Is there a cap on the number of employees on Flexible Furlough?

If the debts owed to you pre-date Covid-19 and your debtor seemed unable to pay well before the Covid-19 pandemic took place, it is entirely possible that you will be able to present a petition on the grounds that the debtor would have been unable to pay its debts even if the Covid-19 had no effect on its financial position. We do not yet have any reliable precedent as to how the Courts are likely to deal with such cases.  Whether you are likely to succeed will depend on the exact circumstances of the debt and your debtor. There has been one case decided in August 2020 where the Court concluded that Covid-19 did not have a financial effect upon the debtor and that the circumstances which gave rise to the petition had arisen long before Covid and would have occurred in any event.  A winding up order was made in that case.  What we do know about the court’s approach is that the purpose of the Act is to allow viable companies to trade through the current times and the Court is likely to set the bar high.

Please contact us if there a debt you would like to discuss. Even if presenting a winding up petition is not available for now, there may still be other forms of legal proceedings that you can use to collect money owed to you, like county court proceedings.

As the coronavirus outbreak continues to develop, we have seen many countries begin to implement emergency procedures and legislation in an attempt to control the spread of the disease.

These have included bans on gatherings and public events, closures of shops, bars, restaurants and public spaces, and full lockdowns which restrict all but key workers to their homes except in certain limited circumstances.

This has a direct impact on businesses and their ability to operate. So what happens if a contract becomes impossible to perform because of emergency legislation?

For example:

• If you are a hospitality business, you have agreed to host an event, and gatherings are prohibited
• If you are a manufacturer or service provider, and your staff are required to remain at home, making performance of the contract impossible

Given the impact the Coronavirus is going to have upon the commercial property market, landlords will undoubtedly, as a matter of good commercial sense, will have to seriously entertain approaches from tenants seeking a rent suspension – notwithstanding there is no entitlement to the same under their lease.

Some landlords may decide it is better to waive or suspend rental payments over the short term rather than face their tenants going out of business and leaving them with an empty building in a flat or dead market.

A measure falling short of a rent suspension would be for the tenants to negotiate with their landlord’s monthly payments of rent rather than quarterly and for those monthly payments to be in payments arrears, rather than in advance.

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.

• It is important to have a clear paper trail for any agreed reduction in salary, and hence any reduction in the amount of contributions. However, the contribution rates (as opposed to the amounts) should be the same as normal, and hence all processes and software should function as per normal and, amongst other things, remain compliant with auto-enrolment employer duties.
• However, if the period of affected contributions does not overlap precisely with the period of reduced salary, for example because of different cut-off dates, there may well be instances of non-compliance with auto-enrolment employer duties at the beginning as well as at the end of the period covered by the Coronavirus Job Retention Scheme.
• Accordingly, where an employer takes advantage of the Coronavirus Job Retention Scheme, good communication with the persons responsible for pensions administration and detailed record-keeping are essential to prevent non-compliances in the short-term and confusion in the long term.