Play fair or risk game over
08 April 2020
Three weeks into the COVID-19 crisis in the UK, and the concept of fair play has been a recurring theme in my mind, as I go about work in a very different way to the norm.
From matters that I am being asked to advise on, through to the steps that we as lawyers are able to take to assist our clients the overriding message seems to be “please play fair”.
The Government seems determined to enable fair play by introducing a generous support package for businesses. This includes the Coronavirus Job Retention Scheme (CJRS) which offers 80% furlough scheme for employees with no work to do from home and a similar scheme for the self-employed. They are also offering grants and rates rebates to business as well as guarantees to banks prepared to assist business customers in difficulty.
Although I head up the Insolvency and Restructuring team within Carson McDowell my background is in litigation. As litigators, we have always had a referee, the courts, overseeing proceedings, ensuring that we all play by the rules and that the outcome is fair. The current court closures mean that this adjudicator is to a large extent unavailable in the short term. Therefore as a legal adviser, I am left to make sure that my clients and indeed their business counterparts continue to play by the rules; to play fair.
Since this crisis started I have had numerous instructions and queries from clients with pressing issues that they would never have anticipated even two months ago. I have referred numerous clients through to our employment team for guidance and advice on furlough and related matters. Thanks to the Government playing fair, I have not been sending them through for redundancy advice, as I had feared in an earlier article before the CJRS was announced.
I have also been advising both tenants and landlords in these challenging times. Whether acting for one or the other, my advice has been straightforward. The Covid Act has taken away the ability of a landlord to exercise penalty clauses in commercial leases for the next three months. There is provision to extend this period if necessary. This leaves the parties with one way to progress matters and that is frank and open dialogue. Both must play fair. The Governments strategy works, so long as the landlord shows leniency to tenants in difficulty but it also requires the tenant and where applicable, any guarantor, to also play fair. Tenants and guarantors on leases should pay where they have the ability.
I have contacted banks on behalf of clients asking that we “down arms” for a period and pick the fight back up once we are in a better position to make firm and achievable settlement proposals. Local banks have again stepped up to the mark and are playing fair by rapidly agreeing holidays and standstill periods of around three months to allow the dust to settle.
The Government also announced this past week that it intends to relax insolvency legislation around Wrongful Trading. It plans to introduce a simplified scheme of moratorium without the company having to actually enter Administration. This recognises that many successful businesses could be killed off in this crisis simply due to a short term cash shortage from an ability to trade in any way, never mind trade in a reduced capacity. Directors will be able to seek crisis loans in situations which might otherwise see them in breach of their Director Duties and the insolvency legislation, for taking credit and thus getting further into debt at a time when the business might technically be insolvent. The Government certainly wants to be seen to play fair on this but likewise in actions and decisions taken, Directors must reciprocate.
The one thing that seems clear to me throughout this dire situation, is that if we are to have any hope of riding out this crisis and not falling into a deeper recession than a decade ago, fair play is key.
Otherwise then I suspect our courts will re-open to a busier timetable than ever. To avoid that happening we must keep our minds open to dialogue and make use of professional advisers where necessary to assist.