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
The Business and Planning Act 2020 entered the statute books on 22 July 2020. Section 18 of the Act includes provisions for the extension of the date by which a reserved matters application must be submitted where the original date falls between 23 March 2020 and 31 December 2020. Where the original time limit for the submission of reserved matters is on or after 19 August 2020, the relevant conditions will be automatically read as requiring the reserved matters application to be submitted by 1 May 2021.
Where the original time limit for the submission of reserved matters is before 19 August 2020, an application will need to be made to the LPA for an Additional Environmental Approval (“AEA”), which the LPA must determine within 28 days otherwise the approval is deemed to be provided. The purpose of the AEA is to consider whether the environmental assessments carried out at the time of the original outline determination remain valid and up to date, and where that is not the case, the AEA will be refused. In such circumstances a new planning application will be required where an application is now out of time to comply with the original date for submission of reserved matters.
Payments of the Community Infrastructure Levy (“CIL”) are tied to commencement of development, and where an instalment policy is in place, the instalments are usually tied to periods of time following commencement rather than build out rates. Therefore where a development has commenced, payments of CIL are likely to fall due in respect of a site notwithstanding that the site may have temporarily closed or build out rates have slowed.
New regulations now in force, provide some additional relief for those developers with an annual turnover of £45 million or less. Such relief will allow the Council to defer payments, disapply late interest charges, and refund late interest charges that have already been levied since 21 March 2020.
For those developers that cannot benefit from the new provisions, unless a Council has adopted an exceptional circumstances relief policy the regulations do not provide for any relief to be provided in instances where payment of CIL will create viability issues. Most Councils have not adopted such a policy, and in those circumstances the CIL liability will remain due in accordance with the payment schedule on the demand notice.
Councils are at liberty to amend their instalment policies in accordance with their own internal procedures, and the Government is encouraging Councils to explore this option to provide some relief to developers. However this will only assist in respect of any prospective instalments where the development commences after the new instalment policy has been adopted.
For those developers whose annual turnover exceeds £45 million, the Government seems to be taking the view that such developers can afford their CIL liabilities regardless of the current climate. The only concession the Government has proposed is to encourage Councils to make use of the existing discretion they have in respect of the imposition of surcharges for late payments.
Small suppliers (defined by reference to certain financial indicators) are temporarily exempt from these new restrictions until 30th March 2021 in order to account for the difficulties to small suppliers during the Covid-19 pandemic.
There are also certain industries that are exempt from these restrictions (for example financial services). The Secretary of State may also create further exemptions framed by reference to kinds of company, supplier, contract, goods or services or in any other way.
Be careful, there is now a cap on the number of employees you can have on furlough at one time.
The number of employees you can claim for in any claim period starting from 1 July cannot exceed the maximum number of employees you claimed for under any claim ending by 30 June 2020. So this cap is going to be specific to each employer.
It may catch out, in particular, employers who had been rotating employees on furlough.
Where it is envisaged that 20 or more employees will be dismissed at a relevant establishment within a 90 day period or less, then collective consultation is required (in addition to individual consultation) and the company must inform BEIS (using form HR1).
If there are less than 20 dismissals then you are only required to carry out individual consultation.