What are the key questions to ask ourselves as a business?
Some examples of the key questions to ask include:
- Is there still a viable underlying business that is likely to continue beyond the current crisis?
- What does the revised short to medium cash flow look like and will the company continue to be able to pay its liabilities?
- Does the company have the support of all of its stakeholders – lenders, shareholders, customers, suppliers and banks – even though the business might be in breach of its own obligations?
- What measures could (and should) the board put in place to protect creditors, including making sure that exposure to creditors (both collectively and individually) is not increased, assets are not sold at less than value and no creditor is treated more favourably than another?
- Is there still a reasonable prospect of the business avoiding liquidation or administration?
The key question is always whether accepting the money is in the best interests of creditors as a whole bearing in mind that accepting Government support and continuing to trade might increase the company’s overall liabilities. Directors should be mindful that if the business fails, their decisions during this critical time may be scrutinised and it is therefore important that directors have up-to-date financial information and projections to form the basis of any decisions, take stock, get the right advice and document the decisions that are taken.
Related FAQs
In our latest “in conversation” webinar we discussed the outlook for the corporate transaction market. Whilst it would be a brave person to predict the future of anything at the moment given current circumstances, we were joined by two organisations who are very well placed to provide their views.
John Laud, Head of Corporate Banking for North and West Yorkshire for Barclays, his colleague Stephen Loureda from their Credit Analysis Team, and Jill Williams, Investment Director of Mercia Asset Management’s Growth Fund, were in conversation with Ward Hadaway corporate partners Adrian Ballam and Jonathan Pollard to share their thoughts about how the ‘new normal’ for the transactions market may look:
- With supply chain and forecast prediction challenges, how will banks and investors determine what represents a sound opportunity?
- How will distressed and opportunistic acquisition opportunities be funded, and what is investor appetite for such opportunities?
- How have seller and buyer pricing expectations been impacted as a result of the pandemic?
- How are funders reacting, and how should ambitious businesses respond to the very low, or even negative, interest rates?
We expect this video to be of real value to those businesses whose plans of buying, selling or investment may have been impacted by the current economic crisis, but who are looking at opportunities to determine how they may shape their futures – #gettingbacktobusiness.
Directors of a company that is in, or potentially facing, financial difficulty have a duty to act in the best interests of creditors as a whole. Failure to comply with that duty can have consequences for directors (including personal liability and disqualification if directors get it wrong).
The duty to act in the best interests of creditors as a whole begins when the company is (or in some cases is potentially or at risk of becoming) insolvent i.e. its assets are worth less than its liabilities and/or the business is unable to pay its liabilities as and when they fall due. However, just because a company is insolvent doesn’t always necessarily mean than an insolvency process is inevitable. Sometimes, the insolvency might just be caused by a temporary cashflow problem or perhaps wider problems in the business that can be overcome by making changes to the business itself.
In addition to that, the potential liability of directors ramps up even further when the company reaches the stage that the directors have concluded (or ought to have concluded) that there was no reasonable prospect of the business avoiding liquidation or administration. If the business reaches that stage, in addition to having to act in the best interests of creditors as a whole, directors can find themselves personally liable unless, from the time the directors ought to have reached that conclusion, they took every step that they ought to have done to minimise the loss to creditors. This is known as wrongful trading.
On the 25th June 2020, the government introduced new legislation – the Corporate Insolvency and Governance Act 2020 – which includes measures to temporarily relax the rules around wrongful trading with the proposed changes to take effect retrospectively from the 1st March 2020. Essentially, the changes say that any court looking at a potential wrongful trading claim against a director is to assume that the director is not responsible for worsening the company’s financial position between 1st March 2020 and the 30th September 2020. Whilst the wrongful trading rules have relaxed, directors still need to proceed with caution if the business is potentially insolvent as the new Act does alter other potential pitfalls for directors, like the risk of breaching their duties or allowing the company to enter into transactions that can potentially be challenged.
The support being offered by the government is potentially a lifeline for businesses under pressure through no fault of their own, but notwithstanding the recent changes to the wrongful trading rules it is still likely to be important for the board to carefully consider whether it is appropriate to make use of the loans, grants and tax forbearance that are on offer.
Exactly what the board should consider will vary from business to business and getting it right can sometimes involve balancing several different (and at times conflicting) priorities, challenges and concerns.
The Coronavirus Statutory Sick Pay Rebate Scheme will repay employers the SSP paid to current or former employees and will be available from 26 May 2020. See here.
The scheme covers all types of employment contracts and employers will be eligible to claim if they:
- Are claiming for an employee who is eligible for sick pay due to coronavirus
- Had a payroll scheme that was created and started on or before 28 February 2020
- Had fewer than 250 employees on 28 February 2020
The repayment will cover up to 2 weeks starting from the first qualifying day of sickness, if an employee is unable to work because they either:
- have coronavirus (COVID-19) symptoms
- cannot work because they are self-isolating because someone they live with has symptoms
- are shielding and have a letter from the NHS or a GP telling them to stay at home for at least 12 weeks
- have been notified by the NHS or public health bodies that they’ve come into contact with someone with coronavirus
- they have been notified by the NHS to self-isolate before surgery
You can claim for periods of sickness starting on or after:
- 13 March 2020 – if your employee had coronavirus or the symptoms or is self-isolating because someone they live with has symptoms; or
- 16 April 2020 – if your employee was shielding because of coronavirus.
- 28 May 2020 – if your employee has been notified by the NHS or public health bodies that they’ve come into contact with someone with coronavirus
- 26 August 2020 – if your employee has been notified by the NHS to self-isolate before surgery
Employees do not have to give you a doctor’s fit note for you to make a claim. But you can ask them to give you either:
- an isolation note from NHS 111 – if they are self-isolating and cannot work because of coronavirus
- the NHS or GP letter telling them to stay at home for at least 12 weeks because they’re at high risk of severe illness from coronavirus
- the evidence from the NHS or public health body requiring them to self-isolate
You must keep the following records in relation to a claim you make under the scheme for three years:
- The reason for the employee’s absence
- Details of each period the employee could not work, including start and end dates
- Details of the SSP qualifying days when the employee could not work
- National insurance numbers for each employee you have paid SSP to
You’ll need to print or save your state aid declaration (from your claim summary) and keep this until 31 December 2024.
Government’s Covid-19 landing page
https://www.gov.uk/coronavirus
Covid-19 recovery strategy
Working safely during Covid-19
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19
Working safely during Covid-19: construction and other outdoor work
Working safely during Covid-19: factories, plants and warehouses
Working safely during Covid-19: labs and research facilities
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/labs-and-research-facilities
Working safely during Covid-19: offices and contact centres
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/offices-and-contact-centres
Working safely during Covid-19: other people’s homes
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/homes
Working safely during Covid-19: restaurants offering takeaway or delivery
Working safely during Covid-19: shops and branches
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/shops-and-branches
Working safely during Covid-19: vehicles
https://www.gov.uk/guidance/working-safely-during-coronavirus-covid-19/vehicles
Business support: loans, tax relief and grants for businesses, employees and self-employed people
https://www.gov.uk/coronavirus/business-support
Education and childcare
https://www.gov.uk/coronavirus/education-and-childcare
Housing and accommodation: renting: guidance for landlords, tenants and local authorities
Housing and accommodation: moving home
Housing and accommodation: planning inspections
https://www.gov.uk/guidance/coronavirus-covid-19-planning-inspectorate-guidance
Healthcare workers, carers and care settings: NHS guidance for people working in healthcare
https://www.england.nhs.uk/coronavirus/
Healthcare workers, carers and care settings: PPE hub
https://www.gov.uk/government/collections/coronavirus-covid-19-personal-protective-equipment-ppe
Healthcare workers, carers and care settings: adult social care guidance
https://www.gov.uk/government/collections/coronavirus-covid-19-social-care-guidance
Healthcare workers, carers and care settings: shielding and protecting people who are clinically extremely vulnerable
Healthcare workers, carers and care settings: adult social care guidance
Healthcare workers, carers and care settings: health, care and volunteer workers parking pass and concessions
International travel and immigration: travel advice for British citizens travelling abroad
https://www.gov.uk/guidance/travel-advice-novel-coronavirus
International travel and immigration: foreign travel advice for each country
https://www.gov.uk/foreign-travel-advice
International travel and immigration: waiting to return to the UK
International travel and immigration: essential international travel guidance
https://www.gov.uk/guidance/coronavirus-covid-19-essential-international-travel-guidance
International travel and immigration: advice for UK visa applicants and temporary UK residents
Government’s financial support for businesses
This page help businesses find out how to access the support that has been made available, who is eligible, when the schemes open and how to apply.
https://www.businesssupport.gov.uk/coronavirus-business-support/
Rishi Sunak
The Twitter feed of the Chancellor of the Exchequer, where he has published various responses to some FAQs from the public.
https://twitter.com/RishiSunak
Normally, once you have submitted the online visa application and paid the fee, you have to attend an appointment to enrol your biometrics and verify your passport within 45 days. This requirement has been relaxed due to the visa application centres being closed.
Now that application centres have mostly reopened, you must book and attend an appointment to complete the application process. However, the Home Office has recently introduced the IDV app which allows applicants who previously gave their fingerprints as part of a previous application since July 2015, to upload a photo electronically. There will then be no need to attend a Visa Application Centre to submit their biometrics. Applicants who are eligible to use this electronic option will be contacted by UKVI.