Given the recent decline in financial performance, the business is now in breach of its covenants with the bank. Should we be concerned?
That will depend on the terms of your facility and the stance taken by your bank.
Banking facilities often place obligations on businesses to stick to certain financial criteria. For example, an obligation to keep turnover or profit above certain levels or a commitment to keep the bank’s exposure within an agreed percentage of the value of the company’s assets (known as loan to value ratio).
The consequences of breaching those covenants will depend on the terms of your facility, but normally this amounts to an event of default. Events of default can result in the loan (or whatever form the facility takes) becoming repayable and could give the bank certain powers to take action to recover the money that they are owed.
Whether the bank will take action during these unprecedented times is another matter, particularly given the extent of support being offered to businesses via mainstream lenders and the political desire to keep viable businesses up and running. Lenders themselves will no doubt wish to remain supportive where possible. The underlying performance of the business (and whether but for the effects of Covid-19 it would have been in a healthy financial position), the relationship you have with the bank and your history with them will no doubt be relevant to the approach taken by the bank. However, early engagement with your bank (as well as other key stakeholders in the business) will be important.
Related FAQs
- On admission to critical care, the risks, benefits and likely outcomes of the different treatment options should be discussed with patients, families and carers so they can make informed decisions about their treatment wherever possible.
- A member of the critical care team should be involved in these discussions whenever the patient or team needs advice about critical care to make decisions about treatment.
The guidance gives numerous examples of the types of performance adjustment which parties should consider. For example this includes:
- Varying deadlines (e.g. for performance or payment)
- Varying compensation (e.g. to recognise increased costs)
- Varying the nature of performance (e.g. allowing substitute goods, allowing pert delivery of services)
The guidance also encourages a reasonable approach to enforcement, which might encourage delaying issuing formal proceedings, increased use of mediation or providing more information to the other party than would be volunteered under normal circumstances.
- On admission to hospital, all adults should be assessed for frailty, irrespective of their age and Covid-19 status. Regard should be had to any comorbidities and underlying health conditions.
- If a patient is identified as potentially having Covid-19, the UK Government guidance on infection prevention and control measures should be followed.
- If Covid-19 is then diagnosed in someone who is not isolated from admission or presentation, the UK Government guidance on actions required when a case was not diagnosed on admission should be followed.
Failure to comply with the individual consultation obligations could render the dismissal unfair and expose you to a financial penalty of the lower of up to 1 years gross pay or the maximum statutory limit (currently £88,519).
As their employer, you have an overriding duty to provide a safe system of work. The Trust would not be able to run a defence to say that an employee “waived their rights” and chose to continue to work. Provided the decision around restricting duties has been carefully thought out, a full risk assessment undertaken and the employee has been truly consulted about the impact on them, then the decision taken will be a reasonable management instruction. Failing to follow that reasonable management instruction could amount to a disciplinary offence.