Due to the escalating COVID-19 coronavirus pandemic, we are living in uncertain times. Things are changing by the day and over the coming weeks and months, businesses will be faced with a number of challenges, from loss of trade and staff shortages to mounting financial difficulty. If your business is struggling in the current environment, it’s important to contact an insolvency practitioner as soon as possible. They are experts on how to plan ahead in difficult situations and can provide helpful large and small business advice on all the options available to you. In the meantime, if you are concerned about how coronavirus will impact you and your business, we investigate how you can prepare for the coming months in this blog…
Keep up to date with government announcements
The government is announcing new plans and emergency measures to help businesses every day. For example, HMRC are now offering Time to Pay tax suspension for businesses that are struggling to pay their tax bills, whilst the usual 3.5% annual interest on deferred tax payments will also be waived. It was also recently announced that there will be no business rates charged on companies in the retail, leisure and hospitality sectors in the 2020-21 financial year and there will also be a £5,000 business rates discount for pubs with a rateable value of £100,000 in England.
In addition, small businesses who are exempt from paying business rates will be eligible for a £10,000 grant to help meet business costs (up from £3,000), and this grant has been extended to up to £25,000 for medium-sized businesses in the sector if they have a rateable value of £51,000 or less. Riskier loans will also be given to help businesses, with the Chancellor announcing up to £330 billion of state-backed loans to businesses. SMEs will be able to reclaim the costs of 14 days’ sick pay per employee, and of course, a number of major lenders are offering mortgage holidays for those impacted by coronavirus, too.
Be aware of your employees’ rights
With so many people self-isolating to try and prevent the spread of coronavirus, what are the regulations surrounding sick pay? Well, those who follow advice to stay at home and who cannot work as a result will be eligible for statutory sick pay (SSP) even if they themselves are not sick. As an employer, you should use your discretion and respect the medical need to self-isolate in making decisions about sick pay. You should also consider extra precautions for staff who might be vulnerable, for example, those over the age of 70, those with underlying health conditions or if someone is pregnant.
Currently, people are being asked to conduct social distancing as much as possible, which involves people working from home and not using public transport - so as an employer you should support your workforce in taking these steps. Of course, in some situations, a business might need to close down or ask staff to reduce their contracted hours. If this is the case, as a director it’s important that you talk with your employees as soon as possible. Employees who are laid off and are not entitled to their usual pay might be entitled to a ‘statutory guarantee payment’ of up to £29 a day from their employer. Finally, companies are legally entitled to cancel holidays due to staffing shortages as long as you give notice equivalent to the length of holiday.
To keep up to date on the latest government advice on employee rights, click here.
Consider an informal agreement if you are struggling to pay your debts
If your business is facing financial difficulty as a result of the coronavirus, it is worth contacting your creditors to try and negotiate an informal agreement to pay your debt on different terms. This is an option usually used when you’re experiencing temporary financial difficulties but there is no immediate threat of formal action by your creditors. It’s important to contact your creditors as soon as you are aware of your financial difficulty so that you can come to an arrangement as soon as possible.
Propose a Company Voluntary Arrangement if you are facing serious financial threat
If your business has a viable future but is currently facing serious financial difficulty, a Company Voluntary Arrangement could be the right solution for you. A CVA is a very powerful tool. It draws a line in the sand with all of your creditors, allowing you to strike a deal with them and repay them from future profits. By proposing a CVA you are clearly showing your creditors that you are trying to maximise their interest, so it can be viewed positively. The deal is based on preserving your company, rebuilding sales and profits and paying something back over an agreed period of time - which means as a director, you can focus on continuing to run your business so you have a chance to turn things around.
Restructure your business with pre-pack administration
Pre-pack administration is a powerful legal way of selling a business on to a third party or the existing directors. It’s a legal insolvency procedure and a way of restructuring a struggling company so that the business can be packaged and sold to a new company that is often controlled by the same directors. An Administrator will be appointed to wind up your company, and a new company will then be set up who will buy the assets and business from the original business. By buying back assets at market value, you can minimise the loss of assets and staff jobs - and once sold the business is sold, you can restart without your debts. What’s more, your business can carry on trading during this process, too.
Cease trading with a Creditors Voluntary Liquidation
If your business doesn’t have a viable future or if you wish to close your company down and start over, a Creditors Voluntary Liquidation provides a beneficial route for directors whilst still prioritising creditors. Rather than waiting for your creditors to take action against you – such as by issuing a CCJ, a winding-up petition or hiring a debt-collector – a CVL will allow you to take control of the situation. Essentially, it’s a quick and powerful way to close a business and deal with things legally and properly; and if it is carried out correctly and as early as possible, many directors do not have to pay to liquidate the company. By closing the doors, dealing with the debt and cancelling any leases, all loose ends can be tied up so that you are free to walk away and get on with a new business.
In these uncertain times, things are changing by the day, so if you are concerned about the future of your company amidst the coronavirus outbreak we are here to help and provide large and small business advice. If you are currently facing financial difficulty, contact McAlister & Co today for a free, remote consultation. These are troubling times, but it doesn’t have to mean the end. And remember, you are not in this alone - so let us help you come up with a plan on how to keep your business going for the rest of this year and beyond.