Current developments in the U.S. - the economic impact of the Covid 19 pandemic


***** Update on 28.05.2020 *****


Funding /State Financing Measures

  • On 24 April 2020, the U.S. Federal Government passed a USD 484 billion relief package, the Paycheck Protection Program and Health Care Enhancement Act (PPP Enhancement Act). It amends parts of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Small Business Act to provide an additional USD 310 billion in loans for the Paycheck Protection Program (PPP) and an additional USD 60 billionin funding for the Economic Injury Disaster Loan (EIDL) program.
  • The Small Business Administration recently clarified that private equity firms and hedge funds are ineligible for the PPP, while their portfolio companies may be eligible.
  • In an effort to support the economy, the Federal Reserve announced additional actions to provide up to USD 2.3 trillion in loans. These actions include:
    • Bolstering the effectiveness of the PPP by supplying liquidity to participating financial institutions through term financing backed by PPP loans to small businesses. This program will extend credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value;
    • Ensuring credit flows to small and mid-sized businesses with the purchase of up to USD 600 billion in loans through the Main Street Lending Program, a program designed to encourage eligible lenders to make new loans or increase existing loans to smaller and medium size businesses. Borrowers must be created or organized in the U.S. or under the laws of the U.S. with significant operations, and a majority of its employees based in the U.S. Under the terms of the expanded Main Street Lending Program, businesses with up to 15,000 employees and USD 5 billion or less in annual revenue may now qualify for relief;
    • Increasing the flow of credit to households and businesses through capital markets, by expanding the size and scope of the Primary and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) as well as the Term Asset-Backed Securities Loan Facility (TALF). These three programs will now support up to USD 850 billion in credit backed by USD 85 billion in credit protection provided by the Treasury Department.

Tax Reliefs

  • The Internal Revenue Service (IRS) will allow partnerships to file amended returns and real property businesses to undo interest expense elections to address the disconnect between certain partnerships’ ability to file amended returns and the CARES Act’s policy of providing immediate retroactive tax benefits.

Stock Market

  • In light of the continuing decline in equity markets, the New York Stock Exchange and the Nasdaq Stock Market recently modified their listing requirements with regard to market capitalization and USD 1.00 minimum price (in the case of NYSE-listed companies) and to market value of publicly held shares and USD 1.00 minimum bid price (for Nasdaq-listed companies), in each case by tolling the applicable compliance periods. Both rule changes were accepted by the Securities and Exchange Commission (SEC).

Corporate Governance

  • As of 6 April 2020, an executive order allows Delaware public corporations to re-notice or adjourn shareholder meetings as virtual-only meetings solely by a filing made under the Securities Exchange Act of 1934 and a press release. The executive order gives relief to Delaware corporations that had already noticed annual or special shareholder meetings and were unsure how to notice a change to a virtual-only format in accordance with the applicable state law.

New York State Court System

  • Beginning 4 May 2020, new motions, responsive papers to previously filed motions and other applications, including post-judgment applications and notices of appeal, may be filed electronically in all pending cases. This partially lifts the previously enacted prohibition on filings in any “non-essential” matter. The ban on filing new cases, however, remains in place.

New York State Considers Expanding Business Interruption Insurance Coverage

  • The proposed bill A-10226 would require insurance policies to cover business interruption for the duration of the COVID-19 state of emergency declared on 7 March 2020. The bill would apply only to those businesses with fewer than 100 eligible employees (working 25 or more hours per week). The respective Insurer required to make payments under A-10226 would be permitted to seek reimbursement from a state fund financed by a “special purpose apportionment” collected from insurers operating in the state.

New York State Allows Deference of Certain Insurance Premiums

  • Small businesses experiencing financial hardship due to COVID-19 may defer paying premiums for property and casualty insurance, including auto, homeowners, renters, workers compensation, medical malpractice, livery and taxi insurance for a 60-day period. There is also a moratorium on an insurer cancelling, non-renewing, or conditionally renewing any insurance policy issued to an individual or small business for a period of 60 days for any policy holder who is facing financial hardship as a result of the COVID-19 pandemic.


***** News published on 01.042020 *****

As the economic impact of the Covid-19 pandemic becomes increasingly visible, more and more companies are asking themselves to what extent the crisis will affect their business and the economy as a whole.

Noerr’s attorneys are continuously monitoring the situation and are committed to assisting clients to navigate the difficult legal issues they face when dealing with the Covid-19 pandemic. Comprehensive and up-to-date information regarding measures taken by the German Federal and State Governments is provided via our Corona Crisis Center.

The U.S. Federal Government is working on a multifaceted rescue program for large sectors of the U.S. economy affected by the Covid-19 crisis. We have compiled information on some of the most important measures taken by federal and New York State authorities, as well as key legal matters pertaining to the global pandemic. Please note that other federal U.S. states have implemented individual support measures and actions as well. As U.S. subsidiaries of German companies may be eligible to receive certain measures offered by the U.S. government, the following initiatives may be of interest.

The Most Current Legal Issues

Funding /State Financing Measures

  • The U.S. government passed the USD 2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which includes more than USD 500 billion in loans, loan guarantees and investments for companies in distress due to the Covid-19 pandemic.
  • The CARES Act also includes USD 349 billion in additional funds for guaranteed loans administered through the Small Business Administration (SBA).
  • Generally, to be eligible for loans under the CARES Act, a company must be created or organized under U.S. law, have significant operations and a majority of employees in the U.S. and have incurred direct or indirect losses due to the Covid-19 pandemic that jeopardizes their continued operations.
  • The federal government also provided USD 20 million to the Disaster Loans Program to help certain small businesses by providing loans of up to USD 2 million. To be eligible, the business must be located in a designated disaster area, show that it has suffered substantial economic injury as a result of Covid-19 and be a “small business.”

The bill does include some restrictions on companies receiving loans under the U.S. relief package:

  • Stock buyback: Companies are not allowed to purchase equity securities listed on a national exchange of the company or a parent company during the time of the loan plus one year, except to the extent required by preexisting contracts;
  • Dividends: Companies are not allowed to pay dividends or other capital distributions on common stock for the life of the loan plus one year;
  • Executive Bonuses: Officers and employees of such companies who received more than USD 425,000 in compensation during the 2019 calendar year can neither receive severance pay or other benefits of more than twice their 2019 compensation, nor can their total compensation (i.e., the aggregate amount of salary, bonuses, awards and other financial benefits) of any 12 consecutive months following the 2019 calendar year exceed their 2019 total compensation. Officers and employees who received more than USD 3 million in 2019 cannot receive more than USD 3 million plus 50% of their excess compensation over USD 3 million.
  • Liquidity support by the Department of Treasury:
    • Expansion of the Money Market Mutual Fund Liquidity Facility (MMLF) to include a wider range of securities, including municipal variable rate demand notes and bank certificates of deposit;
    • Establishment of the Primary Market Corporate Credit Facility (PMCCF) under which the Federal Reserve Bank of New York will provide liquidity to U.S. financial and nonfinancial businesses by providing loan and bond financing to U.S. companies with investment-grade debt ratings;
    • Establishment of the Secondary Market Corporate Credit Facility (SMCCF) under which the Federal Reserve Bank of New York will purchase in the secondary market bonds issued by U.S. companies with investment-grade debt ratings.
  • The Fed pledged to buy as much government-backed debt as needed to bolster the markets for housing and treasury bonds. It announced that it would also buy corporate bonds.
  • New York City Small Business Continuity Fund provides relief for businesses that are located in NYC and are experiencing a decrease in sales of 25% or more due to the coronavirus crisis. In order to be eligible, businesses need to have fewer than 100 employees.

Tax Reliefs

  • All companies affected by the Covid-19 crisis may postpone, payment of (a) all U.S. federal income taxes typically due on 15 April 2020 until 15 July 2020, in respect of the 2019 taxable year and, (b) all U.S. federal estimated income tax payments due on 15 April 2020, in respect of the 2020 taxable year. No interest, penalties or additions to tax will be due with respect to any postponed payments made by 15 July 2020.
  • New York State also moved its income tax filing deadline to 15 July 2020.

Support for Export Community

  • The Export-Import Bank of the United States announced support for new initiatives by injecting liquidity into the market and giving maximum financing flexibility in order to facilitate sales of U.S. goods and services abroad. The measures include:
    • Bridge Financing Program;
    • Pre-Delivery / Pre-Export Financing Program;
    • Supply Chain Financing Guarantee Program;
    • Working Capital Guarantee Program.

Corporate Governance

  • Many public companies are considering whether virtual annual general meetings can replace in-person annual general meetings this year. The option of virtual annual general meetings is subject to state law and the requirements set forth in the company’s articles of association. While Delaware law generally permits companies to hold virtual-only meeting, the law of New York State only allows companies to hold hybrid or in-person meetings. Therefore, virtual meetings are not an option in New York State.
  • The supervisory board continues to be responsible for oversight of the company’s risk assessment and management in connection with the Covid-19 crisis. As with any other risk area, the supervisory board must stay informed and offer strategic direction. Management should consider forming a task force if one is not already in place.

Amendments to Notary Law in New York State

  • Under certain conditions, any notarial act that is required under New York State law is authorized to be performed utilizing audio-video through 18 April 2020.