Avoiding Disaster After the Disaster

If your business has been adversely affected by the earthquake that struck Alaska on November 30, 2018, there are a few things you should know and consider immediately:

  1. Look at your business insurance policy to see if you have “business interruption” coverage, which can help the business through this rough patch.
  2. If you think the interruption may cause the company to breach a contractual obligation, look at the agreement’s “force majeure” (a.k.a act of god) clause which may excuse performance due to the earthquake or its aftermath. Note that this also may excuse your vendors and suppliers who may have breached their obligation to you.  We encourage you to seek counsel if you need help interpreting these contractual clauses.
  3. If you think the disruption caused by the earthquake may impede your ability to continue business activities or otherwise cause the enterprise to become insolvent, you should seek counsel right away to ensure that all available rights are preserved under federal and state laws. Do not rely on creditors or vendors that provide advice as to the business’s rights and obligations under these circumstances.  Your business is entitled to and deserves independent advice from its own qualified legal professional.
  4. If you have shareholders or passive investors not participating in the management of the company, the acts or omissions that cause injury to the shareholders may create liability for the officers and directors.  The business should seek advice from a qualified legal professional.

It may not be necessary that your business is “directly affected” or “physically damaged” by the event itself.  For example, perhaps a sole essential-vendor in your supply chain was seriously impaired which made deliveries impossible – that may excuse or suspend certain performance obligations under services contracts, supplier agreements, and perhaps even credit facilities.

Too often, in the face of a disaster, businesses are quick to incur more debt and not leverage the company’s existing assets.  Make no mistake, contractual provisions are valuable company assets that can very well save the enterprise from oblivion. Therefore, if you have any doubt whether these situations apply to you, call your lawyer.

Please contact your Alaska SBDC business advisor with any questions.