There are few businesses that have not been adversely affected by the pandemic, which has resulted in previously well run, profitable and solvent businesses facing an uncertain future, largely through no fault of their own.
In the past week, we have seen the announcement of the Job Support Scheme (JSS) to replace the Job Retention Scheme (furlough) at the beginning of November. The main concern with the JSS is that there will still be some businesses that may not have a third of the working hours available to employees or would be able to pay them for that third and the balance required under the JJS.
Employers may therefore need to look at redundancies. That in itself can be a significant cost to the business and where they cannot afford to meet their obligations for notice pay and statutory redundancy payments it is essential that directors take a realistic look at the short to medium term viability of their business and seek specialist restructuring advice.
This does not necessarily need to be seen as a negative step but one which may well protect your business and is one which many established names have taken. A formal restructuring or insolvency process may not, on review, be required and a solution can often be achieved by considering finance options and/or negotiating terms with key creditors and stakeholders.
More formal insolvency procedures include creditor voluntary arrangements or one of the new restructuring tools introduced by the Corporate Insolvency and Governance Act 2020, most notable of which are the moratorium provisions which enable a Company to get protection from its creditors for a designated period of time. As a last resort, it may be necessary to consider administration or liquidation.
It is imperative that directors, and indeed all business owners, consider their positions carefully and obtain advice not only on the restructuring options available to them, but also on their obligations to creditors and the consequences of failing to comply with those obligations, which can be stark. Once this occurs, the interests of creditors become paramount and failing to recognise this can become costly in terms of actions brought against directors personally.
The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.
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