The World Health Organization has recently declared a global health emergency over a novel coronavirus that has killed hundreds in mainland China since December 2019, and is continuing to infect many others across the globe. As the disease continues to spread, governments and organizations have rolled out measures such as closure of borders, factories, offices, shops and theme parks as well as suspension of flights to curb its spread.
Over the last few days, media, such as the BBC, Bloomberg, CNBC and The Times have started to report and warn of adverse economic consequences in mainland China and globally, mainly due to mainland China’s essential role in the global supply chain. These consequences include:
Based on our experience, various disputes and regulatory issues are likely to arise out of these unfortunate circumstances. These include:
As of 6 February 2020, there are 436 and 27 mainland Chinese companies listed on the Main Board and the GEM Board of the Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) respectively. Those whose business operations and financial performance have been or are impacted by the virus outbreak and/or containment measures will need to make accurate and timely disclosures of inside information (e.g., profit warnings) under the Securities and Futures Ordinance (SFO). Failure to do so could result in investigations and enforcement action being taken by the Securities and Futures Commission.
Key steps for management to consider if business and operations have been or could be adversely impacted by the outbreak of the novel coronavirus and/or the measures implemented to contain its outbreak:
o Consider whether these difficulties and/or inability to perform are caused by the outbreak of the virus and/or the measures to contain it, and document evidence of the difficulties and/or inability to perform.
o Consider whether there are any steps that can be taken to perform the contract and/or mitigate loss, and if so, take those steps and document evidence of the steps taken.
o Where performance is not possible, document evidence of the inability.
o Communicate in a timely manner with counter-parties to notify that there are difficulties and/or an inability to perform.
How can LC Lawyers LLP help – our service offerings
Our team of dispute resolution and regulatory compliance and investigations lawyers represent clients in cross-border complex disputes, including complex commercial litigation and international arbitrations cases, and advise on regulatory matters. We have a deep understanding of business practices and regulatory systems, particularly in Hong Kong and Mainland China, where we represent companies and executives in various industries, including financial services, commodity trading, manufacturing and retail, in relation to a myriad of disputes and regulatory matters, such as those described above.
We can assist management assess the impact of the novel coronavirus outbreak and the measures to contain them on businesses and operations. We can also assist management to devise a plan for dealing with the adverse consequences, provide practical guidance, including on the key steps summarised above.
We work closely with other law firm members in the global EY network, including Mainland Chinese lawyers, to provide our clients with jurisdictionally relevant legal advice and assistance.
Kareena Teh (Partner)
Philip Kwok (Counsel)
Catherine Wong (Associate)