are not reasonably practicable strike action. In some cases, these risks may
or if preventative measures to safeguard be more apparent than real and employers
the workplace prove insufficient to ensure willing to take these risks, may potentially
the safety of employees or visitors at the implement certain changes to working hours
workplace, then as a measure of last resort, the and/or pay unilaterally. Again, this is a complex
employer may consider closing operations and area of law and advice should be obtained.
imposing temporary lay-offs or short-time/part-
time work. This could potentially be done under Considerations during the lockdown period
the umbrella of a retrenchment consultation
process in terms of section 189/189A of the How do employers’ OHSA duties
Labour Relations Act. This is a complex area work during the Lockdown?
of law and legal advice must be obtained.
The duties that an employer has under
Demanding changes to terms and the OHSA would extend to circumstances
conditions of employment where such an employee renders services
to the Company remotely from home.
Another option is for the employer to make a
demand regarding changed working times and For purposes of the OHSA, the employee’s
a reduction in pay. Employees who do not agree ‘workplace’ would be her/his home. Ordinarily,
to the employer’s proposals, may face being how the employer will ensure a healthy and safe
locked out in accordance with the provisions working environment would depend on the sort
of the Labour Relations Act. In essence the of work that is being carried out from home
parties would be required to negotiate to and what equipment and assistance may need
deadlock. If agreement is not reached, the to be provided to employees by their employer.
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