Coronavirus: Business Continuity Planning

Friday 27 March 2020

Like most countries, the UK has been significantly impacted over the last couple of weeks and continues to face unprecedented challenges.  Here is our summary of five key areas to address when continuity planning for your business.

1. Look after your employees

With the current Government guidance requiring everyone to work from home, except where it is absolutely necessary to leave your homes for work, employers should consider what support employees need to achieve this.

Unless your business provides services that are vital to public health and safety, the Government guidance points to the suggestion that your employees should not be required or encouraged to leave their homes for work.  This is certainly a testing scenario for many businesses who, without the continued hard work of its employees, will struggle.

Government schemes such as the Coronavirus Job Retention Scheme and the Statutory Sick Pay Rebate Scheme to encourage business owners to make the right choices with regards to the health and safety of their employees, as well as to relieve the financial and cash flow pressures on businesses with employees to pay.

It is advisable to keep your employees up to date with your proposals and the current measures in place, and to endeavour to obtain their consent (preferably in writing) before making any changes to their place of work, duties, terms of employment, and/or if you wish to classify them as furloughed.

For further advice and guidance in relation to your obligations as an employer, please contact a member of our Employment team.

2. Insurance
   

As the Government has declared that Coronavirus is a ‘notifiable disease’, a classification is recognised by insurance companies, businesses should be able to make claims under relevant insurance policies, such as business interruption and payment protection policies.

Now would be a good time to review your existing policies to see what, if any, claims could be made to assist your business through this time of uncertainty.

As many business premises will currently be unoccupied, it would be sensible to review any buildings or contents policies, as these may contain specific requirements in relation to unoccupied premises.

3. Your supply chain is robust

Given the far reaching restrictions on movement around the world, it is extremely likely that Covid-19 will disrupt your businesses supply chain, particular if it relies on cross-border supply chains.

Have open conversations with to your key suppliers about their ability to deliver stock and materials reliably and, where necessary, to renegotiate more favourable terms.  Once you have been able to identify any possible or likely supply disruptions, you can begin working to resolve them.

Meanwhile, it may be sensible to identify alternative suppliers in different regions to diversify your supply chain. As the virus peaks in various countries and regions in turn, a varied chain could help you safeguard against shortages and disruption if your usual suppliers have to suspend services.

Our Commercial team would be happy to discuss any supply chain issues and options with you.

4. Review your contractual exposure

The current pandemic no doubt raises questions as to whether your business will be able to fulfil its contractual obligations to clients and customers, and as to whether it is likely that a counterparty will be unable to perform their obligations to your business.

It would be timely to review your material contracts to identify any areas of concern, or that could work to your advantage.  In particular, consider the following:

Force Majeure – do your contracts contain a force majeure clause allowing your business (or a counterparty) to avoid performing its obligations under the contract, by claiming that the effects of the virus have frustrated the contract? Before seeking to enforce a force majeure clause, consider:

• • • what knock on effects this could have for your business or the wider industry; and
    • whether the contract obliges either party to mitigate their losses, or to use reasonable or best endeavours to find reasonable alternatives.

Suspension vs termination – is it possible to suspend performance of the contract, or even terminate it? Consider what the consequences of such action would be, for example, a claim for liquidated damages, consequential effects on other contracts, and the impact on future commercial relationships.

Notification and communication – are there any obligations to notify counterparties in relation to delays, suspension, termination and/or frustration? Even if there are no such obligations, consider whether it would be beneficial to ongoing commercial relationship to maintain contact with customers, clients, suppliers and other counterparties and provide regular updates in relation to material contracts during the crisis.

Variations and amendments – in the event that it is necessary or possible to renegotiate the terms of any of your contracts, particularly where any new terms are more favourable to your business, it is important to ensure that the new terms are properly documented. Most contracts will require any variations or amendments to be in writing and signed by all parties to the contract in order for the variation to be binding.

Our recent blog considers some of the commercial implications of Covid-19 in more detail, and our Commercial team would be happy to advise you further.

5. Evaluate your cash flow, finance and funding options

The pandemic will no doubt already be pushing most businesses to evaluate their financial position, with solvency concerns being at the forefront of minds.

The Government has announced a number of initiatives to assist business owners, most of which are available and designed to support small and medium sized businesses.  These measures include grants of up to £10,000 for small businesses (that are currently eligible for Small Business Rate Relief or Rural Rate Relief), grants for businesses within the retail, hospitality and leisure sectors, and the Coronavirus Business Interruption Loan Scheme to assist businesses in accessing bank funding and facilities.

If you require any advice in relation to obtaining funding, please contact a member of our Corporate team.

In addition to the grants and loans, the Government has implemented scheme to allow business time to pay outstanding tax liabilities through HMRC’s Time to Pay service, as well as an opportunity to defer VAT payments for up to three months. It has also announced business rates holidays for businesses within the retail, hospitality and leisure sectors, and also nurseries.

If you need to discuss your concerns regarding outstanding tax liabilities, or require further information, please contact a member of our Dispute Resolution team.

Whilst it may be tempting to apply for any and all financial help offered by the Government, and we certainly wouldn’t want to discourage you from taking advantage of any of these life lines, please remember that ultimately some of the schemes are temporary solutions.  Any deferred tax and VAT liabilities will be payable at some point, and any facilities obtained under the Coronavirus Business Interruption Loan Scheme will need to be repaid.

If your businesses’ financial situation significantly worsens, you may need to consider whether you are obliged to make the relevant insolvency filings.  If you need advice in relation to any insolvency or business recovery steps, our Insolvency team is here to help.