What should payroll look out for if the Government’s Coronavirus Job Retention Scheme is used?

The European Commission has reintroduced its “comfort letter” system for cooperation in relation to shortage of supply. This allows cooperating businesses to check what the Commission’s view of their proposals are before implementing them.

In the UK context the SMA has introduced an exemption for suppliers of healthcare services to the NHS. This allows:

• Sharing information about capacity
• Coordination of staff deployment
• Joint purchasing of goods, services and facilities
• Sharing or lending of facilities
• Division of activities, including agreeing whether to expand or reduce the volume or type of services provided by suppliers

In relation to whether the CMA will investigate cooperation, it has indicated:

• The CMA will use its discretion as to the prioritisation of its enforcement action to permit some agreements/collaboration which would otherwise potentially give rise to enforcement action (including potentially attracting fines of up to 10% of group worldwide turnover)
• The CMA will use its existing power to exempt certain agreements under the Competition Act 1998 where these are in the public interest

It could be possible depending on your contract. If there is no force majeure clause in a contract, it may be possible that the contract may have been “frustrated” by emergency legislation. In legal terms, a contract can be frustrated where an event occurs after it is entered into which was not contemplated by any party at the outset, is not due to the fault of any party, and which makes the performance of the contract impossible.

If this is the case, the contract could be “discharged”, meaning that the parties’ obligations under the contract are no longer binding.

It is possible that a contract could be frustrated within this particular legal doctrine by a change in the law that makes performance of a contract illegal. However, if it simply becomes more difficult, or more expensive, then the legal tests for frustration might not be satisfied. There are also limits to the application of the rule if the frustrating event was already known about at the time the contracted was entered into.

Again, careful legal advice will be required at an early stage. The rules about force majeure or frustration might help businesses that find themselves unable to perform a contract because of the coronavirus outbreak.

Any new contracts that are concluded should expressly deal with the possibility that performance might become more difficult, more costly, or impossible to perform.

The Coronavirus Business Interruption Loan Scheme (“CBILS“) is open for applications to provide small businesses with a loan of up to £5m to assist with the Covid-19 outbreak. The Scheme is aimed at businesses who are experiencing lost or deferred revenues, and who otherwise would be denied support from lenders, to be supported by a Government backed guarantee. The Scheme will initially run for six months with the possibility to be extended where required, so businesses should only approach a lender under the Scheme as and when they require assistance.

In part in response to the Covid-19 pandemic, legislation was passed by the government earlier this year which sought to assist companies to trade through the current economic climate. Included within the measures is a degree of protection from compulsory winding up.

The Corporate Insolvency and Governance Act 2020 (The Act), was laid before parliament on 20 May, and became law on 26 June. It is important creditors are aware of what changes have been implemented and the potential and impact which it may have upon debt recovery action you may be considering or have already commenced.

The main part of the Act affecting creditors is the temporary restriction on presentation of winding up petitions and the factors that the Court has to take into account when deciding whether to wind up a company.

On Thursday 24 September 2020 the government passed a further statutory instrument which extended the operation of these restrictions. As a result, the measures which were due to expire on Wednesday 30 September 2020 have now been extended until 31 December 2020.

A key point to note is that the Act has retrospective effect so any pending petitions presented after 27 April will be affected, along with any winding up orders made after that date.

The Act has introduced the following restrictions:

• A petition cannot be presented by a creditor during the period of 27 April 2020 and 31 December 2020 unless the creditor has reasonable grounds to believe that (a) coronavirus has not had a financial effect on the debtor, or (b) the debtor would have been unable to pay its debts even if coronavirus had not had a financial effect on the debtor;
• A petition cannot be presented after 27 April 2020 if it is based on a unsatisfied statutory demand served between 1 March 2020 until 31 December 2020;
• When deciding whether to make a winding up order the Court will need to be satisfied that the grounds giving rise to the petition would have arisen even if Covid-19 did not have a financial effect on the debtor;
• All winding up orders made between the 27 April and 31 December will automatically be void (that is, of no legal effect) unless the Court would have made the winding up order if the new law was in force at the time the order was made.

It has now changed. Instead of being 3 weeks, it is now technically any period. However, 7 days is the minimum claim period you can now make.