Our Commercial Team Is Here For You

The ongoing affects on Coronavirus is having an unprecedented affect on trade and commerce, with several industries being significantly impacted by the economic standstill. Business owners will no doubt have a variety of concerns that directly relate to the financial sustainability of their business, and how best to adapt to the current economic situation.

Richard Coulthard

Our Partner & Head of Corporate Law, Richard Coulthard is directly helping SME’s through this difficult time and both Richard and his team have been advising business owners on a variety of matters. Here we summarise a few key issues that may be of particular importance to business owners:

Contractual Obligations

As supply chains are being severely disrupted and cash flow becoming of paramount importance, businesses (and individuals) rights and obligations in contracts are being brought into focus.

Some businesses may be looking into the application of force majeure clauses in order to be exempt (or excused temporarily) from certain contractual obligations.

What is a force majeure clause?

Force majeure clauses are often written into commercial contracts for situations where defined circumstances impacts a businesses’ performance and therefore restricts it’s abilities to adhere to contractual obligations.

It’s worth noting that the specific wording of a force majeure clause is key for its application and would need to be reviewed. However, courts will likely to be generous in their interpretation of the wording when dealing with businesses who are genuinely struggling to perform.

If there is no force majeure clause in place or the wording doesn’t allow for its application to the current COVID-19 crisis, you may be able to rely on the wider law of ‘frustration’. This law is quite broad and more open to interpretation, therefore meaning it can be difficult to apply to a situation but it again refers to unforeseen events restricting a party’s ability to perform.

Temporary reduction of rent

The Coronavirus Act 2020 came into force on 25th March and Section 82 of the Act notes the ban of forfeiture of commercial leases during the period of three months leading up to 30th June. Currently there are no provisions for after that date but the Government may extend this if it deems necessary. It is worth noting that liability for rent is not affected, merely the remedy of forfeiture that would usually be available to the landlord through the terms of the lease.

Although these provisions have been introduced to give some protection to businesses, it will mean that the commercial tenant will be falling into arrears. An effective remedy to this situation could be to negotiate a variation of the contract for agreed periods – with rent free and rent reduction periods being available options.

Although these provisions have sought to assist businesses with their current cash flow, best advice would be to negotiate a formal variation to the lease to avoid arrears accruing.

Working from home – Data Protection

With many workers being asked to work from home, if they can, this presents a new challenge in terms of ensuring data protection is covered. The speed at which businesses have had to make the switch to working from home has resulted in some areas of sensitive and confidential work being overlooked. Here are some key tips:

  1. Make sure have correct security measures in place
    Your business should ensure that you are using an appropriate VPN and that certain security measures are in place to safeguard your network and data. Work closely with your IT team in order to ensure data is not compromised or intercepted. Data shouldn’t be circulated via personal email accounts.
  2. Remote working and Bring Your Own Device (BYOD) policies
    Ensure your business has up-to-date policies for both remote working and BYOD to ensure relevant risk assessments have been carried out and ensure that working from home arrangements are as seamless and productive as possible.
  3. Confidential waste
    There needs to have appropriate procedures in place about disposing of confidential waste. This should not be disposed via general domestic waste bins and could have huge financial implications to a business is reported or intercepted. Suitable arrangements need to be in place for this to be disposed of or collected in the right way.
  4. Privacy notices & GDPR
    Even after the current epidemic crisis, flexible working plans and remote working is likely to be on the increase and your business’ handling of data and procedures that are in place need to be officially documented to adhere to GDPR guidelines – the penalties that have been actioned against businesses haven’t be widely circulated in the media but they are severe.
  5. Employee data
    All employees have right the right for their personal data to be protected. If they are forced to use personal telephone numbers through a new working from home arrangement, relevant software and apps should be used to hide their number when making calls. This also goes for personal email addresses – but as stated above, this should certainly be avoided if you are dealing with sensitive data.

Business Sale & Acquisitions

For many business owners, their business means everything to them, so when it comes to selling their business it can be an emotional time. The reasons for selling vary, but often it’s about timing. In precarious times such as this that we’re facing, there may be business owners that would like to sell their stake in a business as quick as possible as it may suit their specific circumstances. For others, they may be seeking to acquire businesses to strengthen their market share or even diversifying and expand into new markets. For whatever your objective, it’s important to do your due diligence  and find the best solution – at Ison Harrison we can advise and take you through this process.

Changing Shareholders

Given the economic uncertainty, now may be a more cost effective time to either introduce new shareholders or to buy out shareholders who are looking to exit a business. Given the uncertainty, it is likely that businesses will be ‘down-valued’ in the short term.

This means it will be cheaper for new shareholders to invest in a business, potentially giving a much need cash injection into a business, and it may be cheaper and easier to bring in employees into share ownership.

On the other side of the equation, now will be a more cost effective time to look at buying out shareholders who were already thinking about exiting a business.

Our business is keeping a close eye on developments around the COVID-19 crisis and our Head of Corporate Richard Coulthard will be  providing updates on how new legislation can affect business owners to assist them through these challenging times. Richard and his team are continuing to work remotely and can be contacted on 0113 284 5000.

Need more information? Read our blog posts: