Coronavirus - how to get through the next few months

MARK DAVIES and JAN CHILLERY of Shrewsbury law firm Aaron & Partners have put together a 10-point plan to help businesses get through the difficult next few months

As this article is being written, the position is changing at pace and the public are only beginning to comprehend the extent of the health challenge. The impact is projected to be very significant indeed. Health concerns rightly trump all others and particularly how to protect those anticipated to be most vulnerable.

After health, we all think about how we are going to pay the bills and the coronavirus pandemic is very worrying to employers and employees alike.

Take the restaurants, bars and pubs sector which is already experiencing much reduced levels of custom and, therefore, income.

Business owners are having to grapple with a number of additional pressures, including bad debtors.

Employees will be worried about whether they will lose their jobs or how they will pay for childcare if the schools close.

Other stakeholders such as suppliers will be affected. Landlords are likely to have defaulting tenants.

This scenario is likely to be replicated across a number of other sectors in the coming weeks and months.

From a business point of view, the question becomes: how can we get through the next few months? Our thoughts are below:

1. Affected business owners will need to adopt a laser-like focus on managing their cash. This means understanding the current position and preparing cash flow forecasts, then monitoring the position regularly. Decisions may need to be made as to which are business critical payments and which are not. Many will be able to produce their own forecasts, particularly with modern accounting software. Others will need specialist assistance and your accountant is a good starting point.

2. Notwithstanding the rapid pace of the last few weeks, steps have already been taken at a national level. The Budget last Wednesday brought enhanced statutory sick pay measures, and retail, leisure and hospitality firms with a rateable value of less than £51,000 will now be eligible for 100% rate relief. A £330 billion package of measures were announced by the Government on 17 March; no doubt more action will follow as the situation develops.

3. Traditional banks have experienced teams of relationship managers which take control when their customer becomes financially distressed. In our experience these tend to be supportive, provided they are approached at an early stage.

4. Tax liabilities can be an issue for many businesses. HMRC has always been willing to consider a Time To Pay arrangement in a suitable case, and the Chancellor announced last week that it will be scaling up this service to all businesses and self employed to defer tax payments.

5. Business owners may be able to handle their own negotiations with creditors, including Time To Pay with HMRC. Be aware that there are specialist Time To Pay advisers who use their experience to best position a request and have considerable success. We can signpost you to such advisers.

6. Relations with suppliers can quickly become strained. The contractual terms may need to be reviewed to see if they permit room for manoeuvre. Irrespective of the parties’ legal rights usually there will need to be a dialogue to see whether both sides can agree a way forward.

7. In our experience, it pays to keep the lines of communication open with all creditors. This doesn’t mean telling them everything, and indeed that can be counterproductive. If there is or may be an issue then better to raise it sooner rather than later.

8. So far there has been no change to the tapestry of laws which govern the position of struggling businesses, such as the right available to a creditor to present a company winding up petition if owed the sum of only £750. This is in contrast to a bankruptcy petition against an individual, which must be for at least £5,000. Changes may be brought forward by the Government if levels of financial distress spike.

9. There are a number of options to be considered if the business is insolvent, and it is often possible to preserve value and jobs if matters are looked at early enough. We recommend seeking advice from those who specialise in this area of work. Beware of unlicensed advisers.

10.We foresee the business community adapting its practices and being accommodating where it can. There are already stories of large businesses paying suppliers more promptly: this will make a significant positive difference to suppliers’ cash-flows.

Flexibility on all sides and a collaborative approach, based on honest communication, will go a long way to preserving businesses and therefore jobs.

At Aaron & Partners we want to play our part in the economic recovery. As an initial step we will offer FREE “clinics” in relation to your insolvency concerns. These will be 1 hour appointments by telephone available if you are a small or medium-sized business owner. One of our lawyers will listen to your issue and look to offer initial practical commercial legal advice or suggestions.

* You'll find all their contact details here.