Tips to Save Business during COVID-19 Outbreak

See our Latest YouTube Video for Tips to Save Business by implementing 7 Preventive Measures during COVID-19 Threat:

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1. Enforce Force Majeure Clause of your Lease Rental Agreements

Force Majeure can be termed as ‘an event or effect that can be neither anticipated nor controlled. It is, therefore, can be referred to as unforeseeable circumstances that prevent someone from fulfilling a contract.

  • While Force Majeure has neither been defined nor specifically dealt with, in Indian Statutes, some reference can be found in Section 32 of the Indian Contract Act, 1872.

  • The Force Majeure Clause provides temporary reprieve to a party from performing its obligations under a Contract upon happening upon some Contingent event that becomes impossible to perform a contract.

  • This Clause can be used to prevent Financial Losses in the ongoing Business Crisis due to the COVID-19 outbreak. The applicability & validity of this clause in this pandemic clause is duly justified by the Govt. Office Memorandum.

  • As per the Office Memorandum No. F.18/4/2020-PPD issued by Department of Expenditure, Procurement Policy Division, Ministry of Finance dated 19.02.2020, the govt. has issued a clarification to their internal department for invoking Force Majeure Clause.

  • The Force Majeure Clause can be invoked to Prevent / Save Payments of Lease Rental Payments, Labour Contract Payments & all other Contractual Obligations for the specified period of Lockdown.

  • For Specimen Para of Force Majeure and the copy of Govt. Office Memorandum, please see the detailed video above or Visit YouTube Link:

2. The doctrine of Frustration alias Frustrated Contract

  • The Doctrine of Frustration is present in India u/s 56 of the Indian Contract Act, 1872. It says that any act which was to be performed after the contract is made becomes unlawful or impossible to perform, and which the promisor could not prevent, then such an act which becomes impossible or unlawful will become void.

  • In Simple Words, the Contract’s Performance will become impossible because of some intervening or supervening event after the contract has been made.

  • The Force Majeure and Frustration of Contract requires a supervening event.

  • If it is foreseeable than it is a Breach of Contract.

  • Also, this supervening event must render performance.

  • The effect of both Force Majeure and Doctrine of Frustration leads to the discharge of contract between the parties thus relieving them of their obligations under the contract.

  • It is clear that if Force Majeure clauses are not incorporated in Contracts between parties, then the doctrine of frustration will be applied.

3. Availing Moratorium Facility for Delaying / Deferring EMI Payments

  • Reserve Bank of India has announced the regulatory measures to mitigate the debt burden on the Borrowers by deferring the EMI’s Payments for 3 months effective from 01.03.2020 to 31.05.2020

  • The EMI’s can be deferred for 3 months using the Moratorium Facility. This means that the Interest shall continue to be levied at the contracted / original rate of interest.

  • Most of the peoples are assuming that the EMI’s are delayed by 3 months but ignoring the fact that Interest shall continue to levy, resulting in the additional cost of Borrowings.

  • Moratorium Facility can be availed on all types of Term Loans, CC, OD, KCC, Credit Cards, etc. Even the Interest shall continue to levy on Credit Card Payments too

  • We strongly recommend that in case you are able to pay the EMI’s without availing this facility, then you should not opt for this

  • The Impact of Additional Interest by availing this Facility can be offset either by paying Increased EMI’s or by increasing the Repayment Period.

  • For an illustration of the effect of Moratorium and the volume of the impact of additional interest, please see the video above or Visit YouTube Link:

4. Tips to Delay EMIs Payment without Availing Moratorium Facility.

  • You can delay the EMI Payments by arranging alternate Unsecured Loan or any other alternate sources. Even these arrangements may also levy additional interest but the impact of Interest levy under the Alternate Fund Arrangement or under Moratorium may have a significant effect.

  • It is understood that the repayment terms may vary by opting for the option of alternate fund arrangement or the moratorium facility provided by RBI. But still, we can opt for Flexi plans to cope with the impact.

  • For the detailed illustration of the manner of saving additional interest under Moratorium, please see the video above or Visit YouTube Link:

5. Adjustments to Personnel Expenses

  • Since, the pay out’s of Salaries & Wages can be adjusted in mutual consent or in discussion with the Employees, so that the maximum possible actions can be taken in each person’s interest.

  • Employees may be entirely dependent upon us or they may have an alternate source of earning. The alternate source of earning may also include from the Family Source of Income or having Reasonable Financial Strength to survive in this pandemic situation.

  • Those Employees or Labourers, which are entirely dependent upon the Owner or Employer, we must say that such employees or Labourers should be taken care of. Those payments can be treated as the Donations on the personal front. Such an act is purely a personal view.

  • The Employer or owner is under Moral Obligation to pay the Full Salaries & wages to their Staff but at the same time, this can lead to the situation of Insolvency, which may have caused further multiple replications.

  • In recent days, we have seen the Govt. Directives to pay the Full Salaries & Wages during this Lockdown but at the same time, the perspective of Business Owner is ignored at all.

  • To implement the decision of the Govt. is not practical unless the Govt. Provides the Benefit to the MSME by either way of, Subsidised Interest, Tax Benefits, Collateral Free Funding Facilities, etc.

  • Besides of above facility, no one can assure the business flow in the future. The above steps are only during the lockdown, but afterward, the cash flow will surely impact at large. This will result in further recession and a negative impact on the capacity to spend on Salaries & Wages.

  • The decision on how the adjustments can be made to Personnel Expenses are purely dependent on various factors and will vary from case to case.

  • However, make cuts to continue with regular employees, make freeze to salary hikes, cut to performance bonuses, etc are the alternatives that can be implemented in interest on all.

  • Recently, the Petition has been filed before the Supreme Court challenging the GOI order to pay the full Salaries & Wages. The matter is requested to place on an urgent basis through Video Conferencing.

  • Read more about Supreme Court petition at

6. Take Preventive Decisions to Terminate or Amend Regular Business Decisions with a motive to Reduce Cost of Operations

  • We also suggest that further Preventive Decisions should be taken with immediate effect to reduce the cost of operations.

  • Each Business Owner knows best about his / her business. They can work out on the Loop Holes which can be used to save cost. The only thing is brainstorming which needs to be done based upon the changing scenarios.

7. Utilize Idle Funds to earn maximum interest with

  • Utilize Idle Funds to earn Benefits of Interest Income. Although, many of us may already availing this facility. But with extra efforts, we can park the additional funds to Interest.

  • The Funds should be parked in such a way so that the principle is secured with ease of access to utilize at the time of requirement.

  • This measure plays well in the case of Significant Funds of not less than Rs. 20 Lacs in usual. This fund can be of regular business purposes but can be used for Interest, even for days.

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