Responding to the potential business impacts of COVID-19

A special COVID-19 webpage managed by PwC experts. This page provides information on how you can prepare your organisation and respond.

PwC Estonia has set up a special COVID-19 expert team to help our clients find solutions in the time of crisis. On this page, you will find topical materials and an overview of key issues which we will help our clients address and which are related to the spreading of the virus and the state of emergency.

Estonia is one of the few countries in the world where most public services are electronically accessible. Even though the crisis is a challenging situation for us all, it is still possible to continue most of the business activities, as they depend on the accessibility of public services. 

As a global network of firms, we can make use of the best practices of our Asian and European colleagues who have developed crisis plans for a range of issues from the business and financial consultations to operative and technical solutions. PwC’s tax and financial consultants and PwC Legal’s lawyers will give you a comprehensive overview of all relevant issues, to allow you to systemically navigate all your activities in these difficult times.

PwC’s specialists can help you in various roles and with a range of tasks – they can help your management think of potential options and provide operational advice, assist you in project management during the crisis, help you develop and rapidly implement solutions for specific problems, arrange secondment of human resources to perform the activities within your organisation, and do much more.

Our global crisis centre is currently working with a range of organisations across industries.

Six key areas of focus for organisations

Crisis management and response

Existing business continuity plans may not be capable of handling the fast-moving and unknown variables of an outbreak like COVID-19. 

What you can do now: 

  • Develop incident management and scenario plans that are specific to this crisis

  • Focus on factually and effectively communicating to stakeholders

  • Plan on how to meet government priorities in individual countries and minimise the risk of business disruptions

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Workforce

Beyond human welfare, there are other people challenges to tackle, including how to support remote working at scale.

What you can do now: 

  • Attend to immediate global mobility concerns, such as reviewing travel rules, HR policies, first-aid plans

  • Assess remote working strategy, including asking employees to temporarily stop work or work remotely or relocate

  • Address strains on a firm’s existing information technology and communications infrastructure in order to support remote working during the crisis

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Operations and supply chain

The ripple effects of the COVID-19 pandemic are difficult to model and assess, but global businesses can begin to mitigate supply chain distributions. 

What you can do now: 

  • Identify alternative supply chain scenarios — especially as new cases of the virus emerge in different territories

  • Activate pre-approved parts or raw-material substitutions

  • Adapt allocations to customers and pricing strategies

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Finance and liquidity

Financial markets often watch how companies plan for and respond to events like the COVID-19 pandemic.

What you can do now: 

  • Consider disclosures related to direct effects on the results of operations, as well as second- and third-order effects

  • Think about disclosures related to risks and uncertainties about the impact of COVID-19 on future periods

  • Assess disclosures on the current and future impact on liquidity and capital resources

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Tax, trade and regulatory

Navigating complexity and risk in today’s global uncertainty takes more than an understanding of tax and regulatory systems. It is critical that tax functions consider the broader economic, political and societal context you operate in, in order to make informed and compliant decisions that drive your operations forward.

What you can do now: 

  • Effectively manage cash taxes, obtain available refunds and consider local government and tax authority measures in response to COVID-19

  • Consider actions to stabilise supply chains while bracing for an unpredictable revenue and profitability mix in key markets

  • Assess the resources your company needs to meet your ongoing indirect and direct tax compliance requirements

  • Explore opportunities focused on becoming more flexible in responding to arising uncertainties

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Strategy and brand

As companies move from reacting to mitigating the impact of the outbreak, strategies to emerge stronger may come in focus.

What you can do now: 

  • Consider accelerating digital transformations as the shift to remote working reveals gaps in IT infrastructure, workforce planning and digital upskilling

  • Protect growth and profitability through actions such as scenario planning, more frequent financial modeling exercises to improve resiliency, and new models that incorporate economic impacts of past pandemics

  • Take the pulse of your customers, thinking through longer-term considerations around shifts in core markets or business models as a result of the pandemic

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KEY BUSINESS ISSUES RELATED TO THE COVID-19 CRISIS

Our team is continuously updating the content and adding new information to this webpage to keep all the information in correlation with the evolving crisis plan of our government.

Taxes

What will happen if tax declarations are not submitted or taxes due are not paid by due dates?
How can one defer taxes?
Is it possible to reduce one’s tax burden?
In case of payment failures, is interest payable and to what extent; can that extent be reduced?
Can compensating costs to those working from their homes lead to (additional) tax liability?
Is it possible that the salaries of those who used to do cross-border work will now be taxed differently; if so, how?
Is it important to still honour the minimum obligation to pay social tax and why?

The tax authority has gathered important information on the state of emergency, please see its webpage for further details.

NB! The calculation of interest on tax arrears will be suspended during the state of emergency

In order to mitigate the financial problems of companies, the Tax and Customs Board will suspend the calculation of interest on tax arrears of companies. The suspension will apply retroactively from 01 March and will be in force until 01 May. However, all declarations must be submitted by the required deadlines and all persons who are capable to pay their taxes by due dates should do so.

Please see for more information: https://www.rahandusministeerium.ee/et/uudised/eriolukorras-peatatakse-maksuvolgade-intressi-arvestamine

  • Declare and pay your taxes by due dates – owing taxes is expensive because in addition to the main debt you must also pay interest in the amount of 0.06% per each delayed day. Furthermore, the interest payable is subject to income tax.
  • In case of payment failures, the person liable to pay taxes can submit to the tax authority a reasoned request to pay tax arrears in instalments and ask for a deferral of such tax obligations that are not yet due. For a more efficient management of cash flows during the state of emergency, one may consider whether they should ask for the possibility to pay tax arrears in instalments. In general, the tax authority takes a reasoned decision within 20 days. Currently, it is however possible to request for the payment of taxes in instalments in a simplified proceeding. Please see the webpage of the tax authority for more information. While requesting the possibility to pay taxes in instalments, it is possible to apply for the reduction of the interest on taxes (0.06% per day) by 50% (this will be automatically granted in the simplified proceeding).
    PwC’s tax department can help you in preparing and drawing up your reasoned request and timeline and communicating with the tax authority.
  • The basis for changing one’s residence for tax purposes and the issue of taxing the income from employment in a situation where a person is unexpectedly quarantined in a country which is not their actual place of work, may cause problems if the person must remain in the quarantine for a lengthy period (6 months).
    PwC’s tax department can help you in mapping the situation and finding red flags (the basis for changing the residence for tax purposes and taxing the income) in communicating with the tax authority.
  • Incurring costs due to teleworking. A cost is business related if it is incurred with the objective to earn taxable business income or if incurring such a cost is necessary or suitable for maintaining or developing taxable business activities and if incurring such a cost for business purposes is clearly justified. During the state of emergency, costs incurred to maintain and develop one’s business activities may somewhat differ from costs incurred under normal circumstances.
    PwC’s tax department can help you in mapping your costs, providing an assessment on whether specific costs are related to business activities, and communicating with the tax authorities.
On 15 April 2020 Estonian Parliament approved Supplementary Budget Act that stipulates measures to mitigate the effect of the spreading of corona virus that causes COVID-19. These measures include the following tax measures:

Personal protective equipment and other medical equipment shall be exempted from the customs duty and VAT

Personal protective equipment and other medical equipment used to prevent and stop the spreading of COVID-19 virus shall be exempted from the customs duty and VAT

The measure applies to such personal protective equipment that is imported by or in the name of national authorities and public sector bodies for free distribution or self-use. Neither the legislation of the European Union or Estonia provides an exhaustive list of goods to which the duty and tax exemption applies but there is an indicative list used by Estonia in granting the new exemptions. Duty exemption is not automatic but is granted by a decision of the Tax and Customs Board upon the submission of the customs declaration. The initial period for tax and duty exemption is from 30 January 2020 to 31 July 2020.

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The list of goods and services to which a reduced rate of VAT (9%) applies will be extended

The aim of this amendment is to extend the reduced VAT rate (9%) applicable to hard-copy publications to publications on other physical media and to electronic publications (books, academic literature, press publications), which are presently subject to the VAT rate of 20%. Publications on physical media other than hard-copy publications are audiobooks that are stored on a CD or other physical medium and that include the same textual information as a hard-copy or electronic book. The amendment aims to put the tax treatment of hard-copy publications and publications on other physical media and electronic publications on an equal footing. VAT Act will be amended as of 01 May 2020.

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The employers will not have to pay at least the minimum amount of social tax on all salaries

Employers will not have to meet the obligation to pay at least the minimum amount of social tax per employee on salaries paid in March, April and May 2020. There is an obligation to declare and pay social tax on remuneration that was actually paid to the given employee. Employees will not lose their right to medical insurance due to this exemption. 

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Persons with a contract concluded under the law of obligations

Persons with a contract concluded under the law of obligations, i.e. not an employment contract, will not lose their medical insurance

Medical insurance for the insured persons that work on the basis of a contract concluded under the law of obligations will not lose their medical insurance from the 10th day of the second month following the month in which the state of emergency ends even if the minimum obligation to pay social tax is not met during the state of emergency. There is an obligation to declare and pay social tax on remuneration that was actually paid to the person.

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Sole proprietors payments

The state will fund the advance payments of social tax for sole proprietors in the first quarter and the sole proprietors will be exempted from the obligation to pay social tax on the monthly rate for the spouse participating in the activity of the sole proprietor’s enterprise.

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Mitigating measures in relation to tax interest

Calculation and payment of tax interest will be suspended from 01 March 2020 until the end of the state of emergency.

The rate of the general tax interest will be reduced from 0.06% to 0.03% per day from the end of the state of emergency until 31 December 2021.

The tax authority shall have the right to reduce the interest on a deferred tax liability by up to 100% during the period of 01 May 2020 to 31 December 2021.

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A supplementary income tax exemption on donations and gifts

If a legal person makes a donation or a gift for charitable purposes to an agency of an Estonian state body or a local government body or a social welfare institution or to an owner of an Estonia-based hospital during the period of 12 March 2020 to 01 July 2020, such a donation or gift shall not be subject to income tax. 

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Excise duties will be temporarily reduced

Temporary rates of excise duty shall apply for the period of 01 May 2020 to 30 April 2022. It is presumed that lowering the rate of excise duty will decrease the price of diesel fuels by 4 euro cents per litre, the price of light fuel oil by 14.5 euro cents per litre, and the price of natural gas with VAT will thus be reduced for consumers by nearly 47 euros per 1000 m3. Lowering the electricity duty to 1 euro per MWh results in a 3.1% reduction in the electricity price.

Please see more for information on temporary rates of excise duties.

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The state will suspend its payments (4%) into the second pillar pension scheme

The state will suspend state-funded payments into the second pillar pension fund of employees for the period of 01 July 2020 to 31 August 2021. An exception will be made for those who were born in the years 1942–1960: the state will continue to make payments into the accounts of those persons.

Starting from October 2020, employees will be entitled to submit applications to suspend their own payments (2%) into the second pillar pension fund for the period of 01 December 2020 to 31 August 2021. The state will compensate for the suspended state-funded payments by making supplementary payments into the second pillar pension scheme in the years 2023-2024.

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Hannes Lentsius

Tax Service Line Leader, PwC Estonia

+372 5691 1698

Email

Kristiina Stokkeby

Tax Senior Consultant, PwC Estonia

Email

Priit Lätt

Partner / Head of IP/IT, tax disputes and public procurement, PwC Legal

+372 511 9628

Email

Employment relations
  • How to reduce the amount of work on a temporary or a permanent basis? 
  • What are the special rules for redundancy or forced leaves during the crisis?
  • Is it necessary to conclude temporary agreements for reducing pay and amount of work?
  • Is it necessary to prepare for layoffs? Collective layoffs?
  • Is the reduction of the amount of work temporary? Forced leave for up to 3 months?
  • Is it necessary to temporarily recruit more people (the commercial sector)?
  • For which jobs will teleworking be possible?
  • What to do in a situation where a critical number of employees cannot or are no longer allowed to come to the workplace?
  • Which jobs are of key importance for the organisation and which jobs will be sacrificed first, if this proves to be necessary?
  • Which employees does the organisation need in short and medium term?
     

The Estonian Unemployment Insurance Fund has approved measures to help employers maintain jobs by the state’s support in paying salaries. Support will be given to employers who meet at least two criteria out of three:

  • their turnover or income has dropped by a minimum of 30 per cent as compared to the same period last year;
  • they are unable to provide work for at least 30 per cent of their workforce due to the spreading of the Covid-19 corona virus;
  • or they have reduced the pay of at least 30 per cent of their workforce by 30 per cent.

The Estonian Unemployment Insurance Fund will compensate employees 70 per cent of their average gross salary of the last 12 months, but the sum shall not exceed 1000 euros. Employers must also contribute by paying an additional sum of at least 150 euros.

The measure shall be in force in March, April and May and an employer may benefit from the measure for two months during this period. It is also important to note that the measure is applied retroactively, i.e. it can be used to help those who have already been made redundant due to the crisis.

Indrek Ergma

Specialist Counsel / Attorney-at-Law Head of Corporate and Employment, PwC Legal

+372 529 4580

Email

Maris Alt

Associate, PwC Legal

+372 509 8203

Email

Erki Mägi

Advisory Director, PwC Estonia

+372 5625 6340

Email

Contracts

Is non-performance of a contract permissible if it occurs due to force majeure? 
What are the rights of the contractual party to whom the contract is not performed because of force majeure? 
Can one delay payment for the already delivered goods due to force majeure?

  • If a contractual obligation cannot be performed due to force majeure, it is possible that such non-performance is excusable. You need to check whether your contract contains a definition of force majeure and what this definition is.
  • You need to immediately inform the other party to the contract of the force majeure event (an export prohibition, delivery problems, suspended production) that prevents you from performing your obligations and its impact on the performance of the obligation.
  • Please note that the occurrence of force majeure primarily prevents one from claiming for damages and penalties for late payment and a contractual penalty if the right to claim a contractual penalty was agreed upon in the contract. The party that has not violated the contract shall still be entitled to withhold performance of their own obligation, withdraw from the contract or cancel the contract and reduce the price. However, even in the case of force majeure, a party may only terminate the contract if the breach of the non-performing party caused by force majeure is a material one. In order to withdraw from a contract or cancel a contract, one must make a declaration to the other party.
  • Please note that non-performance of an obligation is excusable only for the duration of the period during which performance was prevented by force majeure. Before the force majeure event occurred and after it has ended, you still must perform the contract, unless this is impossible due to the nature of the contract (e.g. the contractual obligation was to deliver goods on a specific date/for a specific event). It is therefore possible that the contractor is not released from the liability for delayed completion of the works, if the completion was delayed already before the force majeure event occurred and the contractor had failed to order materials by the required deadlines while the export prohibition was not yet in place.
  • Non-performing a monetary obligation is not excused by the occurrence of force majeure. Upon incurring financial difficulties, it is therefore necessary to start negotiations with the other contractual party as early as possible for drawing up a payment plan or agreeing on new payment deadlines. It is also possible that due to the state of emergency, the balance of the parties’ contractual obligations changes, especially if closing one’s business is not a voluntary decision, but a duty prescribed by the state. For example, cinemas, entertainment facilities, sports clubs and spas do not need daily maintenance and cleaning services while they are closed, and during the closure, those businesses are unable to earn income. Paying for the afore-mentioned services is therefore now much more complicated or financially burdensome for them. In such a case, the primary claim of the injured party is to modify the contract in a manner that restores the original balance of the parties’ obligations. If modifying the contract is not possible or reasonable, the injured party has a right to terminate the contract.

Indrek Ergma

Specialist Counsel / Attorney-at-Law Head of Corporate and Employment, PwC Legal

+372 529 4580

Email

Karin Marosov

Specialist Counsel / Attorney-at-Law Head of Real Estate, Commercial and Trade, PwC Legal

+372 518 9852

Email

Rutt Värk

Head of M&A, PwC Legal

+372 523 3800

Email

Financing
  • How and on what terms can one apply for a grace period at one’s bank? 
  • Will it be possible to suspend all payments, or will interest still be payable?
  • Can due dates be deferred?
  • Will penalties on late payments have to be paid?
  • How can additional financing be secured? 
  • When and how to inform one’s investors of one’s potential financial problems?

Viljar Kähari

Managing Partner / Head of Banking & Finance, Estonia, PwC Legal

+372 508 4777

Email

Erki Mägi

Advisory Director, PwC Estonia

+372 5625 6340

Email

Raul Ruubel

Deals Senior Manager, PwC Estonia

+372 5650 4101

Email

Allar Karu

Deals Manager, PwC Estonia

+372 520 3069

Email

Restructuring and reorganisation

Companies that suddenly face financial difficulties and enter negotiations with their key creditors need to understand potential future scenarios. It is also possible that a company in such a situation needs a restructuring plan and advice on how to achieve the best possible capital structure.

PwC can assist you in the following fields:

Refinancing

  • Assessing the existing capital structure, involving a review of loan covenants and securities.
  • Advising the client in negotiations with their finance providers to secure best possible financing terms.

Restructuring

  • Preparing and executing the restructuring strategy.
  • Writing a business plan and outlining future scenarios for the alternative ways of restructuring.

Acquiring financial resources and finding new sources of financing

  • Acquiring new financial resources up to the point of securing the new financial resource; project management; and communication with potential creditors.
  • Choosing the best financial resource among those available for the client and defining the optimum debt burden.

Management accounting tools and managing the expectations of different parties

  • Defining shareholders, creditors and other interested parties and coordinating the communication among them.
  • Developing a financing model to monitor cash flows and compliance with special terms in the loan agreement. Creating scenarios and stress tests.

Tax issues related to restructuring

  • Reorganizing shareholder participations and business activities always includes tax issues, be they related to income tax or VAT. Our international tax team will help you resolve both domestic and cross-border tax issues.

Drawing up transaction documents and negotiating

  • PwC can also be of assistance in providing a suitable legal solution for restructuring the company by helping you draw up relevant transaction documents and supporting you in negotiating the deal.

Reorganisation

  • If business activities come to a standstill due to the state of emergency, one way of addressing the obligations that continue to pile up is reorganising the company.
  • Reorganisation – a proceeding conducted via courts - is an adequate tool for overcoming the period of economic difficulties caused by the impact of the virus, restoring liquidity and granting that the company can be sustainably managed.
  • Reorganisation allows for, inter alia, extended deadlines for performing one’s obligations, performing monetary obligations in instalments and reducing the company’s debt.
  • It is also possible to restructure taxes that the company owes and the obligations it has to the bank. 
  • In the context of an unexpectedly changing economic environment, one should not think of reorganisation as a failure – on the contrary, reorganisation is a tool that should be employed without undue embarrassment, where necessary.

Teet Tender

PwC Advisory Leader, PwC Estonia

+372 5621 8528

Email

Erki Mägi

Advisory Director, PwC Estonia

+372 5625 6340

Email

Raul Ruubel

Deals Senior Manager, PwC Estonia

+372 5650 4101

Email

Tarmo Meresmaa

Consulting Senior Manager, PwC Estonia

+372 5819 3443

Email

Hannes Lentsius

Tax Service Line Leader, PwC Estonia

+372 5691 1698

Email

Maris Tamp

Tax Manager, PwC Estonia

+372 5384 1005

Email

Maret Ansperi

Tax consultant, PwC Estonia

+372 5396 6938

Email

Kristiina Stokkeby

Tax Senior Consultant, PwC Estonia

Email

Rutt Värk

Head of M&A, PwC Legal

+372 523 3800

Email

Indrek Leppik

Partner / Head of Litigation, PwC Legal

+372 5621 0872

Email

Erko-Andreas Roosik

Associate, PwC Legal

+372 5342 8581

Email

Independent Business Review of the Company

At the time of economic turmoil, many companies, the public sector and banks may have a greater need than usual to involve fully independent parties who would analyse the status of the companies or their business plans.

PwC can assist companies that are applying for finances, support schemes or need an independent assessment for some other reason, by the following:

  • A review of the company’s current financial position and the short-term need for liquidity, given the present economic environment
  • Detecting fields of activities that need external financial support provided either by the government or a financing institution, and quantifying the need for finances
  • An independent review of the financial information put together for the application for financial support
  • Assistance in the process of applying for government-funded financial support

PwC can assist the public sector bodies that analyse the private sector’s need for financial support, by the following:

  • An independent analysis of financial data submitted by those applying for emergency funding
  • An independent analysis of the company applying for emergency funding and their short-term need for liquidity

PwC can offer the following to financing institutions that assess the potential ways of achieving agreements with their existing and new borrowers:

  • Independent analysis of clients that suddenly face financial difficulties
  • Compiling a transparent overview of the client’s financial status

Teet Tender

PwC Advisory Leader, PwC Estonia

+372 5621 8528

Email

Erki Mägi

Advisory Director, PwC Estonia

+372 5625 6340

Email

Raul Ruubel

Deals Senior Manager, PwC Estonia

+372 5650 4101

Email

Allar Karu

Deals Manager, PwC Estonia

+372 520 3069

Email

Mergers and takeovers during recession

It is possible that the profitability of your company suffers from the present economic uncertainty and you will suddenly have an urgent need for additional funding. This need may be met by selling your company or assets. PwC can assist you in detecting relevant financial and tax problems, comparing potential solutions and rapidly implementing the chosen solution in the context of legal services.

PwC can help you during the sales process of the company or its assets by the following:

  • Assessing the possibilities for a rapid sale
  • Preparing a data room
  • Assessing the company or its assets
  • Defining potential investors and contacting them
  • Preparing transaction documents, negotiating and managing the process
  • Managing the communication of different parties throughout the process
  • Advising the client on conducting the post-deal integration

Economic turmoil also provides new expansion opportunities, including potential takeovers of other companies, for those that have a robust financial position. PwC can do the following for you:

  • Mapping potential investment targets
  • Contacting the investment targets
  • Providing a quick assessment of the investment target or performing the financial analysis
  • Assessing and mapping tax risks
  • Effectively managing the transaction process up to the desired result
  • Integrating the activities of the target into the buyer
  • Compiling transaction documents and negotiating

Teet Tender

PwC Advisory Leader, PwC Estonia

+372 5621 8528

Email

Raul Ruubel

Deals Senior Manager, PwC Estonia

+372 5650 4101

Email

Allar Karu

Deals Manager, PwC Estonia

+372 520 3069

Email

Hannes Lentsius

Tax Service Line Leader, PwC Estonia

+372 5691 1698

Email

Maris Tamp

Tax Manager, PwC Estonia

+372 5384 1005

Email

Kristiina Stokkeby

Tax Senior Consultant, PwC Estonia

Email

Rutt Värk

Head of M&A, PwC Legal

+372 523 3800

Email

Technology
  • Which teleworking solutions does the organisation need and which solutions should it choose?
  • How to organise implementation of teleworking?
  • How to provide efficient IT-support to teleworkers?
  • Are the teleworking solutions used by the organisation safe ones?


How we can help: profiling workplaces for teleworkers

  • Establishing the teleworking needs of your employees (access to data and information systems, need for hardware and software);
  • Identification of deficiencies in teleworking services (existing services; services that can be launched by the existing means; deficient services);
  • Alternative solutions and recommendations (offering you alternatives based on their price, implementation speed or other agreed criteria and assisting you in making your choice);
  • Creating profiles for workplaces of teleworkers (hardware – work equipment and peripheral equipment; software – applications; data and cooperation – access to services);
  • Drawing up service-based access guidelines (step-by-step instructions to your employees for gaining access).

Janar Linros

Manager of ICT Consulting, PwC Estonia

+372 506 0390

Email

Public procurement
  • Can procurement deadlines be extended? 
  • Is it possible to procure goods without the procurement proceeding because of the crisis? 
  • How does the state of emergency affect payments from structural funds? 
  • Is it permissible to modify a public contract due to COVID-19?

The impact of COVID-19 on payments from structural funds and the eligibility of costs

Ministry of Finance, the managing authority responsible for payments from structural funds, has announced that certain costs will be deemed eligible due to the Covid-19 crisis and if, due to the state of emergency, the beneficiaries are unable to complete their activities by the end of the eligibility period, they should submit an application to modify their project to the intermediate body that paid out the support. Please see the official position of Ministry of Finance.

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The impact of COVID-19 on conducting public procurements

  • COVID-19 (and the state of emergency) may give contracting authorities an option to conduct public procurements using the negotiated procedure without prior publication.
  • Contracting authorities should also weigh the option of extending the deadlines in the ongoing public procurements and taking any other relevant measures to allow participation of a higher number of tenderers in public procurements where the time of purchasing supplies, services or contracting for works is not of the essence.
  • It is also possible that it is necessary to modify a public contract that has been concluded and is already been performed.

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The public procurement guidelines of Ministry of Finance in relation to the state of emergency

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For more information, please see:

ERR  -  Erki Fels ja Priit Lätt: eriolukord riigihangetes 
An overview of issues related to public procurements that both contracting authorities and tenderers should know about during the state of emergency.

Priit Lätt

Partner / Head of IP/IT, tax disputes and public procurement, PwC Legal

+372 511 9628

Email

Erki Fels

Associate, PwC Legal

+372 5349 3777

Email

Insurance
  • Will the insurance pay for damages caused by the crisis? 
    • Disruption of business 
    • Cancellation of events
    • Movement restrictions
    • Payment failures

Viljar Kähari

Managing Partner / Head of Banking & Finance, Estonia, PwC Legal

+372 508 4777

Email

Hannes Lentsius

Tax Service Line Leader, PwC Estonia

+372 5691 1698

Email

Disputes
  • Is it possible to resolve a dispute outside of courts? 
  • When should one consider seizing a court and which factors to think of before starting litigation? 
  • Are the courts still functioning and court sessions held?

The Council for Administration of Courts (KHN) has provided the following recommendations.

Indrek Leppik

Partner / Head of Litigation, PwC Legal

+372 5621 0872

Email

Priit Lätt

Partner / Head of IP/IT, tax disputes and public procurement, PwC Legal

+372 511 9628

Email

Indrek Kukk

Senior Associate, PwC Legal

+372 520 6097

Email

Internal control
  • Are the control mechanisms for managing cash flows optimal and well-functioning?
  • Are accesses to systems and databases and decision-making competences adequate during the crisis and in the context of teleworking?
  • How can the organisation guarantee that people will not take advantage of the crisis (internal and external fraud)?

Erki Mägi

Advisory Director, PwC Estonia

+372 5625 6340

Email

Jelena Soboleva

Internal auditor, PwC Estonia

+372 516 9646

Email

Real estate
  • If a tenant who is a natural person has lost their job or their salary has been reduced, how should the situation be resolved?
  • If a tenant who is a legal person is no longer able to provide their services (in full), what are the possibilities for changing the contract?

In the current state of emergency there is a clear distinction between those tenants who have to close their business because they are ordered to do so by the state, and those tenants who have voluntarily closed their offices. In the first case, it is possible that the tenant is entitled to temporarily suspend rent payments or reduce payments and, in the longer perspective, terminate their rental contract. In the second case where the tenant has reorganised their activities at their own initiative, there are no clear legal grounds for reducing or not paying the rent. For example, if a company closes its offices and asks all staff to telework from homes and their turnover is not directly related to the use of rental premises, they will have no legal grounds for paying their rent in a reduced amount. On the other hand, one cannot entirely rule out that a company is entitled to reduce their rent payments if the company provides services to its clients on the rental premises and their turnover depends on the number of clients who visit those premises (such as shops, beauty salons, restaurants). In the legal sense, it is important to differentiate that the basis for not paying the rent, i.e. not performing one’s monetary obligation, is not the force majeure event, but a change in the balance of the contractual obligations that is subject to § 97 of Law of Obligations Act (Loa). 

A similar logic applies to other real estate transactions, meaning that if the activities of one party to the contract have been restricted by a national order, this party may be released from their monetary obligation or reduce their monetary obligation under LoA § 97. Nevertheless, the corona virus as a force majeure event may release a contractual party from liability for non-performance of non-monetary obligations (for the impact of force majeure on contracts, please also see the information under the contract law section). For example, a real estate developer may extend the deadlines by which they have to deliver an apartment or an office to the purchaser, not having to fear a claim for a contractual penalty or damages. The purchaser, on the other hand, may be entitled to withdraw from such a contract if the delay causes the purchaser to lose interest in the transaction or if the delay is unreasonably long. 

Karin Marosov

Specialist Counsel / Attorney-at-Law Head of Real Estate, Commercial and Trade, PwC Legal

+372 518 9852

Email

Jana Tudelep

Associate, PwC Legal

+372 5386 6645

Email

Imbi Jürgen

Senior Associate, PwC Legal

+372 529 5932

Email

Maris Tamp

Tax Manager, PwC Estonia

+372 5384 1005

Email

National support measures
  • What should one take into consideration in communicating with the state and local government institutions? 
  • What should one take into consideration in the case of administrative deadlines? 
  • What are the support measures planned by the state?
  • What needs to be done to apply for state support?
  • Where and how to report one’s needs?
KredEx is offering the following new services in the framework of its first package of mitigating measures:

1. Exceptional loan guarantees for new loans

If the bank agrees to a renegotiated repayment schedule of an existing bank loan not guaranteed by KredEx or is willing to issue a new loan to the company, KredEx will guarantee this loan.

2. Exceptional loan guarantees for renegotiating repayment schedules of existing bank loans

If the bank agrees to a renegotiated repayment schedule of an existing bank loan not guaranteed by KredEx or is willing to issue a new loan to the company, KredEx will guarantee this loan

3. Exceptional loan

If banks no longer provide financing to companies, KredEx can borrow the company exceptional working capital to overcome liquidity problems caused by the corona virus outbreak or else grant the company an investment loan, so as to make use of the business opportunities created by the corona virus outbreak and also other new business opportunities.

Erki Mägi

Advisory Director, PwC Estonia

+372 5625 6340

Email

Karmen Limmer

Consulting Manager, PwC Estonia

+372 5698 7720

Email

Priit Lätt

Partner / Head of IP/IT, tax disputes and public procurement, PwC Legal

+372 511 9628

Email

Managing a company
  • What is expected from the management and board members of a company in a situation that is rapidly changing and unpredictable?
  • Problems with net assets of a company can arise unexpectedly. What can be done to restore those assets?

What is expected from the management members of a company in a situation that is rapidly changing and unpredictable? How can one guarantee that measures taken to manage the crisis are effective and do no turn against those who act fast and make responsible decisions?

In the context of the pandemics and the state of emergency, management members of companies are expected to act fast and decisively. The management must inform the board, or if there is no board, the shareholders’ meeting of all material facts, and to prepare and update action plans. One should not forget that many companies have thoroughly regulated the rules of procedure for the management and the rights of the management members in the company’s internal documents and in contracts concluded with the management members. If management members of such companies conduct transactions outside the regular economic activities of the company, they need the consent of the board or the shareholders.

In several companies, the right of representation of management members has been restricted in a manner that allows only joint representation. The restriction continues to apply during the pandemics but might unexpectedly prevent efficient management of the company, if the other management member who is required for joint representation falls ill.

There are several companies whose articles of association are meant for the so-called normal times and need to be modified. At the very least, persons at positions of responsibility should know the contents of their company’s articles of association, so that taking rapid decisions in the new situation would not turn against the responsible decision-makers who act fast.

If a company is already reviewing its corporate documentation, they should consider introducing more flexibility into those documents. The latest modifications of Commercial Code give companies a possibility to modify their articles of association as of 01 August 2020 in a way that allows transfer of shares without notarising the transaction.

We help you map the obligations arising from the contracts of management members, decisions of the board or the shareholders, shareholder agreements, your articles of association and the legislation, and we will advise you on how to quickly update and modify the procedures currently in force, if you need to do so.

What will happen with the annual general meetings normally held in spring?

Unfortunately, the spreading of the corona virus started just as a lot of companies had already called or were going to call their annual general meetings of shareholders. Due to the state of emergency, it may be necessary to cancel or modify the notices already sent to shareholders.

If the articles of association of the company allow shareholders to participate in a meeting electronically or vote by mail, the notice by which the meeting is called must include, inter alia, information on electronic participation and the order of and deadlines for voting by electronic means and by mail.

We help you solve issues related to convening your annual regular meetings and conducting those meetings.

Problems with the net assets of a company may arise unexpectedly. What are the options for restoring net assets?

Net assets of a company must be at least half the share capital but no less than the minimum level required by the law. If net assets decrease below the required threshold, the shareholders’ meeting must find a way to restore net assets. Classical ways for restoring net assets are issuing shares at a premium or allocating capital to the voluntary reserve. In certain cases, merging companies of the same group, reorganising the company or reducing capital may help. It is also possible that liquidation is the best course of action for some companies.

In cooperation with our colleagues of other business lines we help you find the best solution, given the specifics of your business, and implement this choice.

Indrek Ergma

Specialist Counsel / Attorney-at-Law Head of Corporate and Employment, PwC Legal

+372 529 4580

Email

Karen Root

Senior Associate, PwC Legal

+372 513 9003

Email

Karin Marosov

Specialist Counsel / Attorney-at-Law Head of Real Estate, Commercial and Trade, PwC Legal

+372 518 9852

Email

Corporate documents
  • Do I know the rules in the articles of association of my company? 
  • How to make sure that the crisis is effectively managed, but the measures employed will not turn against those taking responsible and rapid decisions, if the law or the articles of association were violated during the process?

Indrek Ergma

Specialist Counsel / Attorney-at-Law Head of Corporate and Employment, PwC Legal

+372 529 4580

Email

Karen Root

Senior Associate, PwC Legal

+372 513 9003

Email

Karin Marosov

Specialist Counsel / Attorney-at-Law Head of Real Estate, Commercial and Trade, PwC Legal

+372 518 9852

Email

Working capital management and liquidity
  • How and at what expense can your company rapidly improve its short-term liquidity (the principles of making payments, accelerated sales of assets, factoring, lines of credit, etc)?
  • How to optimise the working capital and thereby achieve better liquidity?
  • What should be changed to manage the sharply increased credit risk of clients?
  • How to quickly collect and process information on the movement in cash flows?
     

In helping you manage liquidity problems we can assist you by proposing rapidly implementable measures for working capital management and thereafter managing and implementing those measures with the aim to release financial resources related to the working capital.

Main activities:

  • Releasing financial resources from individual working capital components – “cash conversion cycle“.
  • Performing a comparative analysis and detecting possibilities for improving the working capital position.
  • Performing a diagnostic overview to detect any rapidly implementable measures for optimizing the working capital and such measures that allow for a longer-term optimization of the working capital.  
  • Implementing long-term measures for improving liquidity.

Erki Mägi

Advisory Director, PwC Estonia

+372 5625 6340

Email

Raul Ruubel

Deals Senior Manager, PwC Estonia

+372 5650 4101

Email

Allar Karu

Deals Manager, PwC Estonia

+372 520 3069

Email

Planning and project management during the crisis
  • Do you have the knowledge of all major business areas that will be impacted (workforce, cash flows, chains of delivery, sales channels, etc.)?
  • What are the potential scenarios on the impacts that the state of emergency will have on the organisation?
  • How can you model the financial impact of the various scenarios?
  • Is there an action plan for each of those scenarios if they become a reality?
  • Are there enough staff who have adequate experience in project management during a crisis? What steps to take and in which order?
  • Are there enough operational data and key indicators that allow you to take decisions?

Erki Mägi

Advisory Director, PwC Estonia

+372 5625 6340

Email

Tarmo Meresmaa

Consulting Senior Manager, PwC Estonia

+372 5819 3443

Email

Data protection
  • Do employers have a right to ask employees to submit them their health data in the situation where the corona virus is spreading, so that they could decide whether to allow the employee to work?
  • Is it permissible for the employer to notify third parties of an employee who has contracted the corona virus?
  • Here are the explanations of the Estonian Data Protection Inspectorate (AKI).

Priit Lätt

Partner / Head of IP/IT, tax disputes and public procurement, PwC Legal

+372 511 9628

Email

Analytics and reporting
  • How to rapidly collect and process the necessary data?
  • Which equipment can I use to reduce manual labour?
  • Which reports can I rapidly draw up, to gain near real-time feedback on the indicators of my own organisation?
  • Which visualisation software programs can be quickly set up and put into service?

Tarmo Meresmaa

Consulting Senior Manager, PwC Estonia

+372 5819 3443

Email

Organising our work

  • PwC is making every effort to protect the health of both our employees and clients in the situation where the virus is spreading, and to help you solve major challenges that you face in this difficult business situation.
  • As a responsible company we take the risk of the COVID-19 virus spreading extremely seriously and given the rapid spreading of the virus we have decided that all our employees work from their homes as of 16.03.2020.
  • All our meetings and trainings are conducted via e-solutions and we continue our usual work.
  • We have provided our employees with convenient teleworking options and we will do our utmost to guarantee that all our work processes will be seamless and without delays even though they are performed remotely.
  • Given that this is a crisis, we are ready and willing to solve our clients’ problems also outside our regular business hours – please do not hesitate to call or write us and we will find a way to help you.

ADDITIONAL INFORMATION on the spreading of the COVID-19 virus in Estonia


Our experts in media

We could not have expected this but there is no more work – what to do with the employees?

The corona crisis may result in a situation where a company is no longer able to give its employees the agreed amount of work. Indrek Ergma and Maris Alt, Attorneys-at-Law at PwC Legal, explain what employers should do if such a problem arises.


Contact us

Viljar Kähari

Managing Partner / Head of Banking & Finance, Estonia, PwC Legal

+372 508 4777

Email

Kadri Lindpere

Marketing and Communication Leader, Pärnu mnt 15, 10141 Tallinn, PwC Estonia

+372 505 1239

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