Stay informed about our most recent articles, training activites and job offers.

Therrien Couture Joli-Coeur Newsletter

Stay informed about our most recent articles, training activites and job offers.

Write us

By filling out this form, you enable our team to fully understand your needs and offer you the service best suited to your expectations. We thank you for your trust and promise to provide you with a follow up as soon as possible.


COVID-19: What is the impact on companies operating internationally? - Part 2

  • Micheline Dessureault
By Micheline Dessureault Partner and Trademark Agent
3 COVID-19 Q&As for Companies Operating Internationally

Question 4: 

We have plans to acquire a company abroad. How can the virus have a significant impact on the transaction and is it a good idea to get the project going?

Answer 4: 

Especially in a context of setting up abroad, you will need to rely on key local people who are familiar with the company and the local market. The impact of the virus, from a demographic point of view, cannot be underestimated and it is therefore possible that the head of the company or some of the key people may be victims of this situation.

Furthermore, any acquisition abroad also presupposes that members of your staff will have to travel on numerous occasions to the country or countries involved in the transaction, as well as for extended periods of time in order to complete the transaction, implement practices and policies, harmonize tools and management, etc.

It is therefore obvious that the current situation may not only slow down the transaction, but also compromise it.

Finally, we must not overlook the volatility of the financial markets and it will be more risky to commit significant capital to expansion projects in the short and medium term, since the company will undoubtedly need access to significant liquidity to get through this crisis locally and to deal with the emergency and public security measures that have been put in place and those that will be put in place.

Nevertheless, international trade will not stop, and the situation will eventually return to normal. It is therefore also necessary to consider, in full knowledge of the facts, taking advantage of a market opportunity, even in these times of crisis.

If you wish to proceed with the possible acquisition transaction abroad, it will be essential to pay attention to the contractual documents (letters of intent, offer to purchase, etc.). These documents must not only provide for the addition of the "force majeure" clause, but also provide, among other things, for more flexible timetables, opportunities for your business to withdraw along the way or at certain stages, as well as specific conditions related to the workforce and the owners of the business to be acquired.

It will also be necessary to make sure to provide for additional declarations and obtain additional indemnification commitments from the vendor regarding the possible recourse of local personnel related to COVID-19, for example, for alleged misconduct on the employer for insufficient measures that led to the contamination and complications of the employees' medical condition, including death. Local laws will then apply to the recourse of employees or their estates. Our international affiliates will be called upon by our firm to provide you with valuable recommendations for such a transaction.

Question 5:

We are accustomed to making all our transactions in US dollars or Euros. We have many outstanding contracts in foreign currencies as well. What could we do, and should we change our habits for future transactions?

Answer 5: 

Unfortunately, from a contractual point of view, the contract between the parties will apply if it is already in place. Therefore, in the event of a currency fluctuation to your disadvantage, you will have to deal with the consequences.

However, it is always possible to contact your clients who, like you, are also concerned about currency fluctuations in these times of pandemic, especially when the currency of the transaction is not your buyer's currency either. It is possible to try to foresee at least a range of currency fluctuations, beyond which the parties will be able to renegotiate the contract with a price that provides for a more acceptable replacement currency for both parties, or to terminate the contract with or without penalty.

It would be prudent, given the volatility of the markets, which can also lead to significant variations in exchange rates, to use the various products available on the market, such as those offered by EDC (Export Development Canada) and your financial institutions, and to inquire about the full range of financial products and strategies available to you.

It is also likely that the various insurance products on the market that will be offered to you will soon be modified specifically in relation to a pandemic situation, as was the case with the addition of a terrorism-related exclusion following the events of September 11. You will need to find out about the exclusions and limits associated with these products in order to fully understand your true business risks.

Question 6:  

Our company has an international contract in place that contains a force majeure clause. We must immediately stop production and temporarily close the plant due to COVID-19. We are therefore unable to meet our obligations towards our clients. What do we have to do quickly?

Answer 6: 

First of all, the contract must be analysed as soon as possible to check the exact wording of the "force majeure" clause. This clause should normally contain an obligation for you to give written notice to the other party as soon as possible, informing them of the state of affairs and your inability to meet your obligations. This type of clause could include a specific maximum period of time that you must respect, or use expressions such as "without delay", "immediately", "as soon as reasonably possible in the circumstances", etc.

You will also need to consider how and to whom this formal written notice is to be given. It is imperative that the notice mechanism provided for in the contract be complied with, otherwise the clause will normally become inapplicable.

There is nothing to prevent you from sending such a notice by email, so that your client could quickly react, if the contract does not provide for email as a means of transmission. But remember that in order to benefit from this exception in the contract, you will also have to send the notice a second time using one of the methods provided for in the contract.

You will have to notify the other party of any changes that occur during the impediment, since you will normally have to resume performance of the contract once the impediment has ceased. The specific text of the "force majeure" clause could provide for even partial performance of your obligations as soon as it becomes possible for you to do so.

Finally, in a context of international law, if the contract provides that the laws in force in Quebec are the applicable ones, it is in light of Quebec law and its jurisprudence that the clause will be interpreted and that the facts and circumstances that forced your company to invoke this clause will be examined by the courts, should your client ever have to sue you for breach of contract. If the law provided for in the contract is that of another country or jurisdiction, the criteria could change, as could the interpretation by the local courts.

It is therefore important to seek advice from our specialized lawyers, who will also be assisted, if necessary, by our foreign partner firms, if foreign laws apply to your contract.

To read the first three Q&As for companies operating internationally, click here!