In these challenging times businesses will understandably be concerned about their finances and liquidity. However, as we speak, the government is pushing to overhaul insolvency laws to help companies affected by the coronavirus pandemic in order for them to undergo a rescue or restructure process to continue trading, giving them breathing space that could help them avoid insolvency.

The government will also temporarily suspend the wrongful trading provisions to give company directors greater confidence to use their best endeavours to continue to trade during this pandemic emergency, without the threat of personal liability should the company ultimately fall into insolvency.

Existing laws for fraudulent trading and the threat of director disqualification will continue to act as an effective deterrent against director misconduct.

In the meantime, we offer some general advice for your business during this troubled time:

Don’t rest on your laurels

Despite the proposed Government changes we recommend that you use this time to manage an open dialogue with creditors who may be pursing their outstanding debts to avoid their own insolvency. Assess your customers and their long term financial viability and whether you are willing and/or able to manage a larger debtor book.

We would encourage you to consider offers to pay by instalments or lower lump sum settlements taking into account the funds you have available. Most businesses would be grateful to receive something as opposed to nothing. There are also facilities available to factor debts to keep cash flowing.

Never be scared to ask for help

A coronavirus business interruption loan will be granted to support long-term viable businesses who may need to respond to cash flow pressures, available from 23rd March 2020. However, try and get one that does not have a personal guarantee attached.

Communicate

Businesses should communicate with their partners and customers in an attempt to fulfil their contracts.

At this time, it is important for small businesses to stay connected with their customers especially through digital marketing strategies. Communicating brand identity and values remains important during this difficult time.

Cutting Costs

Businesses should consider what non-essential expenditure can be reduced and asking service providers what discounts may be available on fixed overheads.

Consider claiming for wage costs through the Government Coronavirus Job Retention Scheme. However, if you are considering terminations or furloughs of employees try to remember good employees can be a business’s greatest asset. If you cut too deep, they may not return.

If you’re a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you can defer the payment until a later date. Make sure you cancel your Direct Debit if this is your normal payment method as it may still take.

HMRC’s Time to Pay Service: If you have missed a tax payment or you might miss your next payment due to COVID-19, please call HMRC’s dedicated helpline: 0800 0159 559.

Planning

Contracts should be tailored to include clauses that will allow for the flexibility in times of economic uncertainty such as COVID-19.

Be aware of your responsibilities as a director. If the Company looks to be insolvent seek professional advice as to your options from accountants, solicitors and/or insolvency practitioners. There are several ways to avoid liquidation which may include continuing to trade but you need to act swiftly to improve the prospects of succeeding. Just because HMRC are giving businesses time to recover it doesn’t mean other creditors can or will wait.

Businesses are required to meet regulatory obligations even in the event of unexpected global challenges. If not already in place, systems should be adopted for a business to maintain those obligations.

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Further announcements are anticipated soon with the government pledging it will do what it takes to support businesses. Should you have any queries arising out of your own business please contact us on 0113 266 0735 for an initial free chat during this testing time for us all.