Do I need to give a personal guarantee to access finance under the Coronavirus Business Interruption Loan Scheme (CBILS)?

State aid rules are contained in the Treaty on the Functioning of the European Union (previously referred to as the Treaty of Rome). The State aid rules prohibit the use of state resources, or any public support with an economic value, which given selectively has the capacity to distort trade by favouring certain undertakings, or the production of certain goods, and which has the potential to affect trade between Member States. Where aid is present it must not be granted unless it has been specifically approved in advance by the European Commission or benefits from a general exemption to the rules.

In general, the rules apply to all State actions which might assist businesses including:

• Grants
• “Soft” loans
• Selling to business at an undervalue
• Buying from business at an overvalue

There are four criteria which must be satisfied if an agreement is to be considered exempt:

• It must improve production or distribution, or promoting technical or economic progress – the guidance suggests that cooperation ensuring essential goods and services can be made available to the public, or an important sub-set of the public such as key workers, will satisfy this criterion.
• It must allow consumers a fair share of the resulting benefit – the guidance suggests this will be the case where the action prevents or reduces shortages.
• It must not impose on the undertakings concerned restrictions which are not indispensable to the attainment of the above benefits – the guidance suggests this will be the case where the cooperation is the only reasonable option due to the urgency of the crisis and where the cooperation is temporary in nature.
• It must not afford the undertakings concerned the possibility of eliminating competition – therefore the parties must endeavour to retain competition in respect of the products (in particular price competition).

The Regulations do not require any prior agreement between an employer and employee that it was not reasonably practicable for holiday to be taken for it to be carried over.

However, if an employee requests holiday then an employer must have ‘good reason’ for refusing it due to coronavirus. The term ‘good reason’ is not defined so the Government will expect employers, employees and (if necessary on any dispute) the Courts to apply common sense.

The Regulations are not confined to key workers so could, in principle, be used by employers for a wider range of employees.

The Government guidance suggests that the following factors should be taken into account when considering whether it was reasonably practicable to take the leave in the relevant year:

• Whether the business has faced a significant increase in demand due to COVID-19 that would reasonably require the worker to continue to be at work and cannot be met through alternative practical measures.
• The extent to which the business’ workforce is disrupted by COVID-19 and the practical options available to the business to provide temporary cover of essential activities.
• The health of the worker and how soon they need to take a period of rest and relaxation.
• The length of time remaining in the worker’s leave year.
• The extent to which the worker taking leave would impact on wider society’s response to, and recovery from, the effects of COVID-19.
• The ability of the remainder of the available workforce to provide cover for the worker going on leave.

Employees on any type of employment contract including full-time, part-time, agency, flexible or zero hours and foreign nationals who are eligible to work in the UK on any visa can be furloughed subject to the following excluded categories:

• Anyone who was not employed prior to 30 October 2020
• Anyone for whom you haven’t made a PAYE Real Time Information submission to HMRC between 20 March 2020 and 30 October 2020.
• Employees who are working but on reduced hours or for reduced pay
• Employees currently receiving SSP (see FAQ on SSP and self-isolation below)
• Public sector employees
• Employees of businesses or organisations in receipt of public funding for staff costs (except for those who are not primarily funded by the government and whose staff cannot be redeployed to assist with the Covid-19 response)

The BBC

The national broadcaster’s collated content surrounding the Covid-19 pandemic:
https://www.bbc.co.uk/news/coronavirus

and with regards to business:
https://www.bbc.co.uk/news/business