I’m a housing provider. How do I continue to manage disrepair during the coronavirus outbreak?

The government has announced a number of measures to try to protect businesses during the current period of uncertainty. However there is no outright ban on creditors being able to take legal action to recover money they are owed, though there are temporary restrictions on some forms of legal action, like winding up petitions.

However, it is important to note that these measures only relate to winding up proceedings. Creditors will still be free to commence county court claims.

The new Corporate Insolvency and Governance Act 2020 brings in a new “moratorium” procedure. Businesses in financial difficulty that are viable and can be rescued will now be able to work with an insolvency practitioner to obtain at least 20 business days’ breathing space from creditors to allow the business to formulate a plan to deal with its financial problems.

For more information on the Corporate Insolvency and Governance Act, click here

As part of the raft of measures put forward by the government over recent months, there are also restrictions on landlords taking action to evict commercial tenants who miss rent payments. Various payment holidays and forbearance have been put in place in respect of certain tax liabilities and some business rates.

If your business is going to go into an insolvency process like administration or a company voluntary arrangement, there is the ability to obtain a freeze on creditors taking action whilst those procedures are put in place. However, these sorts of moratoriums will not be available to everyone and in any event not unless an insolvency process is being instigated.

Regardless of whether a business has formal protection from creditors or not, engagement with creditors and trying to reach agreement with them to deal with the debt is therefore vital. Much of the protection measures that the Government has introduced like curbing the ability of landlords to evict a commercial tenant, do not wipe out the debt. They simply prevent action being taken or a payment becoming due for a short time. All businesses should use that time to consider how those debts can be dealt with and engage with the relevant stakeholders sooner rather than later.

As long as you can demonstrate that you have exercised reasonable care in determining status you have discharged your obligations in that respect. However, if you are unable to demonstrate this, you may as the end user client be responsible for the contractor’s tax and NIC’s.

For the purposes of collective consultation, making someone redundant and/or changing terms and conditions of employment, by termination and re-engagement, is also classed as a dismissal by reason of redundancy and so has the exact same consultation requirements.

You should have in place a dispute resolution procedure that sets out the appeal process or contractors or the agency as appropriate. You must respond to an appeal within 45 days.

If the status determination is disputed you should consider the contractor or agency’s reasons objections. You must consider if the original determination is to be maintained and give reasons for this. Or a new determination with reasons can be provided if appropriate.

Records of disputed determinations and the outcome of any appeal should be kept.

You will need to check the terms of the contract you have with the debtor to make sure you are still entitled to be paid (including checking any force majeure clause).

It is also important to remember that the current exceptional circumstances might also affect your contractual rights in other ways too – please see our commercial & contracts site for more information.

Depending on the type of debt you are owed, there might be some additional restrictions in place that you will need to consider. For example there are certain restrictions on landlords being able to forfeit leases, evict tenants or send High Court Enforcement Officers to collect outstanding rent.

Assuming there are no sector-specific restrictions in place then you should be able to start county or high court proceedings to recover the debt.

As an alternative to starting court proceedings, if the debt is undisputed a creditor can usually opt to issue winding up proceedings against a debtor instead. However, the recently introduced Corporate Insolvency and Governance Act introduces a temporary suspension on the ability of creditors to present winding up petitions to recover money unless the reason why the debtor cannot pay is not related to covid-19. For more information click here.

Often taking firm action is the right thing to do, particularly given that it is a sad reality that it is the creditor who shouts the loudest that will often get paid first. However, one important consideration is the commercial reality that many businesses (and indeed individuals) now find themselves in.

Whether taking legal action is likely to result in payment is always a question any creditor should ask themselves. Some creditors might also want to try to support their customers during these difficult times and/or have concerns about their long term reputation if they pursue the debt too aggressively. However, even if that is the case it is still possible to engage constructively and positively with those who owe you money to try to reach the best possible outcome. This could include:

• Having clear and consistent credit control processes in place
• Obtaining statements of means to help understand what a debtor can afford to pay
• Agreeing realistic payment plans
• Negotiating formal payment holidays
• Putting in place voluntary security to secure the debt
• Identifying those debtors who can’t pay as opposed to won’t pay and targeting resources accordingly
• Looking at what other options might be available, including recovering under parent company guarantees