By Wayne Kinkade, Partner – Business & Taxation Law Practice Group
Spring is finally here. It’s that time of year when you realize that your New Year’s resolutions may have been a bit aggressive, your windows are filthy, and you are reminded that weeds grow nine times faster than flowers. If you have a little spring cleaning on your mind like me, how about some spring cleaning for your business?
On that theme, I have a few items to add to your spring checklist. Don’t worry, most of these are easier than committing to a daily exercise routine and eliminating your favorite carbohydrate.
Many businesses utilize contract templates that contain several “miscellaneous provisions” that may have not been revised in the last decade. In the past week, with half of the state shutting down, one contract provision of particular interest is a so-called “force majeure” provision. These provisions are designed to relieve performance due to certain unforeseen events (which may or may not relieve the obligation to make payments under the contract).
The following is a sample force majeure provision:
“Neither party shall be liable for nonperformance or late performance of any of its obligations *** due to reasons outside the party’s control, including acts of God, war (declared or undeclared), action of any governmental authority, riots, revolutions, fire, floods, earthquake, explosions, sabotage, nuclear incidents, locust, lightning, storms, sinkholes, strikes (or similar nonperformance or late performance of employees, suppliers, or subcontractors).”
At a minimum, you do need to know if your contracts contain a similar provision and if you should consider appropriate updates. Note: Most force majeure provisions don’t really include “locust.” I was just seeing if you were paying attention.
Until there is a claim or problem, most of us don’t spend enough time considering insurance coverage and coverage limits. I’m not just talking about general liability coverage. In recent years, we have seen new kinds of risks that were not on our minds just a few years ago.
Cyber Liability – Cyber liability insurance covers certain costs arising from a data breach, virus or other cyberattacks.
Be sure to confirm that the policy covers “ransomware” attacks, as these attacks are becoming increasingly common.
One of your staff opens the wrong email and the next thing you know, an insurance negotiator is working on the release of your data for a price that hopefully falls within your insurance coverage limits.
Business Interruption – businesses everywhere are seeing revenue hits due to the coronavirus pandemic. Certain losses may be recoverable depending on the nature of your policy (if you have coverage at all).
While we all hope that coronavirus soon runs its course, this is a reminder to consider contingency plans for other business interruptions in the future, potentially to include insurance.
Employment Practices Coverage – this is a type of liability insurance covering various claims arising against employers, including wrongful termination, harassment, retaliation, etc. With the ever-changing landscape in employment law, including Oregon’s Equal Pay Act and recent changes concerning the handling of paid sick leave, now is a good time to confirm insurance coverage.
Basically, let’s just make sure your company wasn’t “administratively dissolved” for failure to file your annual report. We see at least a dozen administrative dissolutions every year. As you know, the Corporation Division sends a reminder to file your annual report. If you immediately complete the form (usually, mark “no change” and send the fee), no problem.
Unfortunately, once you leave it on the corner of your desk, it could be years before the error is discovered (see below regarding cleaning your desk). In many cases, we can help you resolve the mistake, but administrative dissolutions can create a number of unforeseen problems. For example, if your business is dissolved, another business is free to register your business name with the Secretary of State. Not an ideal situation and this one can get expensive.
The law requires a corporation to have annual meetings of shareholders and directors. Even if you are an LLC (or another business form), it’s a good idea to sit down once a year to review your business plan and goals, consider budgets and marketing plans, and to think about your business succession plan. For a corporation, at a minimum, you should be annually electing a board of directors and electing a president and secretary. In addition, particularly in the event of an audit, financial decisions should be documented in the annual minutes (particularly those decisions that involve related parties or entities). If you do get audited, one of the first requests from the IRS will be to see your annual meeting minutes for the past three years (or maybe six years).
By far, the most successful business transition plans are those that occur many years before the business owners decide to turn over the keys to a successor. Whether you plan to pass the business to a key employee, your children or a third party, it takes time to successfully transition the business. Ultimately, a distress sale rarely fetches the highest price.
Early planning not only makes for an easier transition of your role, but can also help to ensure you receive full value for your business.
Clean Off Your Desk
No judgment here (this one is mostly for me). Files and paper tend to accumulate over time. Experts say that an organized workspace reduces stress and improves overall job satisfaction. Consider organizing, sorting, and cleaning your desk as part of your spring cleaning to-do list.
If you need assistance with any of the objectives on your spring cleaning checklist, give us a call. We are always here to help (but maybe not with cleaning off your desk).
Wayne Kinkade is a partner in the Business & Taxation Law practice group. Wayne is also a member of the Health and Construction industry teams. The information in this article is not intended to provide legal advice. For professional consultation, please contact Wayne at firstname.lastname@example.org at Saalfeld Griggs PC. 503.399.1070. © 2020 Saalfeld Griggs PC