Our responses below are based on the legal instruments approved following the declaration of the state of emergency (as well as the general legislation in force), namely:
- Presidential Decree no. 11/2020, of 30 March, which decrees the state of emergency;
- Law no. 1/2020, of 31 March, which ratifies the declaration of a state of emergency; and
- Decree no. 12/2020, of 2 April, which approves administrative enforcement measures for the prevention and containment of the spread of the COVID-19 pandemic.
These instruments will be in force until 30 April 2020, unless there is a need to extend the duration of the state of emergency or to take other even more restrictive measures, considering the evolution of the pandemic; thus, our responses are subject to permanent update.
1. What personal protective equipment should be provided to the employees, considering COVID-19?
Depending on the nature of the functions and the level of exposure of the employees, it is recommended that employers make available to employees, at least, masks and gloves.
2. What hygiene, health and safety (HSE) measures should employers take?
Employers should improve safety and health measures at work place, including:
a) the aeration of the facilities;
b) the practice of social distancing (at least 1.5m distance) between colleagues (meeting rooms, office kitchen, open spaces), suppliers, partners and customers;
c) the provision of protective equipment, when applicable;
d) placing hand sanitizers in strategic locations; and
e) frequent cleaning of the workplace (supported by information and awareness campaigns).
The implementation of these measures may require a reorganization of the workspace.
3. How should illness absences, certified or not, resulting from infection by COVID-19 be treated?
If the employee is absent for more than three days and presents a medical certificate, the payment of remuneration will be the responsibility of the National Social Security Institute (INSS). Otherwise, it will be up to the employer to decide whether or not to pay the employee’s salary.
4. Will the suspension of employment contracts be allowed in Mozambique? If so, what are the implications for employers and employees?
The employer may suspend employment contracts due to market, technological reasons, catastrophes or other occurrences that have or are expected to affect the normal activity of the company or establishment. During the period of suspension, the rights, duties and guarantees of the parties inherent to the effective performance of the work cease, while maintaining the duties of mutual loyalty and respect.
Furthermore, during the suspension period, the employee's remuneration is gradually reduced, with the employee entitled to 75%, 50% and 25% of the remuneration during the first, second and third months of the suspension, respectively; the employer, in any case, must pay a salary that is not less than the national minimum salary. As of the fourth month, if the impediment persists, the payment of remuneration may be suspended.
Under this regime, if the impediment persists beyond three months, the parties may agree on the termination of the employment contract, with the employee entitled to a severance payment corresponding to 45 days of salary for each year of service.
5. What are the consequences of a lockdown for employers and employees?
If the mandatory limitation on the movement or permanence of people or vehicles (lockdown) is declared, at any time, within the scope of the declaration of a state of emergency, and depending on the conditions established in the declaration, employers may attempt to find ways to continue to conduct their activities as far as possible. Some alternatives that might be considered include, but are not limited to, teleworking, as well as, the suspension or termination of employment contracts.
6. What is the maximum number of employees that can remain in the workplace?
The number of employees at the workplace at any given time must be reduced to 1/3 of the total number of employees.
7. Which services are considered essential according to current legislation?
Essential services are considered to be:
a) Medical, hospital and medication services;
b) Water, energy and fuel supply;
c) Sale of food and basic necessities;
d) Loading and unloading of perishable animals and foodstuffs;
e) Post and telecommunications;
f) Control of air and meteorological space;
g) Sanitation services;
i) Private security; and
j) Funeral services.
8. Can companies force employees to take collective holidays, even if a lockdown has been declared?
Recourse to the collective vacation regime, during an eventual interruption of activities, can be a viable alternative for employers and employees. However, it is essential to agree with the employees and consult with the competent union body.
1. Which travel restrictions, local and international, are in force?
Local travel restrictions apply to any part of the national territory, provided that there is an exponential increase of contamination cases.
Persons under quarantine at home are prohibited from moving within the territory and must remain at home for 14 days. In addition to persons who are advised to remain in quarantine for having entered the country, persons who have had direct contact with confirmed cases of COVID-19 and citizens for whom the competent health authorities determine an active surveillance situation must also remain in quarantine.
In regard to international travel, the government has determined the suspension of entry visas and the cancellation of visas already issued, as well as the suspension of visa suppression agreements and the limitation of entry and exit of persons from Mozambican territory, through the partial closure of its borders, except for matters of state interest, humanitarian support, health and cargo transport.
2. Will foreign citizens in Mozambique whose visas expire during the term of the state of emergency be fined or penalized for the illegality of their stay?
Among other official documents, identification and residence documents for foreigners and temporary visas are valid and effective until 30 June 2020, even if they have expired.
Thus, foreign citizens in Mozambique shall not be fined or penalized during the above-mentioned period due to the state of emergency.
Corporate / Commercial
1. Does Mozambican law permit General Assembly meetings by video conference?
Mozambican law does not foresee this possibility; however, it does permit the shareholders to deliberate without a meeting, as long as each one declares their vote in writing in a document (a voting letter) that includes the proposal of the deliberation and is duly dated, signed and addressed to the company.
Note that the written deliberation is considered to have been taken on the date in which the last voting letter is received at the company. Once the deliberation is taken in the terms previously described, the Chairman of the General Assembly or their substitute should inform all the shareholders in writing.
2. What are the options to guarantee the approval of the annual accounts during the deadline established by the Commercial Code?
The accounts are subject to shareholders’ approval in a General Assembly. Where it is not possible to meet on time, the shareholders may deliberate without a meeting as discussed in the previous question. Even though this deadline has passed, we advise those companies that have not yet complied with this obligation to regularize this situation.
3. Can powers of attorney and/or similar documents be executed during this period?
Through Notice number 03/DNRN/027.15/2020, of 16 April 2020, issued by the National Directorate of Registrations and Notaries, notarial powers of attorney can only be given for processes for maintenance allowance, pensions, court appearances and other processes of an urgent nature. However, private powers of attorney, for cases in which the transaction in question does not require a specific form, may be executed depending on what the parties decide from time to time.
4. Is there any exception to presenting notarized signatures on powers of attorney or minutes when submitted to the Legal Entities Registry during the period of state of emergency?
The Government of Mozambique has not yet established an exception regarding the presentation of notarized signatures, when related to documents prepared in other countries (which should be notarized in the country of signature) or documents prepared and signed in Mozambique. Note that in the first case, even though some countries have declared mandatory quarantines, thus, making any visit to the notary or similar entity impossible, the Legal Entities Registry still requires notarized documents to be submitted, at the risk of the application not being processed.
Note also that the amendments to the Commercial Code removed the requirement to notarize signatures on General Assembly minutes, however, we have seen in practice that the Legal Entities Registry continues to request the notarization.
It is important to note that as part of the executive administrative measures following the Presidential Decree declaring a State of Emergency, the suspension of the issuance of official documents for legal entity registrations among other registrations, was adopted. However, in terms of Notice number 03/DNRN/027.15/2020 of 16 April 2020, referred to in the previous question, urgent cases can be processed and public notaries will carry out notarizations and certifications in these cases.
5. Can the force majeure clause be invoked to justify breach of contract due to the pandemic?
Respecting the principle of freedom of contract, the parties may freely establish the content of their contracts, provided that they are not forbidden by law. Thus, if the parties established a force majeure clause that classifies events like the current pandemic as an event of force majeure, the affected party may invoke force majeure to justify the breach of contract, and must prove that the breach is a consequence of the force majeure and that it did not result from their culpable conduct. This clause can also provide for the suspension of compliance with contractual obligations as well as termination of the contract if the effects of the force majeure extend beyond a determined period or if continuation of the contract becomes impossible or impractical. Each force majeure clause should be analysed individually on its own terms.
Also note that the party who invokes the force majeure clause must comply with all the obligations provided therein, for example, the duty to inform the counterparty within an agreed period and do whatever is possible to minimize the effects of force majeure.
It is also important to note that, notwithstanding the general rule referred here, this situation should be analysed on a case by case basis, taking into consideration the contractual instruments in question and other factors of the contract in question.
6. If the contract does not contain this clause, can force majeure be invoked at law?
Yes, in this case the parties can invoke force majeure based on law to justify the impossibility of complying with contractual obligations, because the law provides that an obligation is extinguished when the performance becomes impossible through no fault of the party who should comply with the obligation. Additionally, the law provides for the possibility of the parties requesting the termination or amendment of the contract based on the argument that there are abnormal changes to the circumstances that served as a basis for the decision to contract, provided that maintaining the obligations would violate the principles of good faith and was not part of the inherent risks addressed in the contract.
Once more, it is important to emphasize that notwithstanding the general principles indicated above, each situation should be analysed on its own terms.
7. Can contracts currently in force be terminated without respecting the notice periods established in the same, for those activities directly affected by the restrictions imposed (for example travel agencies, restaurants, etc.)?
In principle, yes. The law provides that if the circumstances which induced the parties to enter into the contract suffer an abnormal change, the affected party has the right to terminate or amend the contract (based on equity) provided that the demands of the obligations contracted seriously affect the principles of good faith and are not covered by the inherent risks addressed in the contract.
8. Can the payment of rent due in terms of a lease agreement in force be suspended based on reasons of interruptions of activities?
General rule is no, unless there is a specific agreement established between the parties in the contract in question. There is no provision in the exceptional measures approved by the government for the State of Emergency, or in terms of general law, relating to the right of suspension of payments of rent based on interruption of activities. The exceptional measure approved for the protection of tenants during this period is the prohibition of eviction for contracts for the purpose of habitation, however, the obligation to comply with the payment of rent remains. This means that, if for justifiable reasons arising from the pandemic and the declaration of the State of Emergency, the tenants suspend the payment of rent, the same cannot be evicted, but they must proceed with the payments as soon as possible, under penalty of eviction processes being instituted against them once the State of Emergency and/or the protective measure referred to here is terminated.
It is worth mentioning that, as per comments made in answers to previous questions in reference to commercial contracts, the law foresees the possibility that parties can request the termination or amendment of the contract based on the argument that there are abnormal changes to the circumstances that served as a basis for the decision to contract, provided that maintaining the obligations would violate the principles of good faith and it is not part of the inherent risks of the contract. In this case, the tenant can request an amendment to the contract by negotiating a reduction of the rent, payment in instalments or another arrangement that the parties think is reasonable.
In order to benefit from the protective measures there must be a connection between the reason which resulted in the non-compliance and the situation which the law seeks to protect, under penalty of the landlord having the right to terminate the contract and demand compensation.
The exceptional measure referred to above applies only to leases for habitational reasons: for all the other types of leases, the normal regime remains applicable. However, it is worth noting that during the State of Emergency the courts will only address matters considered urgent, namely, interim relief, cases involving fundamental rights of prisoners or relating to minors at risk. Thus, evictions for lack of payment of rent in the remaining types of leases may also not take place during the State of Emergency, however, the lack of communication or agreement between the parties may result in the application of the penalties defined for cases of non-compliance by the tenant.
1. Are the courts performing judicial acts during the emergency rule (receiving applications, scheduling of hearings / trials)?
Applications may still be submitted; however, the judicial vacation regime shall apply to all judicial acts. During judicial vacations, proceedings, requests and other documents may still be submitted, if the party so chooses, though it is not mandatory. During this period trials will not take place. However, exception is made for trial of defendants under custody and in temporary injunctions, as they are considered urgent procedures.
With regard to administrative litigation, there are other processes that will continue to run, even though a state of emergency has been declared.
2. How will the judicial deadlines will be dealt with, especially in relation to ongoing cases, including urgent cases (for example, temporary injunctions)?
Since during the emergency rule judicial vacation regime applies, all judicial deadlines shall not run, with the exception of urgent procedures such as temporary injunctions.
1. Has the Central Bank taken any measures to protect the economy from the effects of COVID-19?
The Bank of Mozambique has been taking measures to mitigate the effects of COVID-19 on the economy and in the financial system. On 18 and 22 March 2020, the Bank of Mozambique1:
- reduced the rate for mandatory reserves on deposits of commercial bank clients in local and foreign currency by 150 basis points (1,50 percentage points) to 11,50% and 34,50%, respectively;
- introduced a financing facility in foreign currency, for commercial banks authorized to trade in foreign currency, in the amount of USD50 million for a period of nine months, starting on 23 March 2020; and
- removed the mandatory establishment of provisions for distressed debts by commercial banks, in the case of debts restructuring with clients affected by the COVID-19 pandemic, before the maturity of the loan, from 23 March 2020 until 23 December 2020.
2. What measures can be adopted to safeguard the moratorium on companies and families in terms of bank loans?
The measures to safeguard the moratorium in terms of bank loans depend in large extent on the terms and conditions provided in the respective loan agreements. A common clause which can be referred to is the force majeure clause. In circumstances of force majeure, the obligations of the parties are suspended. However, it is necessary to make a careful analysis of each loan agreement, to confirm if such clause has been included, and if COVID-19, would be in fact a situation considered an event of force majeure and in what terms the clause of force majeure can be triggered (notification, deadlines).
It should also be noted that the state approved administrative enforcement measures to prevent and contain the spread of the pandemic COVID-19, to be in force during the state of emergency. In these terms, demands, constitutions in arrears and executions resulting from the delay in the fulfillment of obligations that cannot be performed due to the application of the measures provided by the Decree are of no effect.
In any case, it is always advisable to negotiate a restructuring of the contract with the respective creditor, especially at this moment when the Bank of Mozambique removed the mandatory establishment of provisions for distressed debts restructuring by commercial banks, in the case of renegotiation of debt with clients affected by COVID-19 pandemic. Thus, banks should be more receptive to a restructuring.
We recommend that you seek legal advice before implementing any decision to be made, taking into account the issues raised above.
In case you need more information when making your business plans, please contact Diana Ramalho, at [email protected].