Category : Author / Iain Mackintosh

2022 is set to see more legislative and regulatory change for both residential and commercial property in England and Wales.

In this blog post we look at anticipated changes and recent government announcements. It is not a conclusive list, and we have focused on those matters of particular relevance to our customers. As we have seen over the past two years, legislative changes are frequent, and introduced often with little notice.

Residential

Renting Homes (Wales) Act 2016

It has been announced that this Act will finally come into force in July 2022. This Act will fundamentally change all aspects of renting residential property in Wales. Model contracts will be available and will give tenants in Wales a minimum 12-month contract with eviction notice periods of 6 months for “no-fault evictions”. Further legislation will be introduced to put in place additional measures to support the existing legislation.

Carbon Monoxide Alarms

The government intends to extend the 2015 regulations so that landlords must install a carbon monoxide alarm in any room with a fixed combustion appliance (excluding gas cookers). Legislation only currently requires landlords to fit an alarm where there is a solid fuel burning source. Landlords will be required to repair or replace smoke and carbon monoxide alarms once they have been informed by the tenant that they are faulty.

Right to Rent

On 5 April 2022, the temporary measures introduced during the coronavirus pandemic are set to end. Updated guidance will be published before 6 April 2022, as the way in which checks of biometric residence cards and permits, and frontier worker permits are set to change. These checks will be done using the Home Office online service only.

Eviction Notice Periods (Wales)

The modified notice periods in Wales were extended until 24 March 2022. Save for any further legislation being introduced, the notice periods will then revert to pre-pandemic lengths.

Renters’ Reform Bill

Draft legislation is anticipated relating to the abolition of section 21 notices, the introduction of a lifetime tenancy deposit, and changes to the court procedure for eviction cases. This Bill may also deal with the question of whether landlords will be required to be members of a redress scheme (which deals with complaints) or an obligation for private landlords in England to be registered.

Minimum Energy Efficiency Standards

The government is committed to raising the minimum energy efficiency rating from E to C by 2028. We may see draft proposals from the government this year.

Anti-Money Laundering (AML) and Agents

Agencies which are regulated for AML purposes and earn over £10.2million will be liable to pay a levy which is intended to be used to tackle money laundering in the UK. The amount of the levy varies depending on the revenue of the company. This levy is part of the Finance Bill 2021-22 which is making its way through Parliament. This provision is intended to commence in April 2022.

Letting agency business guidance for money laundering supervision is still awaited.

Regulation of Property Agents

It is still uncertain whether steps will be taken to regulate property agents. A report was published in 2019 by the working group RoPA (Regulation of Property Agents). There has been little progression since the report was published. This question may be addressed in the Renters’ Reform Bill.

Leasehold Reform (Ground Rent) Bill 2021-22

Ground rents payable in new long leases must be one peppercorn (unless the property is exempt). This Bill is likely to be passed this year.

Building Safety Bill 2021-22

This Bill will have a significant impact on those constructing premises, those involved in property management and health and safety of ‘higher-risk buildings’ (buildings with at least two residential units and at least 18 meters in height or seven storeys). The Bill currently proposes a New Homes Ombudsman scheme, with a new code of practice on standards of construction, increased obligations under the 2005 Fire Safety Order and restrictions on landlords and developers recouping remedial costs from tenants.

Commercial

Moratorium on Forfeiture Proceedings, Commercial Rent Arrears Recovery (CRAR), and Winding Up Petitions

The moratorium on forfeiture proceedings for commercial leases (for non-payment of rent) in England and Wales is in place until 25 March 2022. The use of the CRAR regime was also extended. 554 days’ rent needs to remain unpaid for a landlord to exercise CRAR. The ban on landlords issuing a winding-up petition for debts relating to rent or other sums payable by a tenant under a business lease (among other conditions) is due to expire 31 March 2022.

Commercial Rent (Coronavirus) Bill 2021-22

This Bill addresses the issue of commercial rent arrears built up during the pandemic and will establish a binding arbitration procedure to resolve ongoing disputes. This Bill is progressing through Parliament and is expected to come into force in England and Wales from 25 March 2022.

Charities Bill 2021-22

The Bill aims to make land disposal for charities easier. It aims to give greater flexibility, remove certain prescriptive requirements, and make the legal framework for disposing of charity property clearer and less burdensome.

Minimum Energy Efficiency Standards

From 01 April 2023, it will be unlawful for a landlord to continue to let commercial property with an Energy Performance Certificate (‘EPC’) rating of ‘F’ or ‘G’ unless an exemption applies and has been registered.

The Government intends to make it unlawful to let commercial property with an EPC rating of below B by 2030. Proposals to address this are likely to be published this year.

Here at Simply-Docs we will continue to monitor the development and progress of these proposed legislative and regulatory changes and will update the portfolio and notify you when necessary.

Following up on September’s post, New Rent Debt Ring-Fencing Legislation, (which looked at the Government’s intention to set out legislation to deal with commercial rent arrears built up during the pandemic), this post looks at the Government’s much-anticipated draft Bill to address this issue.

The Bill (expected to come into force in England and Wales from 25 March 2022), introduces a binding arbitration procedure for landlords and tenants who cannot reach an agreement on how to deal with the rent arrears.

There has been lots of hype and commentary surrounding the Bill. This post sets out the key points from the Bill. Note that this is subject to change as the Bill progresses through Parliament.

Commercial landlords should be aware of the proposals as these are likely to impact negotiations with a tenant and what enforcement action a commercial landlord may consider in the future.

The Arbitration Procedure

1. Once the Bill becomes law, there will be a six-month window within which either party can refer the matter to arbitration.
2. One party states their intention to refer the matter for arbitration to the other (which is to be supported by a proposal for how to resolve the debt). The corresponding party then has 14 days to respond. Upon receipt of a response (or at the end of 28 days from notifying the respondent), the first party may refer the matter for arbitration which must be accompanied by a formal proposal for how to resolve the debt.
3. The arbitrator will consider the matter and make a binding award which may:
– Write off the whole or part of the debt;
– Give the tenant time to pay (up to a period of 24 months from the date of the award);
– Allow the tenant to pay by instalments; and/or
– Reduce the interest which has accrued, or which may be written off.
4. The arbitrator may dismiss the referral if the tenant’s business is not viable (or would not be viable even if an award were made), or the debt in question is not a ‘protected rent debt.’
5. In making the award, an arbitrator is required to follow certain principles and may consider certain factors which are set out in further detail in the new Code of Practice (which is discussed below).
6. The arbitrator must make their award within 14 days of a hearing, or as soon as reasonably practicable.
7. Each party must incur their own legal fees. The initiating party must pay the arbitrator’s fees, but once an award is made, the cost may be split between the parties unless decided otherwise by the arbitrator.

Protected Rent Debts

1. A matter can only be referred to arbitration if it relates to a ‘protected rent debt’, which means the debts arose because of the closure of and/or severe restrictions placed on businesses during the pandemic.
2. The period of closure starts from 21 March 2020 and ends on the earlier of:
a. 18 July 2021 (England) and 07 August 2021; or
b. The last day on which the relevant business was subject to restrictions (these are set out in the new Code of Practice). Periods in between where businesses were allowed to trade are to be included.
3. Principal rent, interest, service charge, and VAT can be protected rent debts.

Temporary Moratorium

This Bill is due to commence from 25 March 2022 to coincide with the expiry of the current moratorium on forfeiture proceedings and restrictions on the exercise of Commercial Rent Arrears Recovery (CRAR). There will be a temporary moratorium, which means landlords will not be able to:

1. forfeit the lease;
2. exercise CRAR;
3. serve a winding-up petition;
4. serve a bankruptcy petition;
5. issue debt claims; and/or
6. draw-down on the tenant’s deposit,

in relation to protected rent debts until an award has been made by the arbitrator, or until the six-month window has passed and no arbitration has been sought.

A key point to note is once the Bill becomes law, if a debt claim was made for protected rent debts on or after 10 November 2021, either party can request that the claim be stayed. If a judgment was made (for protected rent debts) on or after 10 November 2021, it will not be enforced.

New Code of Practice for Commercial Property Relationships Following the COVID-19 Pandemic

A new code of practice (which replaces the current code) now applies to negotiations between landlords and tenants dealing with rental arrears. The code also sets out a framework for the arbitration process and how this will work once the Bill becomes law. The code is not binding, but the Government strongly advises that the parties follow it.

This post is a high-level summary and only covers the key issues. A link to the code can be found here.  The Bill can be found here.

The Government is also asking people who have expertise or a special interest in the Bill to submit their views to the House of Commons Public Committee. A link to the consultation can be found here. The consultation closes at 5.00pm on 16 December.

We will continue to monitor the progress of the Bill through Parliament and will publish further updates as and when necessary.

When the Covid-19 pandemic began, thousands left their workplaces behind and began working from home. Over the past 18 months or so, working from home has not only become commonplace but now, as employees return to their normal places of work, it has become the preference for many. Working from home has made the long-elusive work-life balance much easier to strike. In many cases, working conditions are more comfortable and convenient, common workplace annoyances are reduced or even removed, and according to some studies, productivity rates have improved (in the interests of balance, however, it should also be noted that there are those who say the opposite).

Whatever the productivity merits, there are some employees who have become so attached to working from home that – according to a recent opinion piece in The Guardian (available here) – they are prepared to accept pay cuts to continue working at home instead of returning to the office. The merits of this approach warrant their own discussion, which we will save for another time. What is important, though, is that if greater numbers of employees are likely to make a permanent switch to working from home, some formalities that might have been overlooked in the scramble to lockdown last year must be addressed.

One of those formalities is copyright and intellectual property more broadly. The default position on copyright ownership is that works created by employees in the course of their employment belong to their employer unless there is an express agreement to the contrary (for example, a provision in an employment contract). In the case of self-employed consultants, the default position for commissioned copyright works is that the creator of the work is the owner, unless it is agreed otherwise in writing. Whether a commissioned work is assigned to the commissioning party or merely licensed to them should be dealt with in the contract.

So far so good. What happens, though, when an employee is working from home and creates something outside of their normal working hours, using their own computer?

Penhallurick v MD5 Ltd

Earlier this year, the High Court considered a case in which a former employee of MD5 Ltd, Mr Penhallurick, had developed a piece of software for use in forensic computers along with a graphical user interface and a user guide. Much of the work had been done outside of Mr Penhallurick’s normal office hours, at home, and using his own computer. The court nevertheless held that MD5 Ltd owned the copyright in the works in question.

A key factor in this decision was the fact that Mr Penhallurick’s normal job duties entailed the creation of the same kind of software. Consequently, there was a “strong and primary indication” that this work, even though it was outside of his normal hours, undertaken at home, and using his own computer, nevertheless formed a part of the course of Penhallurick’s employment.

“…in my view the place where the employee chooses to do the work will not generally make any difference. The same applies to the ownership of the tools the employee chooses to use.” – Judge Hacon

It is also important to note that the work in question was undertaken several years ago, long before the massive growth in working from home caused by the pandemic. If this reasoning applies to work undertaken at home under “normal” circumstances, then one would arguably expect it to be even more likely to apply to work undertaken at home under “new normal” circumstances. (Author’s note: Sorry, you knew we were going to say “new normal” somewhere here, didn’t you?)

With this in mind, then, whether you are dealing with an employee or taking on a contractor, it is important to consider copyright ownership from the beginning, particularly where the individual concerned will be creating some form of copyright works for you. Ensure that a proper contract is in place which clearly defines the individual’s role and duties and, if necessary, addresses copyright ownership and any other applicable IP rights.

If working from home is set to remain a preferred and more common way to work, be it fully or partly with time divided between home and the office, it is even more important to be clear on what constitutes “work in the course of employment”. Working from home is inherently flexible. In many cases, it makes little difference to an employer or to the resulting work whether it is done at 3pm or 11pm. If an employee’s previous office hours were 9am to 6pm, however, there is potential for confusion unless their contract of employment is amended accordingly.

Last year, we witnessed a proverbial stampede for the exit as employees left their offices behind and set up shop on the sofa with a laptop, clad in their finest pyjamas. Understandably, there was insufficient time (not to mention considerable panic and uncertainty over what damage the virus might do to businesses and the global economy as a whole) to get the formalities and legalities in order. Now, however, it is time to take a step back and get things sorted out.

Changes to the IR35 rules came into effect on 6 April 2021. This has caused quite a commotion but why, and should you be concerned? In this post, we will explore the latest changes and their impact.

Media coverage of the impact of the changes

Much of the media coverage over the past months about the IR35 rules has concentrated on the effect of the changes to the rules rather than the IR35 regime as a whole. Various commentators have been emphasising that not only freelance individuals but also their business clients need to consider the impact of the changes on them. In particular, the media have quite rightly focused on whether and how freelancers and their clients are affected by the rule changes, and what action they need to take in response.

If you have seen some of that coverage, you might be forgiven for concluding that the changes will affect all freelancers and their clients from 6 April 2021. We wonder whether the media coverage has focused too much on where the rule changes do impact on the world of freelance work without also clarifying those who won’t be affected.

To redress the balance, we invite you to consider the following situations in which, although the IR35 regime does or might apply, the rule changes themselves will not have any impact on a freelancer and/or their clients.

To keep things simple for our present purposes, we will look only at private sector clients. (Other rules apply to public sector clients.)

Where do the changes not impact on freelancers and their business clients?

If, as a freelancer, you only work for a client as a self-employed individual but do not provide your services to them through a personal services company (“PSC”) or other intermediary company, IR35 rules (pre- or post-April 2021) do not impact on how you have to be paid by a client. In short, IR35 will not apply to you or your client at all if you do not use any type of intermediary company. You will, however, still need to satisfy yourself and HMRC that you are genuinely self-employed, and not in law an employee of a client in order to be paid gross by your client.

So, do IR35 rules apply to a freelancer and/or their client where the freelancer does work for them through a PSC? Possibly. The IR35 rules both pre- and post-6 April can, but do not necessarily, still apply to them. However, there is a distinction between the pre- and post-April situation, as follows.

The new rules only relate to the mechanics of determining a freelancer’s status

The rules both pre- and post-April are concerned with the status of the freelancer, namely whether or not they are to be treated as if they were employed rather than self-employed, and the consequences to how they are to be paid where they have to be treated as if employed. The effect of the 6 April rule changes is to add to that pre-April regime an additional layer of rules which apply in some cases. The changes are not about whether the freelancer is to be treated as if employed or self-employed, but instead on how that status is to be ascertained. In some cases – outlined below – but only in those cases, instead of the PSC having to determine that status, it is the client’s responsibility to do so, where so required by the changes.

This switch in responsibility to the client only applies where it is “medium” or “large”. Factors such as size, turnover, etc. of the individual freelancer and their PSC (and any other intermediary companies) are not relevant for this purpose.

The key test of whether the rule changes affect the freelancer or the client is whether the client is “small”. If it is, the PSC has the legal responsibility to determine the freelancer’s status vis-à-vis that client, just as the PSC did before 6 April. As you will see from the test outlined below, many of our customers and other readers will be “small” business clients, or they will be freelancers or PSCs working for business clients who are “small”. In that case, the changes do not affect them in relation to a work engagement. A client is small if it is in the private sector and at least two of the following apply to it:

• its annual turnover is less than £10.2 million;
• its balance sheet total is less than £5.1 million;
• its employees number less than an average of 50 in the year.

Does IR35 apply at all if the client is exempt as “small”?

Where the exemption applies, it only has the effect of releasing the client from the duty under the post-April IR35 rules to determine the freelancer’s status. In other words, the “exemption” does not take the IR35 regime out of the picture altogether. This means that even if the client is “exempt”, the pre-April IR35 rules will still apply where they require the freelancer to be treated as if employed, with the result that the client has to pay the PSC less PAYE deductions.

Conversely, if the exemption does not apply, it is the client under the post-April IR35 rules that has to determine the freelancer’s status under the pre-April IR35 rules. However, if the client then determines that the freelancer is to be treated under the pre-April IR35 rules as self-employed, the client can make gross payments, i.e. it will not have to pay the PSC less PAYE deductions.

In short, whether the client is exempt and what the freelancer’s status is are two separate questions. The freelancer’s status has to be determined in each case according to the same criteria, and the question of exemption is only relevant to ascertain whether it is the client or the PSC which has to determine the freelancer’s status.

Conclusion

Views about the IR35 regime as a whole cover a broad spectrum. Many who are in favour of the IR35 regime (including the new rules) may hold that view because they are not themselves freelancers, PSCs, or clients of either, and they are not burdened with its direct effects. They simply see IR35 as a good and effective measure to prevent tax avoidance by freelancers. At the other end of the spectrum, many freelancers using PSCs and their clients see IR35 as an unfair set of measures, and would gladly abolish IR35 completely.  Freelancers and their clients alike see IR35 as creating an unacceptably high tax bill for freelancers and a heavy administrative burden for freelancers, PSCs, and their clients.

IR35 and self-employment template documents and guidance notes

We have a wide range of materials on our website which can help you with IR35 and self-employment issues. We recommend that you read our business information pages which you can see here: Business Information pages on Employment and Self-employment and here: Business Info on IR35 and that you also look at our guidance notes and range of template documents that you can use to create forms of agreement between a client and a freelance worker or intermediary company which you can see here: Self-Employment and Freelancer Contracts and here: IR35 And Other Company Contracts. These templates also include a form of IR35 Status Determination Statement template which is designed to save time when a client has to complete a status determination statement to comply with the post April 2021 IR35 rules.

The Renting Homes (Amendment) (Wales) Bill gained Royal Assent on 07 April 2021 (‘the Amendment Act’). The Amendment Act amends certain provisions of the Renting Homes (Wales) Act 2016 (‘the 2016 Act’). The 2016 Act (when it comes into force) will significantly reform housing law and practice in Wales. No date has been set for when the 2016 Act will come into force, but it is expected to come into force early 2022.

The Amendment Act gives residential tenants in Wales greater security. Residential tenancies in Wales will change to give tenants:

• A minimum 12-month contract;
• Minimum notice periods to evict tenants will be extended from two to six months in the case of “no fault evictions” (section 21); and
• Landlords will only be able to serve an eviction notice six months after tenants have moved in (as opposed to four months).

A tenant will therefore be able to move in and spend a year in a property before the landlord can take possession.

When the 2016 Act comes into force, it will simplify and standardise tenancy agreements to make them easier to understand and reduce legal costs. Some of the key provisions of the 2016 Act are as follows:

• Create a new model written statement, a “standard occupation contract”, modelled on the present assured shorthold tenancy (AST);
• Many licences will be converted into occupation contracts;
• The occupation contracts will include certain terms that cannot be varied unless the variation improves the tenant’s or licensee’s position; and
• It will introduce a new tenancy deposit scheme which will apply to all occupation contracts.

Consultation

The Welsh Government has the power to prescribe model written statements and has now launched a consultation seeking views on:

• The draft Renting Homes (Model Written Statements) (Wales) Regulations; and
• The draft Renting Homes (Explanatory Information for Written Statements) (Wales) Regulations

Any interested parties can respond to the consultation and views are being sought on the design, structure, and order of the draft model statements and explanatory information. The terms of the statements are pre-determined (by the 2016 Act). You can read the consultation document and respond online here. The consultation closes on 16 June 2021.

The aim of the 2016 Act is to streamline the housing process in Wales; however, opinion is divided with some stating that these changes will significantly inhibit a landlord’s ability to recover possession even from a problem tenant. This is likely to have a negative consequence for the wider sector with landlords leaving the market when demand for lettings is high.

The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 (‘the Regulations’) require landlords in England to have the electrical installations in their properties inspected and tested by a person who is qualified and competent, at least every five years. Landlords have to provide a copy of the electrical safety report to their tenants and to their local authority, if requested.

Most tenancies are caught by the regulations, although a number of tenancies, including long leases, tenancies granting a right of occupation for a term of seven or years or more, social, or resident landlords, care homes, and licences for lodgers (where the occupier is sharing accommodation with the landlord) are excluded.

The Regulations came into force on 1 June 2020, requiring all landlords who took on new tenants from this date to have all fixed electrical installations inspected and tested by a qualified person before the start of the tenancy.

Landlords of existing tenancies (signed before the Regulations came into force on 1 June 2020) must now also ensure that all fixed electrical installations in their properties are inspected by 1 April 2021. It does not appear that this deadline will be extended, despite the complications caused by the current pandemic. Landlords who fail to comply with the Regulations are liable to face fines of up to £30,000.

Since the Regulations came into force, the Government has issued guidance for landlords on these Regulations which can be found here.

Due to Covid-19, it is more complicated for Landlords and agents to enter properties and carry out inspections, tests, and any remedial work. Landlords and agents should ensure that they have taken all reasonable steps to comply with the Regulations as well as complying with the Government’s safety guidelines for people who work in other people’s homes. Landlords and agents should keep a paper trail of all documentation and correspondence they have had with tenants and electricians regarding these works, and any responses they receive.

The Covid-19 pandemic has created upheaval for almost all businesses and individuals. Many landlords and tenants are experiencing financial hardship. To protect commercial and residential tenants from losing their premises during the pandemic, the government has brought in various emergency measures. Landlords and tenants have also worked together to find a way through the challenges presented by this unprecedented situation.

Here are the key areas where law and practice has changed to date as a result of the pandemic.

Commercial landlords: temporary changes of law

• Forfeiture moratorium: the government has placed a moratorium on forfeiture proceedings for commercial leases. The moratorium initially lasted until 30 June 2020 but has since been extended to 30 September.
• CRAR: the Commercial Rent Arrears Recovery regime (CRAR) has been amended. In normal times, CRAR rights can be exercised when there are 7 days’ worth of rent arrears. The government amended this in April to require 90 days’ worth of rent arrears. From 24 June, 189 days’ rent must be outstanding, i.e. at least two quarters’ worth of rent.
• Insolvency law changes: the Corporate Insolvency and Governance Act became law on 26 June. It restricts landlords’ ability to issue serve statutory demands and issue winding-up petitions as a means of recovering rent arrears. These restrictions are expected to apply until 30 September.

Commercial landlords: practice and policy changes

• Mortgage payment holidays: mortgage lenders have been offering three-month payment holidays to buy-to-let landlords where this is needed due to Coronavirus-related hardship. The scheme has now been extended to 31 October, meaning that new applications for a payment holiday can be made until this date and lenders may agree to an extension of an existing payment holiday.
• Rent concessions: rent continues to be payable by tenants, even if they are unable to trade from their premises, but many landlords have been adopting a pragmatic approach and instituting temporary measures such as a rent reduction or rent suspension.
• Government workplace guidance: The government’s Guidance on working safely during coronavirus will be relevant to landlords, particularly if they are responsible for shared parts of a building or estate. The guidance has been updated a number of times as the lockdown has eased, to reflect the new rules and cover additional workplaces. Landlords should insist that tenants are implementing the guidance in their workplaces.
• New Code of Practice: the “Code of Practice for commercial property relationships during the COVID-19 pandemic” has been agreed between the government and many significant bodies in the property sector, including the British Property Federation and the British Retail Consortium. It is a voluntary code which aims to encourage landlords and tenants to work together to keep viable businesses operating during the pandemic. It applies until 24 June 2021.

Residential landlords: temporary changes of law

• All ongoing residential possession proceedings have been suspended by the courts. Initially the suspension was for 90 days from 27 March. It now applies until 23 August.
• Until 30 September 2020, the minimum notice period to be given when seeking possession of premises from residential tenants is increased from two months to three months.

Residential landlords: practice and policy changes

• The government has produced Covid-19 Guidance for Landlords and Tenants covering rent, possession proceedings, access to property for repairs and health and safety.

Overview

The Corporate Insolvency and Governance Act (CIG) received Royal Assent on 26 June 2020. The CIG is expected to improve the ability of companies to be efficiently restructured, reinvigorate UK rescue culture, and support the UK’s economic recovery.

It also includes temporary corporate governance changes to shareholder meetings, AGMs, and Companies House filing deadlines.

The following is a brief summary of the main provisions. These are specialist areas of the law and will require specialist advice.

Restructuring Plan

The CIG introduces a new flexible restructuring plan, similar to the existing scheme of arrangement. Under the plan, a company that has encountered, or is likely to encounter, financial difficulties that are affecting, or will or may affect, its ability to carry on its business as a going concern has the ability to enter into a compromise or arrangement with its creditors/members in order to restructure its debts.

It will be inserted into the Companies Act 2006 with the aim of achieving a compromise with dissenting secured creditors by the addition of a “class cram down”. This particular feature draws inspiration from US Chapter 11 proceedings.

The aim is to make it easier to pass a restructuring plan by dividing creditors/members into classes based on the similarity of their rights and each class/member given the opportunity to vote on the plan. The new restructuring plan enables a court to sanction a plan that binds dissenting classes of creditors/members. A plan will be passed if it is approved by 75% in value of the creditors/members or class of creditors/members and importantly, unlike a scheme of arrangement, there is no requirement for a majority (over 50%) in number of each class to vote in favour.

Moratorium

The CIG introduces a new, stand-alone moratorium procedure designed to provide breathing space to companies in financial distress. The moratorium provides a payment holiday for certain types of pre- and post-moratorium debts without requiring leave of the court and will prevent creditors from taking enforcement action against a company. Companies will qualify if they are, or are likely to become, unable to pay their debts when they fall due. A company does not have to be solvent to be eligible.

A fundamental requirement of the process is that it must be likely to result in the rescue of the company as a going concern. It is a director-driven process, and the directors retain full management and control of the company throughout. The regime requires the appointment of a monitor, who must be a qualified insolvency practitioner, and whose role it is to oversee the company’s affairs with a view as to whether it remains likely that the moratorium will result in the rescue of the company as a going concern.

Ipso Facto (Termination) Clauses

Contracts for the supply of goods or services contain clauses which allow a supplier to terminate or threaten to terminate or vary the supply when the counterparty to the contract enters into an insolvency or restructuring process. This is known as an ipso facto clause. The CIG contains a provision, to be inserted into the Insolvency Act 1986, to prohibit suppliers from relying on such clauses. Therefore, subject to certain exceptions, suppliers will be required to continue to supply goods or services to a company in a restructuring or insolvency process. The aim is to protect a company’s supply chain and enable the company to continue to trade.

Temporary suspension of winding up petitions, statutory demands and wrongful trading

The Government announced on 28 March 2020, plans to amend the wrongful trading provisions to remove the potential liability for directors in situations where a company’s financial position has worsened during the COVID-19 pandemic. This was an attempt to prevent directors from placing a company into administration prematurely as a result of concern for their exposure to personal liability for wrongful trading.

The relevant period is between 1 March 2020 and one month after the CIG is enacted.

Likewise, it was announced in April 2020 that statutory demands and winding up petitions would be temporarily banned where a debtor company cannot pay its debts as a result of the COVID-19 pandemic. The hope is that this process will enable companies in financial distress to enter into compromises/arrangements with their creditors without the need for formal insolvency processes to be commenced.

Under the CIG, all statutory demands will be void if served on a company during the period between 1 March 2020 and one month after the CIG comes into force.

Flexibility for Holding Shareholder’s Meetings and AGMs

The rules around shareholder meetings will be temporarily relaxed. This period of relaxation began on 26 March 2020 and ends on 30 September 2020, subject to a possible extension until April 2021.

During this period, overriding anything in the company’s constitution, the provisions allow for general meetings to be held on a virtual basis and for votes to be cast by electronic means, and that quorum requirements can be met without any members being together at the same place.

Companies required to hold their AGMs during the period from March to September 2020, can hold their meeting at any time before 30 September 2020 (again with a possible extension).

Temporary Extension of Companies House Filings

Temporary easements will be introduced regarding filing requirements. They include extensions to deadlines for:

• confirmation statements;
• accounts (Companies House has already made arrangements for companies to apply for a three-month extension to their accounts filing deadline if they are unable to meet the deadline owing to COVID-19);
• registrations of charges (mortgage); and
• event-driven filings, such as changes to company directors, people with significant control, or a change of registered office.

Where the existing filing period is 21 days or less, the extended filing period will not exceed 42 days. Where the existing filing period is between three and nine months, the extended filing period will not exceed 12 months.

This is a very brief overview of the CIG and more information can be found here.

After a long build-up, a great deal of commentary, fear, and anticipation, the EU’s General Data Protection Regulation or “GDPR” came into effect on 25 May 2018. At the time, a great deal of attention was focused on the wider scope of the GDPR and, in particular, how “personal data” was defined. Individuals or “data subjects” had more and better rights bestowed upon them, and any organisation that breached those rights would face tough new penalties.

So, what actually happened? At the time, many businesses scrambled to become compliant with the new GDPR regime. Inboxes throughout Europe and beyond became clogged with messages about updated privacy policies. Internet users suddenly found their favourite websites blocked because American companies either didn’t know how to comply with the GDPR or didn’t want to. Far from being taken as a (mostly) sensible and practical evolution of existing data protection legislation, the GDPR became a source of fear for many. Scarcely an article about it could be found that didn’t talk of fines reaching into the tens of millions.

The GDPR itself requires the European Commission to review it every two years. Here in 2020, the outcome of that review is now due and should have been published in April, but at the time of writing, it is now expected in June. Now is also a good time for businesses and other organisations handling personal data to review the GDPR themselves.

• After getting compliant in 2018, have you stayed compliant since?
• There was considerable confusion around the GDPR two years ago; have things been clarified?
• Has the GDPR been a success; is people’s personal data safer and have organisations taken more steps to truly protect privacy?
• Has there been a wider impact; what happened to all those American websites that cut us off?
• Has the GDPR been a force for change in other jurisdictions?

Moreover, as the oft-falsely attributed curse goes, may you live in interesting times. Both Brexit and the COVID-19 pandemic are significantly changing the business and legal landscape, not least where data protection is concerned.

In this post, we will take a look at the GDPR two years on, discussing those questions above (if not providing definitive answers!), and considering where we go from here. Whatever shape the UK’s domestic data protection legislation takes (initially as the “UK GDPR”), the EU GDPR and indeed the EU itself will remain central to many business’ compliance after the transition period ends. Meanwhile, the prevalence of home working and the increase in sensitive medical data changing hands within organisations as the world endeavours to press on through the coronavirus pandemic, also raise important issues that were unforeseen just two short years ago.

What did the GDPR ever do for us?

Data protection legislation is still, in the grand scheme of things, in its relative infancy. Privacy has been protected to some degree by law for much longer, but the first Data Protection Act in the UK only dates back to 1984. This was succeeded by the Data Protection Act 1998, and again by the Data Protection Act 2018 and the GDPR.

Technology, particularly the internet, has been a major catalyst for the development of data protection law. In the mid-1990s, the internet was still quite new, but the implications for privacy and the widespread use of personal data were clearly recognised from an early stage. The EU passed its Data Protection Directive in 1995, setting out minimum data privacy and security standards. Being a Directive, it was then up to EU Member States to implement it through their own domestic legislation and, thus, the Data Protection Act 1998 was born.

As the world settled into the 21^st Century, the internet’s appetite for personal data stepped up the pace. In 2010, the European Commission adopted a communication entitled “A comprehensive approach on personal data protection in the European Union” and so began the work to update the 1995 Directive and, considering the growth of the internet, not before time. In 1995 less than 10% of UK households had internet access. By 2010, this number had risen to over 70%. In 2016, the General Data Protection Regulation was born, due to enter into effect in all EU Member States on 25 May 2018.

The definition of “personal data” expanded significantly to include not only the obvious forms of personal data such as names and contact details, but also less obvious – at first glance, anonymous – forms of data such as IP addresses. The amount of information to be provided to data subjects was increased, and rules surrounding consent where tightened up. Greater emphasis was placed on accountability and record-keeping, and higher standards for “lawful processing” applied.

The GDPR also brought with it a much greater territorial scope than had been seen before. Simply put, if an organisation processed the personal data of anyone residing within the EU, regardless of that organisation’s location, the GDPR applied.

More information was required to be given to individuals when collecting their personal data. This requirement was designed to promote transparency, ensuring that individuals were more informed about what their personal data was being used for, how, why, and what rights they had in relation to that. In practice, it also triggered a veritable blizzard of “we have updated our privacy policy” emails.

The GDPR was designed to raise both standards and hurdles when it came to the use of personal data. In particular, new rules over consent were introduced, including a stricter standard for consent. Consent and explicit consent would now require a clear affirmative action from the individual. Consent would now have to be freely given, specific, informed, and unambiguous. Data controllers were also now required to make it easy to withdraw consent at any time and, unless they had another legal basis on which to continue using the personal data in question, would have to cease using it upon such withdrawal.

Not only were the requirements for consent toughened up, but so were other lawful bases for personal data processing such as “legitimate interests”. Under the old Data Protection Act 1998 regime, the UK had taken a rather generous position on this particular basis, but the GDPR narrowed things down, placing a stricter emphasis on ensuring that such interests were not overridden by the rights and freedoms of data subjects.

Key new rights were bestowed upon individuals, not least the so-called “right to be forgotten”, which gave individuals the right to require organisations to delete all personal data relating to them. In practice, particularly with so much data being backed up in various forms and spread across multiple systems, the prospect of complying with this right was a source of considerable concern for many.

New requirements concerning accountability were introduced. Chief among these were the requirement to notify supervisory authorities (such as the ICO) of data breaches within 72 hours if the breach was likely to pose a risk to the rights and freedoms of individuals. Where there was a high risk that the rights and freedoms of individuals would be adversely affected, the individuals themselves were also to be notified. The GDPR also introduced new requirements relating to Data Protection Officers, making it mandatory for a wide range of organisations to appoint one. Also important under the heading of accountability was record keeping. Even in situations where a decision had been made to not do something, for example, because of a low risk to individuals’ rights, it would need to be documented.

How Did We React?

The majority of news items about the new GDPR were keen to emphasise one element above all others: the fines and penalties. In broad terms, the GDPR introduced two categories of fines, the highest of which could reach up to €20m or up to 4% of an organisation’s total worldwide turnover, whichever was higher. Cooler heads remarked that for many businesses that were already taking their Data Protection Act 1998 compliance seriously, there was little need to worry and that the change was easily manageable. Nevertheless, predictions of doom persisted.

Many were also confused about their obligations, leading in some cases to over-reactions and in others, to apathy. The over-emphasis in commentary on topics such as consent, for example, even led some to believe that it was now the only basis upon which they could use any personal data. Particularly for online operations in the US, so demanding and threatening was the GDPR that the preferred choice was simply to block all EU-based users from their websites.

Further concern stemmed from the fact that a great deal of guidance on data protection, including some of that available from official bodies, was outdated, referring only to the Data Protection Act 1998 / Data Protection Directive 1995 regime.

Where Are We Now?

What happened to all those huge fines that were going to put everyone out of business? There have certainly been fines, but, as the ICO was keen to point out in its blog post GDPR – sorting the fact from the fiction back in August 2017, “it’s scaremongering to suggest that we’ll be making early examples of organisations for minor infringements or that maximum fines will become the norm…Issuing fines has always been and will continue to be, a last resort…we intend to use those powers proportionately and judiciously.”

There have been some big fines, certainly, but looking at them more closely, they are still far from the top end. The French supervisory authority, CNIL, issued a €50m fine to Google. This, however, amounted to a mere 0.04% of Google’s global turnover – arguably more the cost of doing business than a deterrent. Last year, the ICO announced its intention to fine British Airways £183.39m in relation to a cyber incident which took place in 2018. Again, big money, but only equal to around 1.5% of BA’s global turnover. Moreover, at the time of writing, BA has not yet been issued the fine after a series of delays and there are now questions over whether the ICO may take the financial impact of the COVID-19 pandemic into account, the effect of which would presumably be to reduce the fine or perhaps defer it.

The fines may not have turned out to be as bad as feared, but does this mean that people’s personal data is better protected? Is the GDPR doing its job? Certainly, awareness is much higher, even outside of the UK and EU. Some of the biggest names in technology have adopted GDPR standards of data protection worldwide, rather than focusing only on Europe. Small businesses that might previously have overlooked data protection entirely are now keen to get their privacy policies in place, and it is clear that the GDPR itself prompted a surge of updates to business practices and documentation, both inwardly and outwardly.

Moreover, much more useful guidance has emerged over the past two years, including comprehensive guidance on compliance from bodies such as the ICO, and certain issues that caused confusion in the early days have been clarified.

Has it all been good news, however? It would be difficult to argue that this is the case. The GDPR continues to be a source of uncertainty and increased costs, particularly where technology is concerned and in areas such as analytics and ad tech. A 2019 survey conducted by German trade association, Bitkom, found that for many, the GDPR represents a barrier to innovation, particularly where new technologies are concerned. Nor is it necessarily ideal for individuals, many of whom have long since tired of emails informing them of privacy policy changes. Moreover, while many have heard of the GDPR, it is at the very least open to question how many of those people really understand what it means for them. Then, there is also the issue noted above – the geo-blocking of online content, particularly from the US – solely on GDPR compliance grounds. One must ask whether this is a benefit to individuals at all. It will be interesting to see if the Commission’s review considers such real-world impacts and, if so, what improvements may emerge.

What Did You Do Back in 2018?

Two years feels like a long time. Longer now, probably, given that the past two months have felt like an eternity as the world collectively hangs on the pause button. The advent of the GDPR caused no small amount of panic. Many scrambled to make their businesses compliant in time for the 25 May 2018 deadline that loomed like a threatening spectre.

Since then, however, the important question has become not so much “how did we do then?” as “how have we done since?”. Getting your business compliant in 2018 was but the first step of what a less jaded author might call your “GDPR journey”. Now that things have had time to settle down and guidance has become more widespread and fleshed-out, it is an ideal time to take a fresh look at data protection within your business. As a starting point, consider these questions:

• Am I maintaining awareness of data protection within my business?
• Have the changes I made in 2018 been successful? What could I do better?
• Is my privacy information up-to-date and is it easily accessible?
• Am I keeping proper records? Is there any way I can improve upon them?
• Have I had any data breaches? Have they been handled properly?
• Am I being proactive about data protection when considering new uses of personal data?

A Data Protection Audit is a useful exercise to carry out on a regular basis as it prompts you to ask and answer questions like these in more detail, considering all aspects of your business’s data protection compliance. If you haven’t carried one out before or perhaps haven’t carried one out since preparing for the GDPR, now is a good time to get started. It might also be the case that you have avoided an audit because you are afraid of what it might turn up. That is not an invalid concern but consider this – it is an internal exercise and the ICO would rather you identified your weaknesses and fixed them than ignored them. You aren’t going to get a €20m fine landing in your lap because your internal audit identified room for improvement or even outright failings. It is better to find out what is wrong and fix it, so cast aside the fear and get going!

Another side to ongoing compliance is the Data Protection Impact Assessment. A DPIA is a valuable (and indeed mandatory in some cases) tool which helps you to evaluate new projects from a data protection perspective, identifying and minimising the risks from a variety of angles. Again, a DPIA is not an exercise that should be carried out once and forgotten about. A system, product, or feature that began as a new project back in 2018 will quite possibly have changed in some way since then. Perhaps without even realising it, the way in which you collect, use, or store the personal data involved has changed. DPIAs should, therefore, be regularly reviewed and repeated if necessary.

The Picture in 2020

Brexit and Data Protection

Until recently, one of the biggest topics up for discussion in data protection circles was Brexit. We know that, at the end of the transition period, the EU GDPR will cease to apply in the UK and that it will be replaced with a “UK GDPR” – a direct copy in many respects, with necessary contextual changes to accommodate its status as a solely domestic instrument (references to EU laws, institutions, and powers, for example, will be removed or replaced with UK equivalents).

We also know that, whatever the outcome of Brexit, it will remain possible to transfer personal data to the EU and EEA and to “third countries” covered by an existing EU Commission adequacy decision without constraint, as is the case now. Not only that, but the UK will also recognise the current EU Standard Contractual Clauses as a valid mechanism for international transfers of personal data.

We do not, however, know what the UK’s status will be from the European perspective. Despite the similarities in our data protection legislation, the European Commission must still assess the UK’s post-Brexit data protection framework and grant an adequacy decision in order for personal data to flow as freely into the UK from the EU and EEA as it can in the other direction. It is far from certain that an adequacy decision will be made before the end of the transition period.

If an adequacy decision is not granted before the end of the transition period – and many commentators think it unlikely that one will be – other safeguards will be needed to cover personal data moving from the EU into the UK such as the aforementioned Standard Contractual Clauses or binding corporate rules (to name just two examples). Another key change to data protection compliance will be the need to appoint an EEA representative from the end of the transition period if your organisation offers goods or services to individuals in the EEA or monitors their behaviour.

Home is where the Work Is – Data Protection and COVID-19

Just a few short months ago, we might have thought it impossible that any subject could knock Brexit of the top spot of things we were tired of hearing and worrying about, but along came the coronavirus, making Brexit look like proverbial small potatoes.

From a data protection perspective, the pandemic has resulted in a rapid increase in medical data changing hands within businesses of all shapes and sizes. Medical information is, of course, “special category” (formerly “sensitive”) personal data and thus requires greater levels of care and security. Not only that, but such data is also moving around in an inherently less secure environment in many cases. Instead of being confined to secure and tightly-controlled networks and equipment that is constantly kept up to date with the latest security patches and new software, business personal data is now finding itself residing on home computer systems and home networks – some lacking in the latest security software (or indeed any at all), left vulnerable by older equipment and weak passwords. Other security threats are also seeking to exploit the decline in secure IT environments with activities such as phishing reportedly (and dramatically) on the rise.

Not only does the increase in home working pose potential security threats, but it may also make it harder for some organisations to comply with requests from individuals to exercise their rights. With personal data less centralised, for example, it may be harder to locate it in response to a subject access request.

Maintaining awareness and providing regular training is essential in overcoming such new challenges. Having an up to date Data Protection Policy can help to underpin your staff’s knowledge and serve as a reminder of things that, again, might have been fresh back in 2018 but may have given way to complacency or simple forgetfulness by now. Where possible, other practical steps such as the use of VPNs and the issuing of centrally administered computers and other devices can be taken to help reduce the risks associated with individual staff working with personal data on their own devices.

Such challenging circumstances will undoubtedly make assessing the GDPR’s success a harder exercise, both for regulators and for organisations. It remains vitally important to protect personal data and to use it lawfully, fairly, and transparently. At this point, no virus-specific changes are planned for data protection law and it is doubtful that they will be. What is important to note, however, is that authorities such as the ICO are not oblivious to the difficulties. The ICO recently issued a statement reassuring us all that while the law itself remains unchanged, “We understand that resources…might be diverted away from usual compliance or information governance…We won’t penalise organisations that we know need to prioritise other areas or adapt their usual approach during this extraordinary period.” In short, keep calm and carry on!

Where To?

It is clear that while data protection regulation has evolved to keep up with modern technology and contemporary uses of personal data, there remain many problems. Perhaps the greatest of these is that the law appears to be too heavy handed. The law and technology have been at odds in many areas for a long time, and this shows no signs of abating.

Business, technology, and the law itself need to evolve to accommodate one another. Whether or not they will is a different matter. It does seem evident, however, that this is understood on all sides. Enforcement powers and penalties exist to punish those who break the rules knowingly or carelessly and put the rights and freedoms of individuals at risk. Does this mean that small businesses will be fined for innovating? Arguably not.

It will be particularly interesting to see how the UK’s data protection laws evolve after Brexit. While keeping closely in tune with EU legislation, it is arguable that a desire to make the UK an attractive economy for innovation and investment in technology may lead to new developments in the data protection framework. The UK GDPR will be the same as the EU GDPR for all intents and purposes – particularly from the SME perspective – but what comes next will make for interesting viewing.

Introduction

The outbreak of COVID-19 and the ensuing pandemic is unprecedented in recent times and its economic impact is similarly unheard of. The Office for Budget Responsibility recently warned that the pandemic could lead to the UK economy shrinking by 35% by June 2020.

For many businesses of all shapes and sizes, in a variety of sectors, the pandemic has, at the very least, necessitated changes and, in more serious circumstances, poses a threat to their survival.

There is, however, plenty of cause for optimism. The government has introduced a range of measures to help support struggling businesses and there are a number of things that businesses of all size, SMEs in particular, can do to weather the storm of the pandemic. Above all else, it is important to stay calm and organised. A clear head and an efficient approach to business will make everything else that much easier.

Dealing with your Staff

We have covered flexible and home working in a number of other articles here at Simply-Docs (check out our Working from Home with Children blog post and our recent newsletter on Home Working). We also offer a range of documents specifically designed to facilitate such arrangements. Flexible working is a boon to employers and employees alike, particularly in such challenging times. It may not be suitable in all sectors, but if the nature of your business permits it, it is most definitely worth considering if you are not already doing so.

Implementing the right policies is an important element of flexible and home working. Without the structure of a normal working day, productivity and adherence to procedures can quickly deteriorate. Nevertheless, it is also important to understand that many staff, particularly parents or those with other dependents, will be facing considerably more responsibilities at home at present. Cultivating an understanding of such pressures and offering as much flexibility as you can will be appreciated by your staff and ideally enable them to be more productive.

Technology can be a great help. Investing in the right software and hardware can make it much easier for your business to operate as close to normal as possible, enabling your staff to easily keep in touch with each other, to hold meetings, to deal with customers, business partners, and the like. It can also be easier to implement security controls on company-owned technology such as laptops and smartphones, meaning that your business is less likely to fall victim to hacking, malware, or the perils of a data breach and the potentially crippling fines that can follow.

If you find that your resources are stretched, consider weighing up the costs of training existing staff for new or expanded roles instead of recruiting new people or taking on contractors. This opens up new opportunities and the possibility of a very welcome pay increase for your existing employees while avoiding the higher expense and complications of taking on new people.

Not all businesses are suited to home working, whether partially or fully. If your staff still need to come into work, keeping the workplace clean and safe is of paramount importance. The normal health and safety rules continue to apply, but when it comes to keeping things clean and hygienic, now is the time to go above and beyond. Equipment and surfaces should be cleaned more often than normal, with “high-touch” objects and areas receiving particular attention. Where supplies permit, provide cleaning materials for your staff to use, such as alcohol wipes for keyboards, mice, telephones, and other objects that are regularly handled. Ensure a plentiful supply of soap and hand sanitiser and ensure that your staff are reminded to use them frequently. Most important of all – if any of your staff are ill, however minor it may be, and whether or not they think it may be the coronavirus, ensure they stay at home and self-isolate in line with government and NHS guidelines.

If revenue declines to the point at which your options are limited financially, there are a range of options open. What is very important is that you communicate with your staff. Do not keep them in the dark. Consult with them and, where appropriate, involve them in planning. If possible, take advantage of the Coronavirus Job Retention Scheme and place your employees on furlough leave. Simply-Docs has a range of templates and guidance designed to assist with this. Further choices include reduced pay, reduced hours, and, if all else fails, redundancy. When considering any such plans, it is vitally important to take professional advice.

Reduce Your Outgoings

If possible, look to re-negotiate contracts. Many of those businesses you are contracting with will be in similarly difficult positions and it may well be preferable to agree to reduced payments, orders, and so forth rather than to risk losing them completely. We offer a range of templates designed to assist in amending contracts in our Business document folder.

When it comes to property, particularly if you are not using your premises (or not using it to its normal capacity), consider negotiating with your landlord and look into the possibility of options such as discounted rent, rent deferment, rent-free periods, and/or a reduction on service charges. Find out more about managing property during the pandemic in our April 2020 property newsletter.

Whatever accommodations are agreed, and however renegotiations proceed, do not let the sense of urgency tempt you into informal agreements. Whenever possible, ensure that everything is documented and legally formalised.

Looking for New Financing Solutions

As revenue falls, debt becomes harder to pay. It is important to remember, however, that those to whom you owe money should hopefully want to receive it than risk missing out. Communication is, once again, key. Discuss your situation with banks and other lenders and look to renegotiate agreements or even take out new finance to help bridge the gap until normal trading begins to resume. The government’s Coronavirus Business Interruption Loan Scheme is of particular relevance under this heading.

If you are a company, be particularly careful about giving personal guarantees. Always remember that a company is a legal entity of its own. Shareholders are protected and have limited liability. By giving a personal guarantee, the so-called “corporate veil” is pierced and the guarantor’s personal assets (including, potentially, their home) will be at risk. Once again, the importance of taking professional advice cannot be overstated.

VAT

Paying VAT can be a tremendous source of pressure and, if your revenue is on the decline, it will be even more so. Look to set up a quarterly payment plan for VAT and talk to HMRC about other assistance or concessions that may be available.

The government has also announced a VAT payment deferral scheme under which payments due between 20 March 2020 and 30 June 2020 will not need to be made until 31 March 2021. Returns must, however, be filed on time. Also ensure that any direct debits are cancelled.

Take Care of Your Duties to the Company

If your business is a company, it is important to remember that directors must still comply with their statutory duties as set out in the Companies Act 2006:

• Act within their powers
• Promote the success of the company
• Exercise independent judgement
• Exercise reasonable care, skill, and diligence
• Avoid conflicts of interest
• Not accept benefits from third parties
• Declare any interest in a proposed transaction or arrangement

The second of these is particularly important, and directors must act in a way that they consider (in good faith) to be most likely to benefit the company’s shareholders as a whole.

It is also, however, important to keep in mind solvency and wrongful trading. If your company’s solvency is in doubt, a director’s first duty is to creditors, not shareholders. That being said, companies in trouble have been given more breathing room with the recent announcement of changes with respect to wrongful trading.

Under normal circumstances, directors may incur personal liability if they allow a company to continue trading beyond the point at which they should have decided it wasn’t reasonably possible to save it. New measures, however, allow directors to continue trading even if there are reasonable grounds to think that the company may become insolvent, without incurring personal liability. This applies to actions taken after 1 March 2020. There will also be a temporary moratorium to prevent creditors seeking to wind up companies seeking rescue or restructuring, but at the time of writing, this is yet to be introduced.

Ensure that the normal procedures for running your business are adhered to, at least as much as the situation permits. If a decision needs to be made that requires shareholder or board approval, conduct things online using tools such as Zoom or Microsoft Teams (the same applies to meeting with your staff). Ensure that your articles of association permit this, however, and keep to the established processes. Do not succumb to the temptation to let things slide into informality. In particular, if you hold a virtual shareholders’ meeting, ensure that you adhere to the Companies Act 2006 and all required formalities.

Fail to Plan; Plan to Fail

Planning is always important in business, but all the more so now as there is less margin for error. A good starting point is to prepare a cashflow forecast to cover the next two to three months. This should be followed by planning and forecasting for the next couple of years as, even once lockdown restrictions begin to lift, it is likely to take the economy quite some time to stabilise and rebuild.

Organisation is vital. Ensure that your books and management accounts are up-to-date and review everything regularly. All meetings, at whatever level and however formal, should be documented, in accordance with legal requirements where applicable.

Concerns, whether they are of the gravest or most easily dismissed, should all be taken seriously and considered at the appropriate levels within your business, leaving nothing to chance. Changing circumstances could easily turn paranoia into reality on the one hand, and render a significant worry unwarranted on the other. Bury nothing!

Diversify and Grow

Yes – grow! As counterintuitive as it may first appear, such seismic changes to the economic landscape also present opportunities for those businesses ready and willing to adapt. One opportunity is to expand online, particularly if your business has remained predominantly (or entirely) brick-and-mortar in the past. This will not, of course, work for all, but in some cases a move online could not only keep your business afloat during the COVID-19 pandemic, but also benefit it immensely afterward.

It may also be a good time to explore diversification. Perhaps there are new avenues that you have been keen to explore or some that are a natural next step that could be easily accommodated within your existing business model and by your existing staff.

Now is not the time for complacency. Businesses that have built up goodwill and nurtured customer relationships over many years may not, until now, have considered advertising and marketing particularly important. If finances permit, however, now may be an ideal time to consider casting a wider net. Online advertising, particularly on social media, can be an extremely productive investment if done correctly. Similarly, for those businesses already established online, consider your current SEO strategy. Is your website performing at its best? Could you make some changes to it that might move you up a peg or two in the search engine rankings? The internet is key to doing business under normal circumstances and even more so with the vast majority of the population quarantined in their homes.

You CAN Make It!

We keep being assured that there is light at the end of the tunnel. Meanwhile, numerous commentators caution us that we can’t see that light yet. It is certain that the toll that COVID-19 will take on the world will be huge, both in terms of the human cost and economically. Nevertheless, it is vital to persevere, and not surrender to the assumption that your business will fail just because it is facing difficulties.

To wrap up, some key points:

• Stay up-to-date with the news (but don’t overdo it) and look out for announcements from the government that relate to your business affairs.
• Document everything, whether required to by statute or not.
• Avoid informal agreements at all costs.
• When negotiating or re-negotiating contracts, be sure to cover the important points. Be specific about numbers, dates, review periods, termination, and other key provisions such as force majeure.
• Communicate with your board, your shareholders, your staff, your suppliers, your customers, your bank, HMRC, and anyone else with whom your business deals. A problem is much harder to solve if those affected by it don’t know about it!
• Be realistic and act accordingly. Don’t hide from your problems. Be proactive, be honest, be transparent, and be positive!

Being positive may sound awfully trite; but it is vitally important to remain as positive as you can. Looking after yourself as well as your business should be a key priority. Exhaustion and stress will not help keep your business going and could well end up costing you dearly if a lack of focus, physical, or mental illness stop you from performing at your best. Take time for exercise and for rest. Look after your mental health during these difficult times and ask yourself whether doing something really will make a difference. Will sweating over work until 11pm actually result in anything, or would your mind and work fare better with a fresh start in the morning if you took the evening to relax with your family or catch up with a friend over the phone or online?

Plan for the worst, hope for the best, and take steps now to keep your business going. In the words of President Barack Obama in his 2009 inaugural address: “With hope and virtue, let us brave once more the icy currents, and endure what storms may come.”