Coronavirus: Updated insolvency advice for businesses

Businesses will be considering dramatic changes over the next few days and weeks. The Government last week closed certain business such as pubs, theatres, restaurants and cinemas. Last night, the Government went further and ordered that all non-essential retail businesses and hotels should close and that people should not leave their homes to work unless it absolutely cannot be done from home.

Details of the businesses and premises which have been ordered to close can be found here.

It is not clear at present to the extent these new measures will affect the construction sector. The position appears to be that key construction projects will be allowed to continue but others will need to stop. Further Government guidance here is awaited.

The effect of these measures will be that many businesses’ income will stop but they will continue to face liabilities, such as wages and rent, that they may not be able to meet. To help businesses, new economic measures were announced by the Chancellor last Friday to alleviate those potential liabilities, including:

• a coronavirus job retention scheme, whereby HMRC will provide grants to cover 80% of an employee’s wages, up to £2,500 per month;
• the deferment of VAT payments between now and June;
• the Coronavirus Business Loan Interruption Scheme provided by the British Business Bank, introduced earlier this month in the budget now being interest-free for 12 months. Further details can be found here.

In addition, as 25 March is a rent quarter day, the Government also announced last night that there would be extra protection for businesses who are tenants under a commercial lease, namely that any tenant who is not able to pay rent due to the coronavirus measures will not face eviction. More information can be found here.

Further assistance for self-employed people is likely to be announced in the coming days.

The effect of these measures will require many businesses to cease to trade, potentially permanently, whilst there is likely to be some delay in businesses being able to access the financial assistance being offered by the Government. Our advice to directors of affected businesses remains as we set out in our KeyNote last week, namely keep everything under constant review and fully record and document all decisions that are taken during this difficult period.

Should businesses require specific advice regarding their position, they should not hesitate to contact professional advisers, such as those within Keystone Law’s Restructuring and Insolvency team.

Should you have any queries arising out of this KeyNote, please do not hesitate to contact Stephen Young or Mark Parkhouse using the below details.