FAQs

Banking & Finance

Are there any statutory protections available to a borrower in the face of a pandemic?

Algeria - Bourabiat Associés

The Bank of Algeria has adopted Instruction No. 05-2020 dated 6 April 2020 on exceptional measures to alleviate certain prudential provisions applicable to banks and financial institutions.

Instruction No. 05-20 of the Bank of Algeria introduces the following measures for a period of six months:

  • Reduction of the minimum threshold of the liquidity ratio from 100% to 60%.
  • Exemption from the constitution of the safety cushion set by Regulation No. 2014-01 of 16 February 2014 on solvency ratios.
  • Possibility offered to banks and financial institutions to defer, at their discretion, the payment of loans reaching their maturity date, or to reschedule the debts of their clients having been impacted by the economic situation induced by COVID-19.
  • Possibility for banks and financial institutions to grant new loans to clients who have benefited from the above-mentioned deferral or rescheduling measures.
    Pursuant to Instruction No. 05-20 of the Bank of Algeria, on 8 April 2020, the Association of Banks and Financial Institutions (ABEF) announced  the following support measures which are to take effect for a period of six months (31 March 2020 to 30 September 2020):
  • Postponement and/or renewal of credit facilities reaching their maturity date on 31 March 2020 and thereafter;
  • Consolidation of unpaid amounts as at 31 March 2020 and thereafter;
  • Extension of the deadlines for the use of credit facilities and deferred payments;
  • Cancellation of penalties for late payment of debts due on or after 31 March 2020;
  • Maintenance and/or renewal of operating loans.

Ethiopia - Mesfin Tafesse & Associates

Currently, there are none. However, the government of Ethiopia has extended a support of 15 billion Birr to private banks to enable banks to provide debt relief and extend new loans for COVID-19 affected clients. In addition, the pandemic may be considered a force majeure event according to Ethiopian law if the loan agreement between the borrower and lender contains a force majeure clause.

Kenya - Anjarwalla & Khanna

Currently there are none. A lender may however be requested to agree to defer payment of the principal/interest on a loan but the lender is not obliged to do so. However the Central Bank of Kenya (CBK) has announced that banks should soften the terms of repayment in view of the impact of COVID-19 on business, including the restructuring of loans and the provision of extension of periods of repayment of loans for borrowers whose loan repayments are up to date as of 2 March 2020.

Malawi - Savjani & Co.

Currently there are none. However, the following measures relating to the banking and finance sectors were pronounced by the President of  Malawi on 4 April 2020:

  1. Press Release by the Reserve Bank of Malawi dated 9 April 2020
    The Bankers Association of Malawi (BAM) and the Governor of the Reserve Bank of Malawi (“Governor”) and Registrar of Financial Institutions (“RoFI”), on 9 April 2020,  announced the following measures to mitigate the impact of COVID-19 on the banking industry:

    1. Actions by the Commercial Banks:
      1. Immediately provide a three-month moratorium on interest and principal repayments for loans by borrowers on a case by case basis; 
      2. Restructure and refinance or renegotiate loans for small and medium scale enterprises, corporates and other borrowers affected by COVID-19 on a case by case basis; 
      3. Fees and charges related to internet banking, mobile payments and any other related services, except for POS, visa and master card related payments, to be reduced by forty percent (40%) in order to encourage the usage of electronic payment transactions; and
      4. Defer all payments of bonuses and dividends until the risk of COVID-19 is under control. However, this will be assessed by the Registrar of Financial Institutions on a case by case basis.

    2. Actions by the Registrar of Financial Institutions:
      1. Reduce the Liquidity Reserve Requirement (LRR) on domestic currency deposits, thereby releasing K12 billion as additional liquidity availed to banks to directly support borrowers who are undergoing financial distress as a result of COVID-19;
      2. Reduce the Lombard Rate margin by 50 percent (50%) to reduce the cost of accessing funds from the Central Bank and to enable banks to pass on the benefits to borrowers;
      3. Activate the Emergency Liquidity Assistance Facility and make it available to banks on a case by case basis;
      4. Approve the recapitalisation plan under the Prompt Corrective Action (PCA) Directive beyond 90 days in the unlikely event of a bank breaching the Prudential Capital Requirement Directive as a result of COVID-19;
      5. Grant relief to banks on the provision of restructured loans and loans on moratorium impacted by COVID-19.

  2. Press Release by the Reserve Bank of Malawi dated 21 April 2020
     The Governor, RoFI, Mobile Network Operators (“MNOs”), and the microfinance sector announced that they have agreed on the following measures to mitigate the impact of COVID-19 customers in the mobile money and microfinance sectors:

    1. Actions by the MNOs:
      1. completely remove user fees and charges on person to person transfers on the same network;
      2. reduce user fees and charges on person to person transfers across their respective networks from a minimum of K120.00 to K20.00 that will accrue to Natswitch.

    2. Actions by the Reserve Bank of Malawi:
      1. Revise daily transaction and account balance limits on nonbank mobile money services upwards which shall be communicated to customers by individual mobile network operators as follows:
         
         Daily maximum transaction limit
          Current (Kwacha)/day Adjusted to (Kwacha)/day
        Personal subscriber 750,000 1,500,000
        Agents 20,000,000 30,000,000
        Merchants Accounts 100,000,000 Unchanged
        Account Balance Accounts
        Personal Subscriber 1,000,000 2,000,000
        Agents 25,000,000 35,000,000
        Merchants 100,000,000 Unchanged

    3. Actions by Microfinance Institutions Including Financial Cooperatives
      1. immediately provide a three-month moratorium on interest and principal repayments for loans by borrowers including pay-roll borrowers on a case by case basis; 
      2. defer all payments of dividends until the risk of COVID-19 is under control;
      3. suspend all capital expenditure;
      4. restructure and refinance or renegotiate loans for all borrowers affected by COVID-19 on a case by case basis; 
      5. Innovate and encourage their customers to utilise digital platforms.

    4. Actions by the Registrar of Financial Institutions
      1. Provide reliefs that are within his mandate under the Financial Services Laws pertaining to compliance on a case by case basis;

    5. Actions by the Malawi Government 
      1. Engage the donor community through the Ministry of Finance, Economic Planning & Development for stimulus grants to the microfinance sector;
      2. Ensure that all outstanding pay-roll deductions being held by Ministries, Departments and Agencies (MDAs) are remitted to the respective microfinance institutions.

Mauritius - BLC Robert & Associates

Currently there are none under our laws. For these reasons, the Government of Mauritius announced a series of measures on  13 March 2020 and 23 March 2020 in support of enterprises and individuals in view of the impact of COVID-19 on business, including imposing a moratorium on capital repayments of housing loans, the restructuring of loans and the provision of extension of periods of repayment of loans (see section 8 below).

In addition, a lender may be requested to agree to defer payment of the principal/interest on loans but the lender is not obliged to do so subject to the support measures mentioned above.

Morocco - BFR & Associés

Law No. 31-08 provides measures for the protection of consumers and deems a borrower to be in default if he has not paid three successive monthly instalments after their due date and has not replied to the notice addressed to him.

However, Article 149 of Law No. 31-08 provides for a grace period under which the judge may take measures in favor of debtors in financial difficulties. Therefore, the defaulting borrower can obtain the suspension of maturities for a maximum of two years. The defaulting borrower may also ask the court to ensure that during those two years, the outstanding amounts are not interest bearing.  

In the context of the current health crisis, the professional group of banks of Morocco announced the implementation of the measures taken by the banks within the framework of the Economic Watch Committee (the EWC). The EWC is responsible for monitoring the development of the economic situation through rigorous monitoring and evaluation mechanisms and on the other hand, for identifying appropriate measures in terms of support for the sectors impacted.
The EWC has decided on an action plan to run until the end of June with a first series of measures as follows:

  • suspension of payment of social charges; and
  • establishment of a moratorium on the repayment of bank loans to companies.

Therefore, banks will grant a moratorium for the reimbursement of bank loan maturities and for the reimbursement of the leasing maturities until 30 June 2020.

Nigeria - G.Elias & Co.

Currently, there are none. However, the Central Bank of Nigeria (CBN) has published a circular “CBN Policy Measures in Response to COVID-19 Outbreak and Spill Overs” dated 16 March 2020 (the CBN Circular). The effective, retroactive date of the CBN Circular is 1 March 2020 and it applies only in relation to CBN intervention facilities. In relation to all CBN intervention facilities, the CBN Circular grants a further moratorium of one year on all principal repayments to all CBN intervention facilities and reduces the interest rates from 9 to 5 percent per annum for 1 year.  With respect to other facilities, the CBN Circular enjoins parties to negotiate the payment of principal/interest on the loan to be deferred.

In addition, the President of the Federal Republic of Nigeria, directed that:

  1. a three-month repayment moratorium for all TraderMoni, MarketMoni and FarmerMoni loans (these are all social welfare schemes involving the distribution of cash by the Federal Executive) be implemented with immediate effect;
  2. a three-month repayment moratorium be given to all Federal Government funded loans issued by the Bank of Industry, Bank of Agriculture and Nigeria Export Import Bank (all public sector financial institutions); and
  3. for on-lending facilities using capital from international and multilateral development partners, the Federal Government’s development financial institutions should engage these development partners and negotiate concessions to ease the pains of the borrowers.

Rwanda - K. Solutions & Partners

Currently there are none. A lender may be requested to agree to defer payment of the principal/interest on a loan but the lender is not obliged to do so. However, the National Bank of Rwanda has announced that banks should soften the terms of repayment in view of the impact of COVID-19 on business, including the restructuring of loans and the provision of extension of periods of repayment of loans for borrowers who are facing repayment issues as a result of the lockdown in Rwanda.

Tanzania - A&K Tanzania

There are no specific statutory protections to a borrower affected by a pandemic.  However, under the existing Regulations a lender is allowed to restructure a non performing facility up to four (4) times to the borrower where such default is as a result of financial difficulties of a temporary nature and after a defined period the borrower will be able to repay on the revised terms. However the lender is not obliged to do so.

The Bank of Tanzania is yet to provide specific measures to protect the borrowers who have been affected by the pandemic. We understand that the Bank of Tanzania has been engaging various stakeholders on the subject and we expect that Bank of Tanzania will issue specific guidelines in this regard.

Uganda - MMAKS Advocates

Currently there are none. A lender may however be requested to agree to defer payment of the principal/interest on a loan but the lender is not obliged to do so. However, the Central Bank of Uganda (BOU) issued a statement on measures to mitigate the economic impact of COVID-19 including a waiver on limitations on restructuring of credit facilities at financial institutions that may be at risk of going into distress due to the COVID-19 pandemic.

Zambia - Musa Dudhia & Co.

Currently there are none. A lender may however be requested to agree to defer payment of the principal/interest on a loan but the lender is not obliged to do so. The Minister of Finance in a statement on the impact of COVID-19 on the Zambian economy given on 27 March 2020 announced that the Government will issue a Statutory Instrument for Classification and Provisioning of Loans Directives to encourage financial service providers to provide relief to the private sector and facilitate long term lending to productive sectors of the economy. The Minister also announced that Government expects the banking sector to pass on these benefits to their clients.

UAE - Anjarwalla Collins & Haidermota

Currently there are none. A lender may, however, be asked to agree to defer payment of the principal/interest on a loan although the lender is not obligated to do so. The UAE Central Bank has urged banks to support private sector corporates, SMEs and individuals to mitigate the effects of COVID-19. On 14 March 2020, the UAE Central Bank announced the AED 100 Billion economic stimulus package, namely, the Targeted Economic Support Scheme (“TESS”), to relieve the impact of COVID-19 on the UAE economy. Some of the measures adopted under the TESS are set out below:

  • The UAE Central Bank has reduced by half the reserve requirements for demand deposits for all banks from 14% to 7%. This is expected to inject approximately AED 61 billion, which can be utilised to support bank lending in the UAE and enable them to manage their liquidity;

  • Banks and financial institutions participating in the TESS programme will be able to extend to their customers deferrals of principal and interest until 31 December 2020;

  • For banks participating in the TESS programme, the UAE Central Bank has granted an extension of the capital buffer relief to 31 December 2021. The value of the capital buffer relief is AED 50 billion; and

  • For banks and financial institutions participating in the TESS programme, the UAE Central Bank has granted an extension of the zero-cost funding facility against collateral until 31 December 2020. The value of the zero-cost funding is AED 50 billion.

Several banks participating in the TESS programme have already provided certain reliefs to their customers, including deferral of payment of principal and interest for a period of 3 months.

What are the permissible default charges under the Consumer Protection Act (2012) including interest in the event that the lender declares a default?

Algeria - Bourabiat Associés

The permissible default charges under Algerian law are those reasonable charges in respect to costs incurred in collecting a payment from a borrower, realising or protecting a security interest, or costs incurred because a cheque or other payment instrument has been dishonoured.

Ethiopia - Mesfin Tafesse & Associates

The permissible default charges are provided under the agreement between the lender and the borrower. Under the Ethiopian Civil Code, permissible charges include costs incurred in collecting a payment from a borrower, realising or protecting a security interest in order to cover the principal loan and other associated costs incurred in relation to the recovery of the loan.

Kenya - Anjarwalla & Khanna

The permissible default charges under the Consumer Protection Act are those reasonable charges in respect to costs incurred in collecting a payment from a borrower, realising or protecting a security interest, or costs incurred because a cheque or other payment instrument has been dishonoured.

Malawi - Savjani & Co.

This will be in accordance with the provisions of the relevant loan agreement and subject to the moratorium measures announced by the Government of Malawi to support businesses during this period.

Mauritius - BLC Robert & Associates

Default charges will be in accordance with the provisions of the relevant loan agreement and subject to the moratorium measures announced by the Government of Mauritius to support businesses and individuals during this period (see section 8 below).

Morocco - BFR & Associés

In accordance with Law No. 31-08 on enacting measures to protect the consumer, the lender may make a claim for reimbursement from the borrower in the event of the default by the borrower, in relation to costs due as a result of the default, excluding any lump sum repayment of recovery costs.

Nigeria - G.Elias & Co.

The Federal Competition and Consumer Protection Act, 2018 does not make provision for the applicable charges in the event that a lender declares a default. Such charges are governed by the terms of the loan agreement between the borrower and the lender.

Rwanda - K. Solutions & Partners

The permissible default charges under the Banking Law are those reasonable charges in respect to costs incurred in collecting a payment from a borrower, realising or protecting a security interest, or costs incurred because a cheque or other payment instrument has been dishonoured based on the loan agreement.

Tanzania - A&K Tanzania

The financial service providers are required under the Bank of Tanzania (Financial Consumer Protection) Regulations, 2019 to disclose terms and conditions including interest rates, costs, fees and charges.  These would include cancellation fees, costs incurred in collecting a payment from a borrower, realising or protecting a security interest etc.

Uganda - MMAKS Advocates

The permissible default charges will be guided by the Facility Letter/Agreement executed between the borrower and the lender.

UAE - Anjarwalla Collins & Haidermota

Article 76 of Federal Law No. 18 of 1993 relating to Commercial Transactions (the “UAE Commercial Code”) provides that a creditor is entitled to charge interest on a commercial loan according to the rate provided in the contract. If the rate of interest is not specified, then it shall be reckoned according to the market rate prevailing at the time of the transaction, but in this case, it shall not exceed 12% until payment is made.

What are the permissible default charges under the Banking and Financial Services Act 2017including interest in the event that the lender declares a default?

Zambia - Musa Dudhia & Co.

The permissible default charges under section 109 of the Banking and Financial Services Act No. 7 of 2017 (the “BFSA”) are (i) the interest on an overdue payment on a loan; (ii) legal costs incurred in protecting or realising the security on the loan; and (iii) costs, including legal costs, incurred in protecting or realising the security on the loan.

Lenders should note that penal interest is prohibited by the BFSA. Lenders should also note that, except for interest on a judgment sum, the recoverable amounts from a borrower on a non-performing loan are (i) the principal amount owing when the loan becomes non-performing; (ii) any interest in arrears due but not exceeding the principal amount owing when the loan becomes non-performing; and (iii) expenses incurred in recovering the amounts owing.

How do the current circumstances surrounding COVID-19 affect perfection of the following formalities?

  1. Stamping and registration of securities; and
  2. Land Control Board (LCB) meetings.

Algeria - Bourabiat Associés

According to Decree 20-69 dated 21 March 2020, public administrations are to remain open but only with 50% of their employees.  This significantly impacts the day to day land registry processes and may cause considerable delays to transactions.

The COVID-19 pandemic has also affected the Companies Registry (Centre National du Registre du Commerce) which then affects the registration of certain registrable security interests that have statutory times. It is anticipated that affected parties will have to obtain court orders to allow them to have time expanded for their security interests to be registered out of time.

Ethiopia - Mesfin Tafesse & Associates

As a result of work from home orders announced by government for federal offices, many employees are not reporting to work. This significantly impacts the day to day registry processes and may cause considerable delays to transactions.

Kenya - Anjarwalla & Khanna

Stamping and registration of securities
A notice was issued to the public on 16 March 2020 directing that all land offices and registries will be temporarily closed from 17 March 2020 for a period of 28 days.  The land offices and registries were slated to be reopened on 29 April 2020. However, the Ministry of Lands and Physical Planning (the Ministry) extended the closure period for a further 14 days, that is, until 14 May 2020.
 While the Ministry has not issued a subsequent public notice regarding operations at the Lands Registry, we understand that the Registry has been partially re-opened with a specific bias towards security transactions. The following services will be offered at the customer care centres of lands registries countrywide:

  1. registration of bank charges;
  2. registration of bank discharges; and
  3. registration of court orders and verification of sureties.

This significantly impacts the day to day land registry processes and may cause considerable delays to transactions.
The COVID-19 pandemic had also initially led to the closure of the Companies Registry which affected the registration of certain registrable securities that have statutory times under the Companies Act No. 17 of 2015. Affected parties would have had to obtain court orders to allow them to have time expanded for their securities to be registered out of time.

However, through a notice dated 26 March 2020, the Business Registry Service (which oversees the operations of the Companies Registry) released operational directives setting out a business continuity plan for service delivery following the government directives on control of the spread of COVID-19. According to the notice, the registration of debentures and charges will still be offered at the Companies Registry and documents that are received will be processed within two (2) working days.  

As at 29 April 2020, parties can continue with the registration of security rights at the Collateral Registry which remains open.

LCB meetings
Whereas the Land Control Board (LCB) does not fall directly under the ambit of the Ministry of Lands and Physical Planning, it is not clear whether the notice by the Cabinet Secretary covers the operation of the land control boards as well. During this period, we do not expect that LCB meetings will be convened as scheduled.

It may be the case that some transactions will be time barred on the application for LCB consent due to the Boards not sitting during this period. While the courts can issue orders extending the application time in such instances, these very courts are operating at a scaled-down level as directed by the National Council on the Administration of Justice.

Malawi - Savjani & Co.

Stamping and registration of securities
The Office of the Register General is currently still operational. The Government announced in the presidential address of 4 April 2020 that all offices shall work in shifts with the exception of those working in essential services. In furtherance of this directive, the Chief Secretary to the Government shall issue a circular to provide guidelines to the public sector. As of 6 April 2020, it is not yet clear how this directive will affect the operation of the Register General with respect to the stamping and registration of securities.

Mauritius - BLC Robert & Associates

Under Mauritian law, only fixed and floating charges must be registered and inscribed with the Registrar General/Conservator of Mortgages for perfection purposes. However, during the lockdown, the office of the Registrar General/Conservator of Mortgages is not operating. Documents may still be lodged for registration on the online registration platform but are not being processed (taxed and inscribed in public registers) by the Registrar General/Conservator of Mortgages.

Morocco - BFR & Associés

On 16 March 2020, an order was issued directing all land offices and registries to close temporarily from 16 March 2020 until 20 April 2020. This is likely to be extended.  This significantly impacts the day to day land registry processes and may cause considerable delays to transactions.

The COVID-19 pandemic has also led to the closure of the Companies Registry which affects the registration of certain registrable securities that have statutory time frames.  It is likely that affected parties will have to obtain court orders to seek orders for extension of time to allow them to have their securities registered out of time.

Nigeria - G.Elias & Co.

Stamping and registration of securities
Several state governments have issued notices to the public directing the temporary closure of governmental agencies. For example, on 22 March 2020, the Lagos State government issued a notice ordering civil servants from Grade 1 to Grade 12 to stay at home for a period of 14 days. In addition, President Buhari has ordered for the cessation of all movements in Lagos State, Ogun State and Abuja for an initial period of 14 days with effect from 11pm on Monday, 30 March 2020.

This significantly impacts the day-to-day stamping and registration processes and may cause considerable delays to perfecting secured credit transactions. It is likely that the affected parties will have to seek court orders or other extensions in relation to the registration of certain registrable security interests that have statutory timelines under the relevant statutes or pay the applicable default charges in relation to such registrations. For example, s. 197 of the Companies and Allied Matters Act 1990 provides for the registration of every security interest within 90 days after the date of its creation.

Rwanda - K. Solutions & Partners

The securities registration formalities are conducted through an online registration system and the Office of the Registrar General has continued to process the applications without interruption. Thus, parties can continue with the registration of security rights at the Collateral Registry which remains open. However, the issue would be the notarisation of the loan agreement and other documents to be notarised before processing the application for registration of securities as Public Notaries have closed their offices as result of measures taken by the government.

Tanzania - A&K Tanzania

Government authorities in Tanzania Mainland, including the Companies Registry and the Land Registry are still operational.  So far, there has been no significant impact reported due to the COVID-19 pandemic.

Uganda - MMAKS Advocates

Stamping and registration of securities
A notice from the Ministry of Lands, Housing and Urban Development was issued to the public on 18 March 2020 issuing interim guidelines on restriction of non-essential visitors to the Ministry Headquarters and Zonal Office Premises pending further guidelines from the Government. In practice, many of the registries although open for business, are severely restricting access and as such there is a resultant impact on service delivery.

This significantly impacts the day to day land registry processes and may cause considerable delays to transactions.

The Ministry of Public Service Circular Letter No. 3 of 2020 (Guidelines on Prevention Measures Against Corona Virus (COVID-19)) issued on 25 March 2020, require all government departments such as the Companies Registry, to remain open with skeletal staff and this will have a significant impact on turnaround time which then affects the registration of certain registrable securities that have statutory times under the Companies Act 2012. In the event that the Companies Registry does close, it is anticipated that affected parties will have to obtain court orders to allow them to have time expanded for their securities to be registered out of time.

As at 26 March 2020, parties can continue with the registration of security rights at the Security Interest in Movable Property Registry which remains open.

Land Boards meetings
Land Boards such as the Kampala District Land Board, Buganda Land Board, and Uganda Land Commission have not issued any separate communications on their operations. However, they are required to comply with the Ministry of Public Service Circular Letter.

We do anticipate a significant slowdown in activity and any sittings of these Land Boards. Some transactions will be time barred on the application for consent from any of the above Boards due to the Boards not sitting during this period. While the courts can issue orders extending the application time in such instances, these very courts are also temporarily closed during this period as directed by the Chief Justice.

Zambia - Musa Dudhia & Co.

As at 29 March 2020 the lands and deeds registry and the Companies Registry at the Patents and Companies Registration Agency are were still open to the public. However, social distancing and decongestion measures are being put in place to prevent the spread of COVID-19 including, rotation of staff.

It is likely that the Companies Registry and the Lands and Deeds Registry may temporarily close should the spread of the COVID-19 worsen in Zambia. In such a case, search and registration processes may cause considerable delays to transactions. Closure of the registries would also affect the registration of securities within the statutory periods under the Companies Act No. 10 of 2017 and the Lands and Deeds Registry Act, CAP 185.

It is anticipated that affected parties who date the security documents and are out of time will have to obtain extension of time from the Registrar of Companies for registrations in the Companies Registry and court orders for registrations in the Lands and Deeds Registry to allow them to have time expanded for their securities to be registered out of time. It is therefore recommended that security documents should not be dated.

As regards the Collateral Registry, it is anticipated that parties would still be able to continue registration of security affecting movable property despite any lockdown as the registration is done online.

UAE - Anjarwalla Collins & Haidermota

The UAE land departments, UAE court notaries, UAE economic departments and UAE free zones, being the key departments involved in registration of securities in the UAE, are by and large working remotely. As such, it is possible to register and perfect securities in the current circumstances although the process may take longer.

Does the impact of COVID-19 affect the enforcement of securities?

Algeria - Bourabiat Associés

The COVID-19 pandemic has a direct bearing on enforcement of security interests. In the event that COVID-19 does not constitute a force majeure event under the terms of a financing arrangement and the borrower defaults under the terms of the agreement, the lender can proceed to enforcement as provided in the relevant security document.

The Minister of Justice issued a directive on 17 March 2020 on the temporary closure of the courts in a bid to mitigate the spread of COVID-19 and therefore lenders that elect to sue for the repayment of their loans may not get timely relief as suits may not be heard unless filed under a certificate of urgency.  In such cases, manifest urgency must be demonstrated.  

Lenders may be forced to resort to other enforcement mechanisms that do not involve government agencies and offices or auctioneers such as private sales or any other mechanism set out in the finance document that does not involve the land registries, the courts or any of the government agencies.

Ethiopia - Mesfin Tafesse & Associates

Yes. In the event COVID-19 does not constitute a force majeure event under the terms of a financing arrangement and the borrower defaults under the terms of the agreement, the lender may enforce as provided in the relevant security document, unless special dispensation is granted by the lending bank taking into consideration the COVID-19 pandemic. 

Lenders that elect to sue for the repayment of their loans in courts of law may not get timely relief due to the closure of federal courts unless the claims require urgent action such as cases with a close to end period of limitation. However, banks can use enforcement mechanisms that do not involve government agencies and offices or courts such as private sales or repossession of the secured property on the basis of their legally prescribed foreclosure powers.

Kenya - Anjarwalla & Khanna

The COVID-19 pandemic has a direct bearing on enforcement of securities. In the event that COVID-19 does not constitute a force majeure event under the terms of a financing arrangement and the borrower defaults under the terms of the agreement, the lender can proceed to enforcement as provided in the relevant security document.

The National Council on the Administration of Justice has announced operational directives regarding services in the justice sector in the wake of the COVID-19 pandemic. While measures such as electronic filing of pleadings and adoption of videoconferencing technology for delivery of judgments and virtual hearings have been introduced, open court hearings remain suspended. Therefore lenders that elect to sue for the repayment of their loans may not get timely relief relief given that the court process in Kenya is generally time and resource consuming even outside the COVID-19 pandemic.

Lenders may be forced to resort to other enforcement mechanisms that do not involve government agencies and offices or auctioneers such as private sales or any other mechanism set out in the finance document that does not involve the land registries, the courts or any of the government agencies.

Malawi - Savjani & Co.

The COVID-19 pandemic has a direct bearing on enforcement of securities. In the event that COVID-19 does not constitute a force majeure event under the terms of a financing arrangement and the borrower defaults under the terms of the agreement, the lender can proceed to enforcement as provided in the relevant security document.

Currently, the courts have not been closed in Malawi and all members of staff of the Judiciary continue to be on duty. The Chief Justice has however issued a notice that the Judiciary’s policy is to generally slow down on all non-urgent court matters. Further, to our knowledge, government agencies and offices or auctioneers have also not been closed.

Enforcement of securities would be subject to the moratorium and measures announced by the Government of Malawi on 4 April 2020 to support businesses during this period.

Mauritius - BLC Robert & Associates

The COVID-19 pandemic has a direct bearing on enforcement of securities. In the event that COVID-19 does not constitute a force majeure event or another excuse event under the financing arrangement and the borrower defaults under the terms of the agreement, the lender can proceed to enforcement as provided in the relevant security document.

On  22 March 2020, the office of the Chief Justice announced that the courts will remain closed but a minimum staff will still be operating for urgent applications. Lenders may be forced to resort to other enforcement mechanisms permitted by law that do not involve courts, government agencies and offices or auctioneers such as private sales or any other mechanism set out in the finance document that does not involve the land registries, the courts or any of the government agencies.

The above remain subject to the support measures announced by the Government, see section 8 below.

Morocco - BFR & Associés

The COVID-19 pandemic has a direct bearing on enforcement of securities. In the event that COVID-19 does not constitute a force majeure event under the terms of a financing arrangement and the borrower defaults under the terms of the agreement, the lender can proceed to enforcement as provided in the relevant security document.

Lenders may be forced to resort to other enforcement mechanisms that do not involve government agencies and offices or auctioneers such as private sales or any other mechanism set out in the finance document that does not involve the land registries, the courts or any of the government agencies.

As indicated above, the banks will grant a deferral, on request, of the maturities of loans and leasing (without any fees or penalties) until 30 June 2020.

Under these conditions, lenders are unlikely to be able to proceed to the enforcement of securities where the concerned borrower has benefited from the deferral. Otherwise, if the borrower does not fit into the category of persons who can benefit from the deferral, the bank will have the right to proceed to enforce the securities.

Nigeria - G.Elias & Co.

The COVID-19 pandemic has a direct bearing on enforcement of securities. In the event that COVID-19 does not constitute a force majeure event as defined under the terms of a financing arrangement and the borrower defaults under the terms of the agreement, the lender can proceed to enforcement as provided in the relevant security document.

On 23 March 2020, the Chief Justice of Nigeria, Justice Tanko Muhammad, issued a directive on the temporary closure of the courts for 14 days in a bid to mitigate the spread of COVID-19. Therefore, lenders that elect to sue for the repayment of their loans may not be able to get timely relief as suits will not be entertained unless they are urgent, essential or time-bound in accordance with Nigeria’s extant laws. Although the directive does not define “urgent matters”, it is likely that such matters relate to bail applications and fundamental human rights matters. The Chief Judges of some of the other states e.g. Lagos State, have done likewise.

Lenders may be forced to resort to other enforcement mechanisms that do not involve courts, government agencies and offices or auctioneers, such as private sales.

Rwanda - K. Solutions & Partners

The COVID-19 pandemic has a direct bearing on enforcement of securities. In the event that COVID-19 does not constitute a force majeure event under the terms of a financing arrangement and the borrower defaults under the terms of the agreement, the lender can proceed to enforcement as provided in the relevant security document.

However, the Registrar General issued a directive on 16 March 2020 on the temporary suspension of issuance of the permit to sell collateral for two weeks. The same directives have been issued by the High Council of the Judiciary for closure of all court proceedings for two weeks in a bid to mitigate the spread of COVID-19 and therefore lenders cannot enforce their securities during this period.

Tanzania - A&K Tanzania

Loan documentation will need to contain an express force majeure clause that extends to the pandemic for enforcement of securities to be impacted. Without such provisions the lender can proceed to enforcement as provided in the relevant security document.

Courts in Tanzania are still operational. However, following the recent recommendations provided by Government officials on public gatherings, enforcement of the security by way of conducting physical public auctions may not be possible.

Uganda - MMAKS Advocates

The COVID-19 pandemic has a direct bearing on enforcement of securities. In the event that COVID-19 does not constitute a force majeure event under the terms of a financing arrangement and the borrower defaults under the terms of the agreement, the lender can proceed to enforcement as provided in the relevant security document.
The Chief Justice, Honourable Bart Katureebe issued a directive on 19 March 2020 on the measures to be taken by the courts to mitigate the spread of COVID-19.

Lenders that elect to sue for the repayment of their loans may not get timely relief as suits may not be heard unless filed under a certificate of urgency. Courts shall not hold any open court sessions for 32 days from the 20 March 2020. In such cases, manifest urgency must be demonstrated.   Specifically, the execution division has suspended all proceedings.

Lenders may be forced to resort to other enforcement mechanisms that do not involve government agencies and offices or auctioneers such as private sales or any other mechanism set out in the finance document that does not involve the land registries, the courts or any of the government agencies.

Zambia - Musa Dudhia & Co.

The COVID-19 pandemic has a direct bearing on enforcement of securities. In the event that COVID-19 does not constitute a force majeure event under the terms of a financing arrangement and the borrower defaults under the terms of the agreement, the lender can proceed to enforcement as provided in the relevant security document.

The Chief Justice issued a directive on 27 March 2020 to the effect that the hearing of civil matters whether in Chambers or Open Court is suspended for 14 days effective 30 March 2020, except for urgent matters such as injunctions and stay of executions. These measures will be reviewed after 14 days. Therefore, lenders that elect to sue for the repayment of their loans may not get timely relief as suits may not be heard unless filed under a certificate of urgency.  In such cases, manifest urgency must be demonstrated.  

Lenders may be forced to resort to other enforcement mechanisms that do not involve government agencies and offices or auctioneers such as private sales or any other mechanism set out in the finance document that does not involve the land registries, the courts or any of the government agencies.

UAE - Anjarwalla Collins & Haidermota

COVID-19 has a direct bearing on enforcement of securities. In the event that COVID-19 does not constitute a force majeure event under the terms of a financing arrangement and the borrower defaults under the terms of the agreement, the lender can proceed to enforcement as provided in the relevant security document.

Courts in the UAE are currently operating remotely and therefore lenders that elect to sue for the repayment of their loans will be able to get relief from the UAE courts although the process may take longer.

Can COVID-19 constitute a force majeure event under a loan agreement?

Algeria - Bourabiat Associés

A typical loan agreement is unlikely to have a force majeure clause. In the event that the loan agreement contains a force majeure clause, parties would look to the force majeure provisions of such agreement. In the case where there is no force majeure clause, a borrower seeking to terminate the loan agreement and subsequent release from payment obligations thereunder would likely rely on Article 307 of the Civil Code which provides that the obligation of the debtor is extinguished when the performance of the contract becomes impossible due to a cause which cannot be imputed to him.

Whether a particular clause is triggered will depend on the drafting of the clause. Force majeure clauses may comprise either (a) a closed list of triggering events, including epidemics or (b) in addition or as an alternative to the closed list, an open-ended “catch all” category to cover any unexpected events outside of a party’s control. For further details, please see our note on Force Majeure.

Ethiopia - Mesfin Tafesse & Associates

A typical loan agreement is unlikely to have a force majeure clause. In the event that the loan agreement contains a force majeure clause, parties would look to the force majeure provisions of such agreement. In the event the loan agreement does not have a force majeure clause, a borrower seeking to terminate the loan agreement and subsequent release from payment obligations thereunder would not have any option except resorting to the statutory stipulation.  

Under the Civil Code, force majeure results from an occurrence which the debtor could normally not foresee and which prevents him absolutely from performing the obligations. The law adopted an illustrative list of circumstances that constitute force majeure. Among other things, official prohibitions preventing the performance of the contract or the death or a serious accident or unexpected serious illness of the debtor constitute force majeure.  To the extent any of them are applicable to the borrower, COVID-19 can be used as a force majeure event.

Mauritius - BLC Robert & Associates

This will depend on how the loan agreement is drafted and what is included as within the categories of “force majeure”. If the contract is silent, the Civil Code (articles 1147 and 1148) recognises the concept of force majeure as a defense, which excuses a contracting party from performing its obligations.  Force majeure then prevents the party who has been prevented from preforming from being liable to the other contracting parties.  For an event to amount to force majeure under the Civil Code, it must be unforeseeable and irresistible.

A “force majeure” only exonerates the contracting party from performance during the period for which the “force majeure” event lasts, once this period is over or its effects are over, the contract should be performed.

If the effects of the “force majeure” event are such as to have rendered the performance of a contract nugatory, any one of the contracting parties can apply to court for the termination of the contract under article 1184 of the Civil Code. This recourse may be not be applicable to monetary obligations under a loan agreement.

Morocco - BFR & Associés

First of all, reference should be made to the legal definition of force majeure as provided in Article 269 of the Moroccan Code of Obligations and Contracts.  Article 269 provides a non-exhaustive list of force majeure events (for instance: floods, drought, storms, fire, locusts, enemy invasion, fait du prince).

Parties must verify if the force majeure provision is expressly covered in the agreement (force majeure clause cannot be implied into an agreement) and verify whether in the definition of force majeure, epidemics or restrictive measures of government authorities are covered.

It will also be necessary to prove that the non-performance of the contractual obligations is mainly due to the occurrence of COVID-19.

In addition, the qualification of force majeure remains subject to the sovereign assessment of the Moroccan judges.

Lenders should also carefully review “material adverse effect” clauses in existing loan agreements, which we address in the next question.
For further details, please see our note on Force Majeure.

Nigeria - G.Elias & Co.

A typical loan agreement is unlikely to have a force majeure clause. Force majeure clauses may comprise either:

  1. a closed list of triggering events including epidemics; or
  2. in addition or as an alternative to the closed list, an open-ended “catch all” category to cover any unexpected events outside of a party’s control.

It is important to note that a force majeure clause cannot be implied into an agreement and parties can rely on a force majeure event only if it is expressly covered in the agreement.

The Loan Market Association Standard, however, provides for a “Disruption Event” which is defined to include the occurrence of an event which results in a disruption of the payment operations of a party, preventing that party from performing its payment obligations under the loan agreement.  

In the event that the loan agreement contains a force majeure/disruption event clause, parties would look to the force majeure/disruption event provisions of the agreement to ascertain their respective rights and obligations. Typically, declaration of a force majeure/disruption event would mean that there has been no breach or, where there has been a breach, the lender must excuse the acceleration of the affected party’s payment obligations and not enforce the security.

In the case where there is no force majeure/disruption event clause, a borrower seeking to terminate the loan agreement and obtain a release from its payment obligations thereunder may invoke the doctrine of frustration. The doctrine may arguably be applied where the performance of a contract is rendered impossible due to the occurrence of events beyond the control of the parties to the contract. The law here is at best unclear.  There are authorities indicating that the doctrine does not apply to loan agreements.

Tanzania - A&K Tanzania

A typical loan agreement is unlikely to have a force majeure clause, although parties are not restricted to include such a clause in loan agreements.
Force majeure clauses may comprise either (a) a closed list of triggering events including pandemics or (b) in addition or as an alternative to the closed list, an open-ended “catch all” category to cover any unexpected events outside of a party’s control.

It is important to note that a force majeure clause cannot be implied into an agreement and parties can only rely on this concept if it is expressly covered in the agreement. Lenders should also carefully review “material adverse effect” clauses in existing loan agreements which we address in the next question.

Uganda - MMAKS Advocates

A typical loan agreement is unlikely to have a force majeure clause. In the event that the loan agreement contains a force majeure clause, parties would look to the force majeure provisions of such agreement. In the case where there is no force majeure clause, a borrower seeking to terminate the loan agreement and subsequent release from payment obligations thereunder would likely rely on the doctrine of frustration. The doctrine may arguably be applied where the performance of a contract is rendered impossible due to the occurrence of events beyond the control of the parties to the contract.

Whether a particular clause is triggered will depend on the drafting of the clause. Force majeure clauses may comprise either (a) a closed list of triggering events including epidemics or (b) in addition or as an alternative to the closed list, an open-ended “catch all” category to cover any unexpected events outside of a party’s control. It is important to note that a force majeure clause cannot be implied into an agreement and parties can only rely on this concept if it is expressly covered in the agreement. Lenders should also carefully review “material adverse effect” clauses in existing loan agreements which we address in the next question.

General

A typical loan agreement is unlikely to have a force majeure clause. In the event that the loan agreement contains a force majeure clause, parties would look to the force majeure provisions of such agreement. In the case where there is no force majeure clause, a borrower seeking to terminate the loan agreement and subsequent release from payment obligations thereunder would likely rely on the doctrine of frustration. The doctrine may arguably be applied where the performance of a contract is rendered impossible due to the occurrence of events beyond the control of the parties to the contract.

Whether a particular clause is triggered will depend on the drafting of the clause. Force majeure clauses may comprise either (a) a closed list of triggering events including epidemics or (b) in addition or as an alternative to the closed list, an open-ended “catch all” category to cover any unexpected events outside of a party’s control. It seems clear that the spread of COVID-19 is an event outside that would come into the definition of force majeure under the “catch-all” construct. It is important to note that a force majeure clause cannot be implied into an agreement and parties can only rely on this concept if it is expressly covered in the agreement. Lenders should also carefully review “material adverse effect” clauses in existing loan agreements which we address in the next question.

UAE - Anjarwalla Collins & Haidermota

A typical loan agreement is unlikely to have a force majeure clause. In the event that the loan agreement contains a force majeure clause, parties would look to the force majeure provisions of such agreement. In a case where there is no force majeure clause, a borrower seeking to terminate the loan agreement and subsequent release from payment obligations thereunder would likely rely on the statutory doctrine of force majeure which is contained in Article 273 of the UAE Civil Code.

The statutory force majeure doctrine applies automatically to commercial contracts (including loan agreements) governed by UAE laws. Whether an event would constitute a force majeure event is subject to determination by UAE courts as the UAE Civil Code has not prescribed the events which constitute a force majeure event. In determining whether an event is a force majeure event, the UAE court would consider whether the event (or in this case, COVID-19 pandemic):

  • was unforeseeable at the time of entering into the contract;
  • was unavoidable in terms of occurrence or impact; and
  • the pandemic rendered the performance of the obligation impossible.

Can COVID-19 constitute a material adverse effect (MAE) under a loan agreement?

Ethiopia - Mesfin Tafesse & Associates

The Ethiopian law of contracts does not recognise material adverse effects as a ground for the failure to perform contractual obligation. Under Article 1764 of the Civil Code, a contract will remain in force irrespective of the fact that the conditions of its performance have changed and the obligations assumed by a party have become more onerous than was foreseen. If the loan agreement provides for the MAE to be a ground for the termination or variation of the contract, materiality will need to be demonstrated clearly and objectively.

Malawi - Savjani & Co.

In some instances it could, but it is difficult to say with any certainty as it is dependent on the precise phrasing of the MAE provision and the specific circumstances.

When invoking an MAE clause, materiality will need to be demonstrated clearly and objectively. Given that MAE clauses tend to lack language that identifies a particular event or loss as an MAE, determination of a claim for MAE relief often requires a detailed factual inquiry with an uncertain outcome. Invoking an MAE clause due to COVID-19 issues may be difficult given that the long-term effects of COVID-19 on financial and operational aspects are unknown. Much turns on the actual language of the provision.

Morocco - BFR & Associés

In some instances, it could be – but it is difficult to say with any certainty as this would be dependent on the precise phrasing of the MAE provision and the specific circumstances.

When invoking a MAE clause, materiality will need to be demonstrated clearly and objectively. Given that MAE clauses tend to lack language that identify a particular event or loss as a MAE, determination of a claim for MAE relief often requires a detailed factual inquiry with an uncertain outcome. Invoking a MAE clause due to COVID-19 issues may be difficult given that the long-term effects of COVID-19 on financial and operational aspects are unknown but much turns on the actual language of the provision.

Nigeria - G.Elias & Co.

This depends on the precise phrasing of the MAE provision and the specific circumstances. When invoking a MAE clause, materiality will need to be demonstrated clearly and objectively. Given that MAE clauses tend to lack language that identifies a particular event or loss as a MAE, determination of a claim for MAE relief often requires a detailed factual inquiry with an uncertain outcome.

Tanzania - A&K Tanzania

A MAE (or material adverse change) clause is designed to allow parties to terminate, enforce or renegotiate the transaction. The precise phrasing of the MAE provision and the specific circumstances could cover COVID-19 pandemic, however this would need to be determined on a case by case basis by reference to the actual language used in the relevant agreement.

General

In some instances, it could be – but it is difficult to say with any certainty. The precise phrasing of the MAE provision and the specific circumstances.

When invoking a MAE clause, materiality will need to be demonstrated clearly and objectively. Given that MAE clauses tend to lack language that identify a particular event or loss as a MAE, determination of a claim for MAE relief often requires a detailed factual inquiry with an uncertain outcome. Invoking a MAE clause due to COVID-19 issues may be difficult given that the long-term effects of COVID-19 on financial and operational aspects are unknown but much turns on the actual language of the provision.

I sold one of my properties and I wanted to use the purchase price to settle a bank loan I had taken. In the event the land registry is shut down, meaning registration cannot occur, will interest continue to accrue on my loan?

Ethiopia - Mesfin Tafesse & Associates

Yes. The interest will continue to apply on the loan. The borrower may request the bank for a reduction or relief of the interest which is at the discretion of the bank.

Malawi - Savjani & Co.

The three (3) month moratorium on interest and measures announced by the Government in the Presidential address of 4 April 2020 appears to mainly be directed to Micro, Small and Medium Enterprises. Individual borrowers may not benefit from these measures and interest may continue to accrue on the bank loan. It would be possible to request from the bank a deferral of any payments that would be due during the period of closure of the registry. However, such deferral would be at the discretion of the bank and the bank would have to confirm if any interest will accrue on the deferred payments.

Mauritius - BLC Robert & Associates

Yes, subject however to the moratorium proposed by the Ministry of Finance on certain types of loans (see section 8 below) and making a possible request to the bank for a deferral of any payments that would be due during the period of closure of the registry.

Morocco - BFR & Associés

Moroccan banks may grant a three-month deferral of any payments without fees or delay penalties, provided that the borrowers falls under one of the criteria announced by the banks, as described in Q. 8 below.

Nigeria - G.Elias & Co.

Yes. Interest on the loan will continue to accrue on the bank loan. It may be possible to request for a deferral of any payments that would be due during the period of closure of the registry. However, such deferral would be at the discretion of the bank and the bank would have to confirm if any interest will accrue on the deferred payments.

Tanzania - A&K Tanzania

Yes. Interest on the loan will continue to accrue on the bank loan. It is open to a borrower to request the lender to agree to a deferral of any payments that may be due during any period of closure of the registry (although so far registries in Tanzania remain open as normal). However, such deferral would be at the discretion of the bank and the bank would have to confirm if any interest will accrue on the deferred payments.

Zambia - Musa Dudhia & Co.

Yes. Interest on the loan will continue to accrue on the bank loan. It would be possible to request the bank for a deferral of any payments that would be due during the period of closure of the registry. However, such deferral would be at the discretion of the bank and the bank would have to confirm if any interest will accrue on the deferred payments. It will be noted that the bank is prohibited from charging penal interest should you default on your loan repayments.

General

Yes. Interest on the loan will continue to accrue on the bank loan. It would be possible to request the bank for a deferral of any payments that would be due during the period of closure of the registry. However, such deferral would be at the discretion of the bank and the bank would have to confirm if any interest will accrue on the deferred payments.

Is it possible to have governmental/regulatory intervention in private commercial transactions? For example, can the government require lenders to take certain action or inaction in light of the pandemic?

Algeria - Bourabiat Associés

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.

However, in light of recent developments that have seen the COVID-19 declared a pandemic and threatened the financial system worldwide, the Central Bank of Algeria announced a raft of measures which include the deferral of the payment of credit tranches coming due, or the rescheduling of their customers' receivables, having been impacted by the economic situation induced by COVID- 19.

In addition, the Association of Banks and Financial Institutions recommends to the banks to cancel penalties for late payment of debts due on or after 31 March 2020.

Ethiopia - Mesfin Tafesse & Associates

Contracts regulate the relationship between persons who are parties to the contract and every aspect of the contract is required to be determined by the parties themselves. Therefore, regulatory authorities do not have the mandate to regulate the contractual terms and conditions. However, under Article 15(1) of the NBE Establishment Proclamation No. 591/2008, the NBE has the mandate to regulate the credit transaction of banks. As noted above, the government of Ethiopia has extended a 15 billion Birr liquidity support to private banks in order enable the banks to provide debt relief and extend new loans for COVID-19 affected clients.

Kenya - Anjarwalla & Khanna

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.

However, in light of recent developments that have seen the COVID-19 declared a pandemic and threatened the financial system worldwide, the Central Bank of Kenya on 18 March 2020, in consultation with commercial banks, announced a raft of measures which include restructuring of loans for borrowers in an effort to curb the adverse effects that borrowers may face from disruption of their businesses by the pandemic. Restructuring of loans will not happen automatically. A borrower is required to place a request with their bank for restructuring of the facility. The banks therefore have discretion to restructure a loan or not and to decide which other remedy they may avail to a borrower.

Loans should have been paid up to date as at 2 March 2020 according to the announcement.

Malawi - Savjani & Co.

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.

However, in light of recent developments that have seen COVID-19 declared a pandemic and threatened the financial system worldwide, many governments have put in place intervention measures. The Government of Malawi announced a series of measures on 4 April 2020 to implement a win-win arrangement with commercial banks and Micro-Finance Institutions to observe a three-month moratorium on interest and principal repayments for all loans contracted by Micro, Small and Medium Enterprises. Under this arrangement, the Registrar of Financial Institutions will encourage commercial banks to restructure loans in order to extend their repayment to more than a year.

Mauritius - BLC Robert & Associates

The Government of Mauritius and the Central Bank of Mauritius in consultation with commercial banks through the Mauritius Bankers Association and other stakeholders of the key economic sectors, announced a couple of measures to support businesses and employment during this period.

Below are some of the key measures announced in favour of businesses as at the 20 March 2020:

  1. Reduction of the Key Repo Rate from 3.35% to 2.85% to support domestic activity.
  2. Special Relief amount of MUR 5 billion to assist businesses whose cash flow and working capital have been adversely affected by COVID-19. The Special Relief amount will be available through commercial banks. Loans under this measure will be provided between 23 March 2020 until 31 July 2020 for a term of 2 years with an interest rate cap at 2.5% per annum and will be subject to a moratorium of 6 months for the payment of capital and interest.
  3. A moratorium of 6 months on capital repayments will also be applied to existing loans to businesses, which have been impacted by COVID-19. These measures will be accompanied by a reduction from 9% to 8% in the Cash Reserve Ratio applicable to commercial banks.
  4. Temporary suspension of the application of the Bank of Mauritius Guideline on Credit Impairment Measurement and Income Recognition with immediate effect. The suspension is intended to allow commercial banks to support businesses having cash flow and working capital difficulties.
  5. Introduction of a 2020 Savings Bond to be issued by the Bank of Mauritius as from 23 March 2020. The savings bond will be issued for a total amount of MUR 5 billion with a coupon of 2.5% and maturity of 2 years. Subscription will be open to individuals who are resident of Mauritius and locally registered non-profit NGOs, and will be subject to a cap per investor.
  6. Enterprise Modernisation Scheme (EMS) by DBM Ltd Interest rate under EMS will be reduced from 3.5% to 2.5%.
  7. The interest rate under SME Factoring Scheme will be reduced from 3.9% to 2.5%.
  8. Corporate Guarantee ISP Ltd will issue corporate guarantee to banks to enable them to grant loans to companies affected by COVID-19.
  9. The SME Equity Fund Ltd will reduce its minimum return requirement on equity financing from 6% to 3%.
  10. DBM Revolving Credit Fund A Revolving Credit Fund of Rs 200 million will be established at the Development Bank of Mauritius Ltd to help companies with turnover of up to Rs 10 million to ease cash flow difficulties up to 31st December 2020. Under this scheme, the credit to companies will be free of interest, provided that it is repaid within 9 months
  11. Double Tax Deduction on Investment Enterprises being affected by COVID-19 will be entitled to a double tax deduction on their investment in Plant and Machinery for the period 1 st March 2020 to 30th June 2020.
  12. Households affected by Covid-19 may request their commercial banks for a 6-month moratorium on capital repayments.
  13. The Bank of Mauritius will bear interest repayments of outstanding household loans from 01 April to 30 June 2020, for households earning up to Rs 50,000 a month.

Additional support measures have also been taken per sectors such as tourism, manufacturing and trade, agro-industry and health.

Morocco - BFR & Associés

Given the premise of the Moroccan Code of Obligations and Contracts and the principle of freedom of contract, government and/or regulatory authorities would normally not intervene in private commercial transactions between parties.

However, the President of the Professional Group of Moroccan Banks  (PGMB) announced that banks will implement two main measures as of 30 March 2020.

With regard the first measure, the President of the PGMB has provided for a deferral of credit, on request, until 30 June 2020 for each of the following categories of persons directly affected by the consequences of COVID19:

  • households (for real estate and consumer credit);
  • professionals and small companies (TPE) (medium and long term credit); and
  • other companies (for medium and long term credit). In this case, requests will be reviewed on a case-by-case basis by the bank.

The second measure aims to avail additional lines of credit to the businesses affected by COVID-19. This measure allows companies to have the necessary funds to meet the salaries of their employees and pay their suppliers. These additional lines of credit are ultimately repayable by December 31, 2020.

The interest rate calculated on these additional lines of credit is fixed at the refinancing rates of Bank Al-Maghrib (Central Bank of Morocco) plus 200 basis point.

Nigeria - G.Elias & Co.

As a general rule of the principle of privity of contract and the freedom of parties to contract, the government and/or regulatory authorities would typically not intervene in private commercial transactions.

The Central Bank of Nigeria (CBN) may intervene in private sector loans where the lender is an entity licensed and regulated by the CBN. The CBN can issue directives to banks to take certain actions or inactions with respect to their lending transactions in light of the pandemic. The CBN has not given any such directives. The CBN Circular only applies to CBN intervention facilities to financial institutions.

In relation to all CBN intervention facilities, the CBN Circular grants a further moratorium of one year on all principal repayments to all CBN intervention facilities and reduces the interest rate from 9 to 5 percent per annum for 1 year.

The CBN Circular also grants leave to commercial banks to consider temporary and time-limited restructuring of the tenor and loan terms for the businesses and households most affected by the outbreak of COVID-19 (particularly oil and gas, agriculture and manufacturing businesses).

Rwanda - K. Solutions & Partners

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.

However, in light of recent developments that have seen the COVID-19 declared a pandemic and threatened the financial system worldwide, the National Bank of Rwanda on 18 March 2020, in consultation with commercial banks, announced a raft of measures which include restructuring of loans for borrowers in an effort to curb the adverse effects that borrowers may face from disruption of their businesses by the pandemic. Restructuring of loans will not happen automatically. A borrower is required to place a request with their bank for restructuring of the facility. The banks therefore have discretion to restructure a loan or not and to decide which other remedy they may avail to a borrower.

Tanzania - A&K Tanzania

Unless there is a change of policy or law in Tanzania, Government/regulatory authorities would not intervene in private commercial transactions between parties.

Government/regulatory authorities in Tanzania reserve the right to issue directives and regulations to cater for relevant changes or development.

With regard to the banking and finance sector, the Minister of Finance and Planning of Tanzania and the Governor of the Bank of Tanzania have the mandate to make regulations and issue directives and circulars for carrying out or giving effect to the purposes and provisions of banking and financing services which may include but are not limited to additional prudential guidelines or requirements.

In light of COVID-19 having been declared a pandemic, the Minister of Finance and Planning or the Governor of the Bank of Tanzania may, in consultation with commercial banks, issue directives on measures to mitigate the COVID-19 pandemic in banking and financial services, however, to date no such measures have been taken.

Zambia - Musa Dudhia & Co.

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.

However, in light of recent developments that have seen the COVID-19 declared a pandemic and threatened the financial system worldwide, the Minister of Finance in a statement on the impact of COVID-19 on the Zambian economy given on 27 March 2020 announced that the Government will issue a Statutory Instrument for Classification and Provisioning of Loans Directives to encourage financial service providers to provide relief to the private sector and facilitate long term lending to productive sectors of the economy.

The Minister also announced that Government expects the banking sector to pass on these benefits to their clients. Whether this could result in claims against the Government for expropriation remains to be determined.

UAE - Anjarwalla Collins & Haidermota

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for the government and/or regulatory authorities to intervene in private commercial transactions between parties.

However, in light of recent developments that have seen the COVID-19 declared a pandemic and threatened the financial system worldwide, the UAE Central Bank announced the TESS programme which we have discussed in our response to Question 1. Restructuring of loans will not happen automatically. A borrower is required to place a request with their bank for restructuring of the facility. The banks therefore have discretion to restructure a loan or not and to decide which other remedy they may avail to a borrower.

What are the consequences of declaring a force majeure event under a finance transaction?

Algeria - Bourabiat Associés

The consequences for the parties where a valid force majeure event has occurred will depend on the nature of the affected party’s obligations under the agreement, as well as the consequences and remedies expressly provided for in the contract. Contractual remedies for force majeure typically include an extension of time to perform those obligations or suspension of contractual performance for the duration of the force majeure event.

If the force majeure event extends over a longer period (the period is typically specified), such clauses usually permit either party to terminate the agreement. Termination will result in the commitments made under the agreement being cancelled and all amounts becoming immediately due and payable.

If the contract is silent on the consequences of force majeure, Article 121 of the Algerian Civil Code provides that if the force majeure events make it impossible for a party to perform its obligations, the contract may be terminated.

Ethiopia - Mesfin Tafesse & Associates

For a force majeure clause provided under the contract, its consequence for the parties depends on the rights affected by the event and the contract will constitute remedies available for the event. The remedies under the contract could be extension of time of performance, variation of some terms and/or even termination of the agreement, when the event goes beyond a specific time. Termination will result in the commitments made under the agreement being cancelled and all amounts becoming immediately due and payable. Statutory force majeure will have the consequence of setting the defaulting party free from the payment of damages to the counter party in the event of cancellation of the agreement.

Malawi - Savjani & Co.

The consequences for the parties where a valid force majeure event has occurred will depend on the nature of the affected party’s obligations under the agreement, as well as the consequences and remedies expressly provided for in the contract. Contractual remedies for force majeure typically include an extension of time to perform those obligations or suspension of contractual performance for the duration of the force majeure event. If the force majeure event extends over a longer period (the period is typically specified), such clauses usually permit either party to terminate the agreement. Termination will result in the commitments made under the agreement being cancelled and all amounts becoming immediately due and payable.

Mauritius - BLC Robert & Associates

If a “force majeure” clause was provided under the loan agreement, the consequences will depend on what was expressly provided for in the contract. Contractual remedies for force majeure typically include an extension of time to perform those obligations or suspension of contractual performance for the duration of the force majeure event.

If the force majeure event extends over a longer period (the period is typically specified), the clauses may permit either party to terminate the agreement. Termination will result in the commitments made under the agreement being cancelled and all amounts becoming immediately due and payable.

If “force majeure” events were not provided under the loan agreement please refer to comments under section 5 above.

Morocco - BFR & Associés

The consequences for the parties where a valid force majeure event has occurred will depend on the nature of the affected party’s obligations under the agreement, as well as the consequences and remedies expressly provided for in the contract. Contractual remedies for force majeure typically include an extension of time to perform those obligations or suspension of contractual performance for the duration of the force majeure event.

If the force majeure event extends over a longer period (the period is typically specified), such clauses usually permit either party to terminate the agreement. Termination will result in the commitments made under the agreement being cancelled and all amounts becoming immediately due and payable.

Nigeria - G.Elias & Co.

The consequences for the parties where an applicable force majeure event has occurred will depend on the nature of the affected party’s obligations under the agreement, as well as the consequences and remedies expressly provided for in the contract. Typically, declaration of a force majeure event would mean that there has been no breach or, where there has been a breach, the lender may be willing to excuse the acceleration of the affected party’s payment obligations.

The contractual consequences of force majeure applying typically include an extension of time to perform those obligations or suspension of contractual performance for the duration of the force majeure event. If the force majeure event extends over a longer period (the period is typically specified), such clauses usually permit either party to terminate the agreement. Termination will result in the commitments made under the agreement being cancelled and perhaps all amounts becoming immediately due and payable.

Rwanda - K. Solutions & Partners

The consequences for the parties where a valid force majeure event has occurred will depend on the nature of the affected party’s obligations under the agreement, as well as the consequences and remedies expressly provided for in the contract. Contractual remedies for force majeure typically include an extension of time to perform those obligations or suspension of contractual performance for the duration of the force majeure event. If the force majeure event extends over a longer period (the period is typically specified), such clauses usually permit either party to terminate the agreement. Termination will result in the commitments made under the agreement being cancelled and all amounts becoming immediately due and payable.

General

The consequences for the parties where a valid force majeure event has occurred will depend on the nature of the affected party’s obligations under the agreement, as well as the consequences and remedies expressly provided for in the contract.

Contractual remedies for force majeure typically include an extension of time to perform those obligations or suspension of contractual performance for the duration of the force majeure event. If the force majeure event extends over a longer period (the period is typically specified), such clauses usually permit either party to terminate the agreement. Termination will result in the commitments made under the agreement being cancelled and all amounts becoming immediately due and payable.

UAE - Anjarwalla Collins & Haidermota

The consequences for the parties where a valid force majeure event has occurred will depend on the nature of the affected party’s obligations under the agreement, as well as the consequences and remedies expressly provided for in the contract. Contractual remedies for force majeure typically include an extension of time to perform those obligations or suspension of contractual performance for the duration of the force majeure event. If the force majeure event extends over a longer period (the period is typically specified), such clauses usually permit either party to terminate the agreement. Termination will result in the commitments made under the agreement being cancelled and all amounts becoming immediately due and payable.

However, if the loan agreement has no force majeure provisions, then the consequences of declaring a force majeure event under a finance transaction would, as discussed above, depend on the determination by UAE courts on whether COVID-19 is indeed a force majeure event.

In the event of a force majeure event, what would be the pertinent clauses that would need to be reviewed in the loan agreement?

  1. Financial covenants;
  2. EODs;
  3. Material adverse effect; and
  4. Notices (remedy periods, triggers?)

Algeria - Bourabiat Associés

  1. Financial-covenants
    If a borrower anticipates breaches of their financial covenants, they may have contractual rights to cure by pre-emptive equity injections or be able to raise subordinated group debt to apply in partial prepayment.  In addition, borrowers and lenders will need to scrutinise certain financial covenant related definitions to determine if any available add-backs could be utilised to limit the covenant impact resulting from decreased revenue.

  2. EODs
    Some finance documents allow financial covenant breaches to be cured which borrowers may wish to consider. In addition, agreements may be reached that waive breaches for a short period of time. Borrowers can also attempt to negotiate for applicable remedy periods for such events of default.

  3. Material adverse effect (MAE)
    It is not possible to say at this stage how long the coronavirus and its consequences will last. Therefore, claiming an event of default by virtue of a breach of a MAE clause will require careful consideration of the precise wording of the clause and the surrounding circumstances.

  4. Notices (remedy periods, triggers)
    Borrowers should review their loan documentation and, where events of default have been triggered or are likely to be triggered, they should approach their lenders to renegotiate or restructure their loans.

Lenders should, however, be cognizant of the emergency measures (available here) announced by the Central Bank of Algeria to mitigate against the economic effects of the COVID 19 outbreak.

Ethiopia - Mesfin Tafesse & Associates

  1. Financial-covenants: given the protection made available to banks and financial institutions and the position they are placed in, it is less likely that financial covenants would be subject to review.
     
  2. EODs: there is no relevant law in this regard.  Agreements may be reached that waive breaches for a short period of time. Borrowers can also attempt to negotiate for applicable remedy periods for such events of default.

  3. Material adverse effect (MAE): the law recognises force majeure as a mechanism of exoneration from the payment of compensation; not for the purpose of re-negotiation.  It is not possible to say at this stage how long COVID-19 and its consequences will last. Therefore, claiming an event of default by virtue of a breach of a MAE clause will be dependent on the terms and conditions contained under the agreement and it requires careful consideration of the precise wording of the clause and the surrounding circumstances.

  4. Notices (remedy periods, triggers): borrowers need to review their loan documentation and, where events of default have been triggered or are likely to be triggered, they should approach their lenders to renegotiate or restructure their loans. Renegotiating or restructuring the loan is at the discretion of the banks. For statutory force majeure, immediate notice by the defaulting party to the creditor is always required.

Kenya - Anjarwalla & Khanna

  1. Financial-covenants
    If a borrower anticipates breaches of their financial covenants, they may have contractual rights to cure by pre-emptive equity injections or be able to raise subordinated group debt to apply in partial prepayment.  In addition, borrowers and lenders will need to scrutinise certain financial covenant related definitions to determine if any available add-backs could be utilised to limit the covenant impact resulting from decreased revenue.

  2. EOD’s
    Some finance documents allow financial covenant breaches to be cured which borrowers may wish to consider. In addition, agreements may be reached that waive breaches for a short period of time. Borrowers can also attempt to negotiate for applicable remedy periods for such events of default.

  3. Material adverse effect (MAE)
    It is not possible to say at this stage how long the coronavirus and its consequences will last. Therefore, claiming an event of default by virtue of a breach of a MAE clause will require careful consideration of the precise wording of the clause and the surrounding circumstances.

  4. Notices (remedy periods, triggers?)
    Borrowers should review their loan documentation and, where events of default have been triggered or are likely to be triggered, they should approach their lenders to renegotiate or restructure their loans.

    Lenders should, however, be cognizant of the emergency measures (available here) announced by the Central Bank of Kenya to mitigate against the economic effects of the COVID 19 outbreak.

Malawi - Savjani & Co.

  1. Financial-covenants
    If a borrower anticipates breaches of their financial covenants, they may have contractual rights to cure by pre-emptive equity injections or be able to raise subordinated group debt to apply in partial prepayment.  In addition, borrowers and lenders will need to scrutinise certain financial covenant-related definitions to determine if any available add-backs could be utilised to limit the covenant impact resulting from decreased revenue.

  2. EODs
    Some finance documents allow financial covenant breaches to be cured which borrowers may wish to consider. In addition, agreements may be reached that waive breaches for a short period of time. Borrowers can also attempt to negotiate for applicable remedy periods for such events of default.

  3. Material adverse effect (MAE)
    It is not possible to say at this stage how long COVID-19 and its consequences will last. Therefore, claiming an event of default by virtue of a breach of a MAE clause will require careful consideration of the precise wording of the clause and the surrounding circumstances.

  4. Notices (remedy periods, triggers?)
    Borrowers should review their loan documentation and, where events of default have been triggered or are likely to be triggered, they should approach their lenders to renegotiate or restructure their loans.

Mauritius - BLC Robert & Associates

Financial-covenants
If a borrower anticipates breach of their financial covenants, they may have contractual rights to cure by pre-emptive equity injections or be able to raise subordinated group debt to apply in partial prepayment.  In addition, borrowers and lenders will need to scrutinise certain financial covenant related definitions to determine if any available add-backs could be utilised to limit the covenant impact resulting from decreased revenue.

EOD’s
Some finance documents allow financial covenant breaches to be cured which borrowers may wish to consider. In addition, agreements may be reached that waive breaches for a short period of time. Borrowers can also attempt to negotiate for applicable remedy periods for such events of default.

Material adverse effect (MAE)
It is not possible to say at this stage how long COVID-19 and its consequences will last. Therefore, claiming an event of default by virtue of a breach of a MAE clause will require careful consideration of the precise wording of the clause and the surrounding circumstances.

Notices (remedy periods, triggers)
Borrowers should review their loan documentation and where events of default have been triggered or are likely to be triggered, they should approach their lenders to renegotiate or restructure their loans.

Lenders should, however, be cognizant of the support measures announced by the Government of Mauritius to mitigate against the economic effects of the COVID 19 outbreak (see section 8 above).

Morocco - BFR & Associés

Financial-covenants
If a borrower anticipates breaches of their financial covenants, they may have contractual rights to cure by pre-emptive equity injections or be able to raise subordinated group debt to apply in partial prepayment.  In addition, borrowers and lenders will need to scrutinise certain financial covenant related definitions to determine if any available add-backs could be utilised to limit the covenant impact resulting from decreased revenue.

EOD’s
Some finance documents allow financial covenant breaches to be cured which borrowers may wish to consider. In addition, agreements may be reached that waive breaches for a short period of time. Borrowers can also attempt to negotiate for applicable remedy periods for such events of default.

Material adverse effect (MAE)
It is not possible to say at this stage how long COVID-19 and its consequences will last. Therefore, claiming an event of default by virtue of a breach of a MAE clause will require careful consideration of the precise wording of the clause and the surrounding circumstances.

Notices (remedy periods, triggers)
Borrowers should review their loan documentation and, where events of default have been triggered or are likely to be triggered, they should approach their lenders to renegotiate or restructure their loans.

Lenders should, however, be cognizant of the emergency measures announced by the Central Bank of Morocco to mitigate against the economic effects of the COVID-19 outbreak.

Nigeria - G.Elias & Co.

Financial covenants
If a borrower anticipates breaches of its financial covenants, it may have contractual rights to cure the same by pre-emptive equity injections or be able to raise subordinated group debt to apply in partial prepayment. In addition, borrowers and lenders will need to scrutinise certain financial covenant-related definitions to determine if any available add-backs could be utilized to limit the covenant impact resulting from decreased revenue.

EODs
Some finance documents allow a cure or grace period for EODs. Borrowers may wish to look out for such provisions and even if not available, agreements may be reached between parties to waive breaches for a short period of time. Borrowers can also attempt to negotiate for applicable remedy periods for such events of default.

Material adverse effect (MAE)
It is not possible to say at this stage how long COVID-19 and its consequences will last. Therefore, claiming an event of default by virtue of the application of an MAE clause will require careful consideration of the precise wording of the clause and the surrounding circumstances. This is especially because invoking an MAE clause will usually require material evidence, which may be unavailable at this stage.

Notices (remedy periods, triggers?)
Borrowers should review their loan documentation and, where events of default have been triggered or are likely to be triggered, they should approach their lenders to renegotiate or restructure their loans.

Lenders should, however, take cognisance of the CBN Circular.

Rwanda - K. Solutions & Partners

  1. Financial covenants
    If a borrower anticipates breaches of their financial covenants, they may have contractual rights to cure by pre-emptive equity injections or be able to raise subordinated group debt to apply in partial prepayment.  In addition, borrowers and lenders will need to scrutinise certain financial covenant related definitions to determine if any available add-backs could be utilised to limit the covenant impact resulting from decreased revenue.
  2. EOD’s
    Some finance documents allow financial covenant breaches to be cured which borrowers may wish to consider. In addition, agreements may be reached that waive breaches for a short period of time. Borrowers can also attempt to negotiate for applicable remedy periods for such events of default.
  3. Material adverse effect (MAE)
    It is not possible to say at this stage how long the coronavirus and its consequences will last. Therefore, claiming an event of default by virtue of a breach of a MAE clause will require careful consideration of the precise wording of the clause and the surrounding circumstances.
  4. Notices (remedy periods, triggers)
    Borrowers should review their loan documentation and, where events of default have been triggered or are likely to be triggered, they should approach their lenders to renegotiate or restructure their loans.

Lenders should, however, be cognisant of the emergency measures (available here) announced by the National Bank of Rwanda to mitigate against the economic effects of the COVID 19 outbreak.

Zambia - Musa Dudhia & Co.

  1. Financial-covenants
    If a borrower anticipates breaches of their financial covenants, they may have contractual rights to cure by pre-emptive equity injections or be able to raise subordinated group debt to apply in partial prepayment.  In addition, borrowers and lenders will need to scrutinise certain financial covenant related definitions to determine if any available add-backs could be utilised to limit the covenant impact resulting from decreased revenue.
  2. EOD’s
    Some finance documents allow financial covenant breaches to be cured which borrowers may wish to consider. In addition, agreements may be reached that waive breaches for a short period of time. Borrowers can also attempt to negotiate for applicable remedy periods for such events of default.
  3. Material adverse effect (MAE)
    It is not possible to say at this stage how long the coronavirus and its consequences will last. Therefore, claiming an event of default by virtue of a breach of a MAE clause will require careful consideration of the precise wording of the clause and the surrounding circumstances.
  4. Notices (remedy periods, triggers)
    Borrowers should review their loan documentation and, where events of default have been triggered or are likely to be triggered, they should approach their lenders to renegotiate or restructure their loans.

UAE - Anjarwalla Collins & Haidermota

  1. Financial-covenants
    If a borrower anticipates breaches of their financial covenants, they may have contractual rights to cure by pre-emptive equity injections or be able to raise subordinated group debt to apply in partial prepayment. In addition, borrowers and lenders will need to scrutinise certain financial covenant-related definitions to determine if any available add-backs could be utilised to limit the covenant impact resulting from decreased revenue.
  2. EOD’s
    Some finance documents allow financial covenant breaches to be cured which borrowers may wish to consider. In addition, agreements may be reached that waive breaches for a short period of time. Borrowers can also attempt to negotiate for applicable remedy periods for such events of default.

  3. MAE
    It is not possible to say at this stage how long the coronavirus and its consequences will last. Therefore, claiming an event of default by virtue of a breach of a MAE clause will require careful consideration of the precise wording of the clause and the surrounding circumstances.

  4. Notices (remedy periods, triggers)
    Borrowers should review their loan documentation and, where events of default have been triggered or are likely to be triggered, they should approach their lenders to renegotiate or restructure their loans.
    Lenders should, however, be cognizant of the TESS programme announced by the UAE Central Bank to mitigate against the economic effects of COVID-19.

Is it possible to have governmental/regulatory intervention in private commercial transactions? For example, can the government require lenders to take certain action or inaction in light of the pandemic?

Algeria - Bourabiat Associés

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.
However, the Central Bank of Algeria announced a raft of measures which include the deferral of the payment of credit tranches, coming due, or the rescheduling of their customers' receivables, having been impacted by the economic situation induced by COVID- 19.

In addition, pursuant to Instruction 05-20 of the Bank of Algeria relating to incentives to support Algerian companies, banks and financial institutions, the Association of Banks and Financial Institutions invited lenders to examine the situation of each of their clients individually (small and medium-sized businesses, small and medium-sized manufactures and large companies) and to grant the appropriate following measures:

  • Extension and/or renewal of deadlines for credits maturing on or after 31 March 2020;
  • Consolidation of unpaid debts not treated on or after 31 March 2020;
  • Extension of the deadlines for the use of credit facilities and deferred payments;
  • Cancellation of penalties for late payment of receivables due on or after 31 March 2020;
  • Maintenance and/or renewal of operating loans.

Kenya - Anjarwalla & Khanna

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.

However, the Central Bank of Kenya announced a raft of measures which include restructuring of loans for borrowers in an effort to curb the adverse effects that borrowers may face from disruption of their businesses by the pandemic. Restructuring of loans will not happen automatically. A borrower is required to place a request with their Bank for restructuring of the facility. The banks therefore have discretion to restructure a loan or not and to decide which other remedy they may avail to a borrower.

Malawi - Savjani & Co.

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.

However, in light of recent developments that have seen COVID-19 declared a pandemic and threatened the financial system worldwide, many governments have put in place intervention measures. The Government of Malawi announced a series of measures on 4 April 2020 to implement a win-win arrangement with commercial banks and Micro-Finance Institutions to observe a three-month moratorium on interest and principal repayments for all loans contracted by Micro, Small and Medium Enterprises. Under this arrangement, the Registrar of Financial Institutions will encourage commercial banks to restructure loans in order to extend their repayment to more than a year.

Morocco - BFR & Associés

Government and/or regulatory authorities normally do not intervene in private commercial transactions between parties.

However, the President of the Professional Group of Moroccan Banks  (PGMB) announced that banks will implement two main measures as of 30 March 2020.
With regard the first measure, the President of the PGMB has provided for a deferral of credit, on request, until 30 June 2020 for each of the following categories of persons directly affected by the consequences of COVID19:

  • households (for real estate and consumer credit);
  • professionals and small companies (TPE) (medium and long term credit); and
  • other companies (for medium and long term credit). In this case, requests will be reviewed on a case-by-case basis by the bank.

The second measure aims to avail additional lines of credit to the businesses affected by COVID-19. This measure allows companies to have the necessary funds to meet the salaries of their employees and pay their suppliers. These additional lines of credit are ultimately repayable by December 31, 2020.

The interest rate calculated on these additional lines of credit is fixed at the refinancing rates of Bank Al-Maghrib (Central Bank of Morocco) plus 200 basis point.

Nigeria - G.Elias & Co.

As a general rule of the principle of privity of contract and the freedom of parties to contract, the government and/or regulatory authorities would typically not intervene in private commercial transactions.

The CBN has the power to intervene in private sector loans where the lender is an entity licensed and regulated by the CBN. The CBN can issue directives to banks to take certain actions or inactions with respect to their commercial transactions in light of the pandemic. The CBN has not given any such directives. The CBN Circular only applies to CBN intervention facilities to financial institutions. In relation to all CBN intervention facilities, the CBN Circular:

  1. grants a further moratorium of one year on all principal repayments to all CBN intervention facilities; and
  2. reduces the interest rate from 9 to 5 per cent per annum for 1 year.

The CBN Circular also grants leave to commercial banks to consider temporary and time-limited restructuring of the tenor and loan terms for the businesses and households most affected by the outbreak of COVID-19 (particularly oil and gas, agriculture and manufacturing businesses). See question 8 above.

Rwanda - K. Solutions & Partners

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.

However, the National Bank of Rwanda announced a raft of measures which include restructuring of loans for borrowers in an effort to curb the adverse effects that borrowers may face from disruption of their businesses by the pandemic. Restructuring of loans will not happen automatically. A borrower is required to place a request with their bank for restructuring of the facility. The banks therefore have discretion to restructure a loan or not and to decide which other remedy they may avail to a borrower.

Tanzania - A&K Tanzania

Government/regulatory authorities in Tanzania reserve the right to issue directives and regulations to cater for relevant changes or development.

With regard to banking and financial services, the Minister of Finance and Planning of Tanzania and the Governor of the Bank of Tanzania have the mandate to make regulations and issue directives and circulars for carrying out or giving effect to the purposes and provisions of banking and financing services which may include but are not limited to additional prudential guidelines or requirements not expressly mentioned under existing banking laws.

The Minister of Finance and Planning or the Governor of the Bank of Tanzania may, in consultation with commercial banks, issue directives on measures to mitigate the COVID-19 pandemic in banking and financial services.

Uganda - MMAKS Advocates

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.

However, in light of recent developments that have seen the COVID-19 declared a pandemic and threatened the financial system worldwide, the Central Bank of Uganda on 20 March 2020, in consultation with commercial banks, announced a raft of measures which include a waiver on limitations om restructuring of loans for borrowers in an effort to curb the adverse effects that borrowers may face from disruption of their businesses by the pandemic.

Restructuring of loans will not happen automatically. A borrower is required to place a request with their bank for restructuring of the facility. The banks therefore have discretion to restructure a loan or not and to decide which other remedy they may avail to a borrower.

Zambia - Musa Dudhia & Co.

Given the premise of our law of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.

The Minister of Finance in a statement on the impact of COVID-19on the Zambian economy given on 27 March 2020 announced that the Government will issue a Statutory Instrument for Classification and Provisioning of Loans Directives to encourage financial service providers to provide relief to the private sector and facilitate long term lending to productive sectors of the economy. The Minister also announced that Government expects the banking sector to pass on these benefits to their clients. Whether this could result in claims against the Government for expropriation remains to be determined.

UAE - Anjarwalla Collins & Haidermota

Given the premise of UAE’s laws of contract and the principle of freedom of contract, it would not be typical for government and/or regulatory authorities to intervene in private commercial transactions between parties.

However, the UAE Central Bank announced a raft of measures under the TESS programme (discussed above)  which include restructuring of loans for borrowers in an effort to curb the adverse effects that borrowers may face from disruption of their businesses by the pandemic. Restructuring of loans will not happen automatically. A borrower is required to place a request with their bank for restructuring of the facility. The banks therefore have discretion to restructure a loan or not and to decide which other remedy they may avail to a borrower.

Can a borrower request a moratorium on repayments?

Algeria - Bourabiat Associés

There is no statutory right to a debt moratorium in Algeria outside of an insolvency situation in Algeria. Borrowers should proactively enter into negotiations with lenders in order to forestall potential loan defaults as this would be in the best interest of all parties involved. Lenders should take note that the Central Bank of Algeria has announced “Emergency Measures to Mitigate the Adverse Economic Effects on Bank Borrowers from the Coronavirus Pandemic” (available here) in order to avoid an increase in non-performing loans in the loan market.

Ethiopia - Mesfin Tafesse & Associates

There are no legal stipulations that entitle a borrower to request a moratorium under Ethiopian law. However, given the unprecedented nature of COVID-19 and government support extended to banks, banks are likely to put a moratorium on repayments. Borrowers should proactively enter into negotiations with lenders in order to forestall potential loan defaults as this would be in the best interest of all parties involved.

Kenya - Anjarwalla & Khanna

There is no statutory right to a debt moratorium in Kenya outside of an insolvency situation in Kenya. Borrowers should proactively enter into negotiations with lenders in order to forestall potential loan defaults as this would be in the best interest of all parties involved.

Lenders should take note that the Central Bank of Kenya has announced “Emergency Measures to Mitigate the Adverse Economic Effects on Bank Borrowers from the Coronavirus Pandemic” (available here) in order to avoid an increase in non-performing loans in the loan market.

Malawi - Savjani & Co.

There is no statutory right to a debt moratorium in Malawi outside of an insolvency situation. Borrowers should proactively enter into negotiations with lenders in order to forestall potential loan defaults as this would be in the best interest of all parties involved.

The Reserve Bank of Malawi and the Registrar of Financial Institutions announced a series of measures on 9  April 2020 and 21 April 2020, which are set out in our response to question 1 above, to implement win-win arrangements with commercial banks and micro finance institutions to observe a three-month moratorium on interest and principal repayments for all loans.

Mauritius - BLC Robert & Associates

There is no statutory right to a debt moratorium in Mauritius outside of an insolvency situation. However as mentioned under section 8 above, the Government of Mauritius introduced support measures amongst which moratorium on repayments of loans. Borrowers should proactively enter in negotiations with lenders in order to forestall potential loan defaults as this would be in the best interest of all parties involved.

Morocco - BFR & Associés

There is no statutory right to a debt moratorium in Morocco save for in an insolvency situation. Borrowers should proactively enter into negotiations with lenders in order to forestall potential loan defaults as this would be in the best interest of all parties involved.
The Economic Watch Committee has announced the establishment of a moratorium for the repayment of bank loan maturities until 30 June 2020 without payment of fees or penalties.
The conditions for implementing these measures are detailed in the following here.

Nigeria - G.Elias & Co.

There is no statutory right to a debt moratorium in Nigeria outside of the terms of a contract between parties. Borrowers should proactively enter into negotiations with lenders to manage potential loan defaults.

Rwanda - K. Solutions & Partners

There is no statutory right to a debt moratorium in Rwanda outside of an insolvency situation. Borrowers should proactively enter into negotiations with lenders in order to forestall potential loan defaults as this would be in the best interest of all parties involved.

Lenders should take note that the National Bank of Rwanda has announced “Emergency Measures to Mitigate the Adverse Economic Effects on Bank Borrowers from the Coronavirus Pandemic” (available here) in order  to avoid an increase in non-performing loans in the loan market.

Tanzania - A&K Tanzania

There is no statutory right to a debt moratorium in Tanzania outside of an insolvency situation. Borrowers should proactively enter into negotiations with lenders in order to forestall potential loan defaults as this would be in the best interest of all parties involved.

Zambia - Musa Dudhia & Co.

There is no statutory right to a debt moratorium in Zambia. Where the company is under business rescue, the obligation to make repayments would remain but a lender will not be able to enforce its rights in the event of any default by the Company except with the written consent of the business rescue administrator or with the leave of the Court and in accordance with any terms and conditions the Court considers suitable. Borrowers should proactively enter into negotiations with lenders in order to forestall potential loan defaults as this would be in the best interest of all parties involved.

Lenders should take note that it is anticipated that the Government will issue a Statutory Instrument for Classification and Provisioning of Loans Directives to encourage financial service providers to provide relief to the private sector and facilitate long term lending to productive sectors of the economy. The Minister of Finance in a statement on the impact of COVID-19 on the Zambian economy given on 27 March 2020 announced that Government expects the banking sector to pass on these benefits to their clients.

UAE - Anjarwalla Collins & Haidermota

There is no statutory right to a debt moratorium in the UAE outside of an insolvency situation in the UAE. Borrowers should proactively enter into negotiations with lenders in order to forestall potential loan defaults as this would be in the best interest of all parties involved. Lenders should take note that the UAE Central Bank has announced the TESS programme (discussed above) in order to avoid an increase in non-performing loans in the loan market.

Does a lender have an obligation to accommodate a borrower’s requests in the face of a pandemic and what would be the legal consequences of a refusal?

Algeria - Bourabiat Associés

Unless otherwise provided in the relevant loan agreement between a borrower and lender, lenders have no legal obligation to accommodate a borrower’s request for a moratorium on debt repayments.
Lenders should however be cognizant of the emergency measures announced by the Central Bank of Algeria to mitigate against the economic effects of the COVID 19 outbreak.

Ethiopia - Mesfin Tafesse & Associates

The lenders are not legally obligated to accommodate a borrower’s request for the postponement of payment. However, parties may require the lender to accommodate a borrower’s request for a moratorium on debt repayments under the loan agreement.

Kenya - Anjarwalla & Khanna

Unless otherwise provided in the relevant loan agreement between a borrower and lender, lenders have no legal obligation to accommodate a borrower’s request for a moratorium on debt repayments.

Lenders should however be cognizant of the emergency measures (available here) announced by the Central Bank of Kenya to mitigate against the economic effects of the COVID 19 outbreak.

Malawi - Savjani & Co.

Unless otherwise provided in the relevant loan agreement between a borrower and lender, lenders have no legal obligation to accommodate a borrower’s request for a moratorium on debt repayments.

Lenders should however be cognizant of the measures announced by the Reserve Bank of Malawi and the Registrar of Financial Institutions to mitigate against the economic effects of the COVID-19 outbreak.

Mauritius - BLC Robert & Associates

Unless otherwise provided in the relevant loan agreement between a borrower and lender and subject to the support measures put into place by the Government of Mauritius (see section 8 above), lenders have no legal obligation to accommodate a borrower’s request for a moratorium on debt repayments.

Morocco - BFR & Associés

Unless otherwise provided in the relevant loan agreement between a borrower and lender, lenders have no legal obligation to accommodate a borrower’s request for a moratorium on debt repayments.

Lenders should however be cognizant of the emergency measures announced by the Economic Watch Committee to mitigate against the economic effects of the COVID 19 outbreak.
The main measures implemented by the Economic Watch Committee concern only certain categories of borrowers, in particular those who have been directly affected by the COVID-19.

The possibility of deferral for three successive months is not open to everyone, as there are certain criteria that one would need to satisfy. Therefore, one would have to demonstrate that at the time of the request for deferral (borrowers will have to fill in an online form), they were suffering as a result of a job loss, there was a drop in their income or their income was suspended due to the crisis caused by COVID-19.

If the borrower does not meet the eligibility criteria, they will have to settle the amount of credit in accordance with the schedule set out in credit agreement.

Nigeria - G.Elias & Co.

Unless otherwise provided in the loan agreement between a borrower and lender, lenders have no legal obligation to accommodate a borrower’s request for a moratorium on debt repayments.

Tanzania - A&K Tanzania

Unless otherwise provided in the relevant loan agreement between a borrower and lender, lenders have no legal obligation to accommodate a borrower’s request for a moratorium on debt repayments.

Zambia - Musa Dudhia & Co.

Unless otherwise provided in the relevant loan agreement between a borrower and lender, lenders have no legal obligation to accommodate a borrower’s request for a moratorium on debt repayments.

Lenders should note that it is anticipated that the Government will issue a Statutory Instrument for Classification and Provisioning of Loans Directives to encourage financial service providers to provide relief to the private sector and facilitate long term lending to productive sectors of the economy. The Minister of Finance in a statement on the impact of COVID-19 on the Zambian economy given on 27 March 2020 announced that Government expects the banking sector to pass on these benefits to their clients.

UAE - Anjarwalla Collins & Haidermota

Unless otherwise provided in the relevant loan agreement between a borrower and lender, lenders have no legal obligation to accommodate a borrower’s request for a moratorium on debt repayments.

Lenders should however be cognizant of the TESS programme (discussed above) which contains certain emergency measures  announced by the UAE Central Bank to mitigate against the economic effects of COVID-19.

Can the Kenya Bankers Association (KBA) engage CBK on possible exemption from certain reporting requirements?

Kenya - Anjarwalla & Khanna

Delay of more than 90 days in the repayment of a debt requires a bank to classify the borrower as being in default and the loan as non-performing. This requires the lender to set aside more cash to cover the non-performing loan.

Under the CBK Prudential Guidelines, banks are required to maintain certain minimum core capital requirements and also maintain adequate provisions for bad and doubtful debts prior to declaring profits or dividend.

In light of the directive issued on 18 March 2020 by the CBK and the potential rise in non-performing loans in the short to medium term, KBA should consider engaging with the CBK to exempt banks from the requirement of setting aside capital to match the non-performing loans arising during this period. The KBA should also engage the CBK and explore the possibility of the CBK providing a rescue line of credit to the banks to cushion the banks from the expected financial downturn the banks will incur from the restructuring of loans.

Can the Tanzania Bankers Association (TBA) engage Central Bank on possible exemption from certain reporting requirements?

Tanzania - A&K Tanzania

Yes. The Tanzania Bankers Association (TBA) being the main advocacy body for the banking sector in Tanzania plays a great role in ensuring that the interests of both banks and financial institutions as well as customers are secured.

As such TBA may engage the Bank of Tanzania for possible exemption on reporting requirement as a result of COVID-19 pandemic.

Can the Bankers Association of Zambia (BAZ) or other associations for financial service providers engage Bank of Zambia (BoZ) on possible exemption from certain reporting requirements?

Zambia - Musa Dudhia & Co.

Delay of more than 90 days in the repayment of a debt requires a financial service provider to classify the loan as non-performing. This requires the lender to set aside more cash to cover the non-performing loan.

Under the Banking and Financial Services (Capital Adequacy) Regulations, 1995, financial service providers are required to maintain certain minimum core capital requirements and also under the Banking and Financial Services (Classification and Provisioning of Loans) Regulations 1996, financial service providers are required to make provisions for loan related losses.

In light of the potential rise in non-performing loans in the short to medium term, BAZ or any other association for financial service providers should consider engaging with the BoZ to exempt banks and financial service providers from the requirement of setting aside capital to match the non-performing loans arising during this period. The BAZ should also engage BoZ and explore the possibility of the BoZ providing a rescue line of credit to the banks and financial service providers to cushion the banks and financial service providers from the expected financial downturn the banks and financial service providers will incur from the restructuring of loans.

Can the Mauritius Bankers Association (KBA) engage on possible exemption from certain reporting requirements?

Mauritius - BLC Robert & Associates

Please refer to Section 8 above on the support measures taken at the level of the Government and the Central Bank of Mauritius in support of the banking activity after consultation with the Mauritius Bankers Association.

Can the Rwanda Bankers Association (RBA) engage CRB on possible exemption from certain reporting requirements?

Rwanda - K. Solutions & Partners

Delay of more than 90 days in the repayment of a debt requires a bank to classify the borrower as being in default and the loan as non-performing. This requires the lender to set aside more cash to cover the non-performing loan.

Under a law governing credit reporting system, banks are required to maintain certain minimum core capital requirements and also to maintain adequate provisions for bad and doubtful debts prior to declaring profits or dividend.

In light of the directive issued on 18 March 2020 by the National Bank of Rwanda and the potential rise in non-performing loans in the short to medium term, RBA should consider engaging with the National Bank of Rwanda to exempt banks from the requirement of setting aside capital to match the non-performing loans arising during this period. The RBA should also engage the National Bank of Rwanda and explore the possibility of the National Bank of Rwanda providing a rescue line of credit to the banks to cushion the banks from the expected financial downturn the banks will incur from the restructuring of loans.

Can the Chartered Institute of Bankers of Nigeria (CIBN) engage CBN on possible exemption from certain reporting requirements?

Nigeria - G.Elias & Co.

The CIBN can and should consider engaging with the CBN to exempt banks from the requirement of setting aside capital to match the non-performing loans arising during this period. The CBN Circular reiterates the CBN’s readiness to support the capacity of commercial banks to direct credit to individuals, households and businesses, as well as provide liquidity backstops as and when required. CIBN should also engage the CBN and explore the possibility of the CBN providing a rescue line of credit to the banks to cushion the banks from the expected financial downturn the banks will incur from the restructuring of loans.

However, the Bankers’ Committee, which is an umbrella body of managing directors of deposit money banks and directors of various departments of the CBN, meets with the CBN periodically (at least once every month) and may be in a better position to engage the CBN timeously on this issue.  It has more clout than the CIBN.

Can the Moroccan banks engage CBM on possible exemption from certain reporting requirements?

Morocco - BFR & Associés

The Central Bank of Morocco (CBM) issued a statement on 29 March 2020 indicating that it has adopted a set of new monetary and prudential policies to support access to bank credit for the benefit of both households and businesses. This system will triple the refinancing capacity of banks with the CBM thanks to:

  • the possibility of recourse by banks to refinancing instruments ;
  • the extension to a wide range of securities accepted by the CBM in return for refinancing granted to banks;
  • the extension of the duration of these refinancings; and
  • the strengthening of the specific refinancing program for the benefit of TPME, by integrating, in addition to investment credits, operating credits and increasing the frequency of their refinancing.

CBM is also taking prudential measures to support credit institutions, covering liquidity and provisioning of claims in order to strengthen the capacity of these institutions to support households and undertaken in these exceptional circumstances.

Can the members of the Banking sector engage authorities on possible exemption from certain reporting requirements?

Malawi - Savjani & Co.

During the presidential address of 4 April 2020, the President of Malawi encouraged the private sector to agree on sector specific measures and submit them to the Cabinet Committee for presidential consideration and approval within 72 hours of the address.

In the press release of 9 April 2020, the Reserve Bank of Malawi, the Registrar of Financial Institutions (“RoFI”) and the Bankers Association of Malawi (“BAM”) agreed that the RoFI would take the following measures to assist commercial banks:

  1. Reduce the Liquidity Reserve Requirement (LRR) on domestic currency deposits, thereby releasing K12 billion as additional liquidity availed to banks to directly support borrowers who are financially distressed as a result of COVID-19;
  2. Reduce the Lombard Rate margin by 50 percent (50%) to reduce the cost of accessing funds from the Central Bank and enable banks to pass on the benefits to borrowers;
  3. Activate the Emergency Liquidity Assistance Facility and make it available to banks on a case by case basis;
  4. Approve the recapitalisation plan under the Prompt Corrective Action (PCA) Directive beyond 90 days in the unlikely event of a bank breaching the Prudential Capital Requirement Directive as a result of COVID-19;
  5. Grant relief to banks on the provisioning of restructured loans and loans on moratorium impacted by COVID-19.

In our view, there is room for the BAM to engage with authorities to discuss the possibility of granting exemptions from certain reporting requirements if that may assist in mitigating the economic effect of COVID-19. However, there is no guarantee that such a request would be accepted.

Contacts

Akash Devani

Akash Devani

Partner, Anjarwalla & Khanna

Arshad Dudhia

Arshad Dudhia

Managing Partner, Musa Dudhia & Co.

Foued Bourabiat

Foued Bourabiat

Managing Partner, Bourabiat Associés

Francisco Avillez

Francisco Avillez

Managing Partner, ABCC

Fred Onuobia

Fred Onuobia

Managing Partner, G.Elias & Co.

Geofrey Dimoso

Geofrey Dimoso

Partner, A&K Tanzania

Gloria Matovu Kawooya

Gloria Matovu Kawooya

Partner, MMAKS Advocates

Iqbal Rajahbalee

Iqbal Rajahbalee

Partner, BLC Robert & Associates

Jean-Eric Sauzier

Jean-Eric Sauzier

Partner, BLC Robert & Associates

Julien Kavuruganda

Julien Kavuruganda

Partner, K. Solutions & Partners

Krishna Savjani

Krishna Savjani

Managing Partner, Savjani & Co.

Mesfin Tafesse

Mesfin Tafesse

Principal Attorney, Mesfin Tafesse & Associates

Mona Doshi

Mona Doshi

Partner, Anjarwalla & Khanna

Oldivanda Bacar

Oldivanda Bacar

Partner, ABCC

Romain Frédéric Rabillard

Romain Frédéric Rabillard

Partner, BFR & Associés

Sahondra Rabenarivo

Sahondra Rabenarivo

Managing Partner, Madagascar Law Office

Salimatou Diallo

Salimatou Diallo

Partner, SD Avocats

Segun Omoregie

Segun Omoregie

Partner, G.Elias & Co.

Shellomith Irungu

Shellomith Irungu

Partner, Anjarwalla & Khanna

Sonal Sejpal

Sonal Sejpal

Partner, Anjarwalla & Khanna

Valerie Basasur

Valerie Basasur

Partner, BLC Robert & Associates