The current context demands that companies exercise greater diligence in managing their operations and maintain order and clarity regarding the legal aspects of those operations. Below is a list of 10 legal tips that companies should consider to minimize contingencies and achieve greater resilience in this time of crisis:
- Avoid long-term commitments: In this environment, it is not advisable to commit to long-term agreements. Although in many cases it may not be feasible to establish day-to-day contractual relationships (leases, distribution contracts, or similar), I suggest that any contracts you sign include terms that allow you to reassess or even terminate them in the short term.
- Clear rules: Establishing clear rules (through minutes or agreements) with your partners and collaborators regarding the management of the company is extremely important. Clear procedures and mechanisms for decision-making, resource use, and company administration are key to protecting your assets and maintaining harmonious relationships with your partners.
- Exit clauses: Review the procedures and rules regarding the termination or modification of contracts you have signed. Knowing these procedures in advance will allow you to save time and resources and to plan more effectively for any drastic measures you may need to take.
- Alternative dispute resolution: Any contract you sign should include an alternative dispute resolution clause. In times of crisis, the number of disputes and lawsuits tends to increase. Dispute resolution clauses help you handle conflicts with greater certainty, less stress, and lower costs.
- Keep all documents proving ownership and rights to your assets organized and accessible: Property titles, securities, vehicle registration cards, and similar documents are essential to demonstrate ownership of your assets and must be readily available if you wish to sell or use them as collateral.
- Credit documentation: This advice is similar to the previous one but relates to loans or credit you have extended. Any credit you have granted to a third party (loan, invoice credit, etc.) and your rights under it must be properly documented. Therefore, I recommend verifying that all your credits are duly supported and that their collateral (if any) is updated.
- It may seem obvious, but unfortunately it is not: Falling into noncompliance with obligations not only weakens your negotiating position when attempting to modify a contract or restructure debt, but can also generate additional charges (interest). Above all, it is important to remain in compliance with your obligations as agreed.
- Debt restructuring: If you are considering this option, present your creditors with payment proposals backed by assets that guarantee them. Not only can you offer real estate (mortgages) as collateral, but you can also offer vehicles, inventory, invoices, and accounts receivable, among other assets. These guarantees can be registered in the Movable Collateral Registry, which provides creditors with greater security regarding debt repayment.
- Transparency and good faith: In this context of crisis, transparency and good faith are increasingly rare and therefore more valuable. In every contractual relationship, act with honesty and good faith. Assume only those obligations you are confident you can fulfill. Do not create false expectations and discuss any potential default situations with your creditors openly and transparently.
- Maintaining your human resources is important, but at the same time, you must minimize your expenses. The suspension of employment contracts (and not necessarily their termination) can be the tool that allows you to achieve this.
The tips shared here are part of the content from the e-book “100 Tips from 10 Experts for Entrepreneurs in Times of Covid-19,” an excellent initiative promoted by Plata con Plática that contains valuable advice from several experts in different fields related to business. You can find the e-book at the following link:
https://plataconplatica.com/ebook-100-consejos-de-10-expertos-para-emprendedores-en-tiempos-de-covid/
