What will be the impact of the proposals on suppliers?
The change in the law has the potential to place much greater financial risks on suppliers, making it more difficult to exit a contract with a customer of doubtful solvency. This will place increased emphasis on appropriate financial due diligence and credit checking before entering into supply contracts.
In addition to the obvious issues around financial risk, suppliers will also need to think carefully about how their contracts are drafted. For example, any form of right that is drafted so as to be triggered on customer insolvency will clearly be problematic. These could include:
- Retention of Title provisions, which are commonly drafted so that the right to enter premises and retake possession of the goods is triggered on insolvency;
- Provisions for brand protection, which seek to control how goods are dealt with on termination of the contract.
This is potentially a very significant development for many businesses. We would strongly recommend specialist advice be obtained so that:
- businesses understand the potential increased risks faced; and
- where possible, contracts are updated so that appropriate protections are maintained.
Related FAQs
Hosted by The North East England Chamber of Commerce, this webinar discussed practical advice on Covid-19 and the specific challenges for International Trade.
Partner Damien Charlton along with Andrew Needham,from Haines Watts and Grant Murray from XE Finance, provided an update on the challenges and potential solutions in their field, as well as a look forward for the “New Normal”.
To watch the full recording, please click here or to view the slides, please click here.
The government has produced a series of industry specific “Covid-19 Secure” guidelines, which employers should follow. These guidelines are designed to keep the risk of infection as low as possible, while allowing as many people as possible to resume their livelihoods.
As the project progresses, it is important to continually monitor the contractor’s performance. Any one or more of the items below can be early warning signs that the contractor is in financial difficulty, and that further actions may be necessary:
- Decrease in labour or contractor’s personnel on site, and/or rapid turnover of contractor’s personnel
- Slowdown in progress on site
- Plant, equipment or materials suddenly disappearing from site for no apparent reason – unpaid subcontractors may unilaterally decide to remove items from site regardless of their contractual rights to do so
- An increasing number of defects and reduction in the quality of the contractor’s work
- The contractor seeking changes in the payment arrangements, and in particular early payments
- The contractor making spurious claims or contra charges
- The contractor seeking assignment of its benefit of the building contract
- Late filing of accounts by the contractor at Companies House
- Unsatisfied court judgements against the contractor
- Subcontractors and suppliers not being paid or being paid late
- Rumours in the press, in the industry, on site or elsewhere regarding the solvency of the contractor
- Unusual visits to site, for example from the contractor’s senior management or other personnel who had not previously been present or are not expected to be present
- Increasingly aggressive behaviour by the contractor
- The contractor’s parent company or another company within the contractor’s group displaying any of the above signs
Has there ever been a more important time for all staff to feel that they are able to raise concerns about their working environment?
It is a pertinent time to remind all staff that they should be able to raise concerns without the fear of repercussions. It is a good time to be reviewing and re-issuing your Freedom to Speak up/Whistleblowing policy to all. Likewise it is a good time to remind all staff that they should not treat others unfairly or detrimentally for raising health and safety concerns.
Both subjecting someone to a detriment because they have blown the whistle or raised health and safety concerns (and dismissing someone for the same) is unlawful.
The coronavirus outbreak has seen State support being given to businesses on an unprecedented scale.
This issue is likely to be increasingly relevant as Governments seek to protect and stimulate their economies as they emerge from lockdown.
How have the rules been relaxed in the context of the crisis and what facets of the existing law can be used for the State to provide support to undertakings?