As of mid-April, COVID-19 has spread to more than 200 countries and territories, with more than 2 million confirmed cases and the majority of the world’s population under quarantine or lockdown. This pandemic is a once-in-a-generation event that has decimated the global Business Events industry.
Every meeting organizer has been working non-stop over the past month to postpone or cancel their events. Every event supplier has seen their revenue plummet to zero or close to zero as their book of business has been emptied by the global shutdown.
HOW DOES OUR ESCROW SOLUTION PROTECT YOUR ORGANIZATION?
When a global crisis like COVID-19 strikes, clients want to know how much they have paid, how much they owe, what would it cost to cancel now, in 30 days, in 60 days, can they declare Force Majeure, will they be able to postpone with or without penalty? And above all, they want to know, will they be able to get their deposits refunded and if they postpone, will their supplier still be in business when the crisis is over.
Suppliers have similar concerns: if the client cancels, and they still owe deposits, will they refuse to pay or honour the terms of the contract? If the client declares Force Majeure under the terms of the contract, will they rebook in the future? If they postpone the event but demand the return of their deposits, will they maintain that booking and agree to pay deposits in the future?
Holding advance deposits in escrow eliminates these risks for the client and the supplier.
Neither party can use the possession of the funds to their advantage and must negotiate fairly and in good faith. Once the parties come to an agreement and provide updated instructions to Meeting Escrow, as trustee of the funds, we execute the instructions.
If the parties agree to postpone rather than cancel the program, they can instruct Meeting Escrow to continue to hold the funds in escrow until the new program dates are set.
Added benefits of the escrow process are:
1) the client’s meeting budget remains committed
2) the budget is shielded from foreign exchange fluctuations (if being held in a different currency)
3) the funds continue to earn interest for the client (USD and CAD dollar escrow accounts) until the postponed program eventually takes place and funds are released.
HOW THE SOLUTION WORKS
1) Quick Escrow Overview:
Advance deposit funds are securely held in escrow for the protection of the client and the supplier and only released once the program is completed (except for sub-vendor deposits required by DMCs and other intermediaries). Several “trigger conditions” can interrupt the release of the funds:
a) there is a change in ownership or brand of the supplier (for example a hotel that changes “flags” and is no longer appropriate for an incentive group)
b) bankruptcy / cessation of operations by the supplier or client
c) force majeure invoked by the client or supplier.
2) Is COVID-19 crisis a reason for invoking force majeure today?
This is a matter for meetings industry legal experts such as Lisa Sommer Devlin and Jonathan Howe to advise on (and there have been many articles published recently). Should either party invoke force majeure, based on their interpretation of their contract or agreement, they would notify Meeting Escrow and we would pause the release of funds for 7 days, giving time for verification by both parties.
3) If not force majeure, both parties can also agree to a pause
If force majeure is not invoked, but the parties require additional time to negotiate next steps, then to pause the release of funds, the client would send an email to Meeting Escrow with c.c. to the supplier and the supplier would have to reply that they agree.
4) Supplier contract terms always apply
The most important thing to remember is that no matter whether funds are due to be deposited in escrow or already held in escrow or already released (for sub-vendor advance deposits), the actual obligations of the client and supplier are still governed by the agreement that they have signed together.
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Contact us at +1 647-494-3356 or firstname.lastname@example.org for more information.