Advice for Companies and Directors During the Coronavirus Pandemic
Many Companies Have Run into Severe Difficulties Almost Over Night
Our Insolvency Practitioners and business turnaround specialists have been talking to many Companies, across a range of sectors whose business has disappeared over night as a result of the Coronavirus Pandemic, yet until a couple of weeks ago these were successful Companies which were profitable and many were growing. Now they face overhead bills but no income.
The UK cannot afford to lose these Companies. We are Insolvency Practitioners and our team of specialists want to help as many companies survive as possible – but how? In addition to some key points, below, we also explain why we believe that the Company Voluntary Arrangement might prove to be a good solution for some companies.
Here are some key points
- Most importantly, although for many it will be very hard not to, please DO NOT PANIC. New initiatives are being released by the Government on a daily basis, all of which are designed to ease the burden.
- There is talk about reverse PAYE/NI being paid to companies, for example, and as of Friday 20th March, the Chancellor has announced wages cover for businesses of 80% up to a maximum of £2,500 per month.
- The Chancellor also announced on 20th March:
- VAT liabilities due between now and the end of June will be deferred until the end of the financial year;
- July 2020 self-assessment payment on account to be deferred to January 2021;
- Coronavirus Business Interruption Loan Scheme – interest free loan for 12 months;
- Statutory Sick Pay to be available from day 1 of illness and funded for 14 days for companies with under 250 employees;
- £10,000 grant for businesses who claim Small Business Rates Relief;
- £25,000 grant for businesses in the Retail, Leisure and Hospitality Sector who have a property with a rateable Value between £15,000 and £51,000;
- A 12-month business rates holiday for all retail, hospitality and leisure businesses in England.
- Then understand and work out exactly what your committed cash flow is.
- Next, talk to your Lenders and Asset Finance companies about repayment holidays.
- Then talk to your landlords about a rent holiday. It is not in your Landlords’ interests to have empty premises at this time. Indications are that Business Rates, where still applicable, will not be pursued aggressively.
- And also make sure you know what your duties are if you are a company director. It is vital that these statutory are carried out correctly especially when a company is in financial difficulties
What About Staff?
How do you tackle staff costs? This is going to be one of the most difficult issues for Companies. Legislation means those Companies employing over 20 people cannot simply lay people off or make them redundant without consultation – generally over a 28 day period, but can the Company survive that log?
Then of course there is the issue of suppliers who desperately need invoices paid.
Company Voluntary Arrangements – A Possible Solution
One solution we have in our armoury, as Insolvency Practitioners is a Company Voluntary Arrangement.
We believe CVA’s could enable Companies to survive, by effectively “mothballing” them until better times return. Click here for our quick guide to CVAs.
Two key points are:
- Suppliers and employees will be bound by the CVA, but will get the best prospect of recovering their losses if the Company still exists and can be quickly kick-started once business returns.
- The CVA would seek to repay creditors and employees out of future profits, in the meantime employees can claim arrears of pay, redundancy and other benefits from the Government which will remove the short-term burden on the Company.
These are unprecedented times for businesses and people everywhere.