Striking the balance between legal and commercial realities

Emma Stevens, a Partner in the dispute resolution team at Coffin Mew , discusses her firms advice to organisations during the COVID-19 pandemic

The ongoing Coronavirus pandemic and its repercussions are hot topics and there are many unanswered questions about what the long-term effects of the current challenges and restrictions will be on both society in general and the economy.

In the UK the implementation of "lockdown" measures by the UK Government, which came with relatively little notice, meant that many businesses have faced immediate and significant challenges to their day-to-day operations. For many businesses, their existing Business Continuity Plans made no real provision for a pandemic lockdown scenario in the UK - as it is not an issue that the UK has ever faced previously.

The UK Government guidance has also taken some time to get up to date with practical reality, and is still behind in some cases, and this has impacted on businesses' management of the situation.

How G4S has dealt with mass remote working during the pandemic

We work with clients across a wide-range of different sectors and the impact of the ongoing restrictions differs from case to case. In some areas, the impact has been remarkably positive; for example for some of our clients in the logistics sector, they are still open and operating, but have had to take swift action to ensure that they manage staff activity in order to operate safely. In some areas of online retail our clients are seeing an uptake in business volumes; some clients in computing technologies have seen large spikes in software sales as a result of the lockdown and clients managing hardware installation and/or supply have been similarly busy as a result of the myriad of businesses who have had to take urgent action to mobilise their workers to agile working.

For many, unsurprisingly, the pandemic lockdown has had a much more negative impact; of those businesses we have seen a number of key issues arise including: employee issues in relation to managing staff remotely and properly considering and communicating furlough opportunities; problems with supply and access to products and/or components, either in sourcing materials altogether, or in suppliers having difficulties in keeping to original timescales; clients have had issues with cash flow in recovering overdue payments from third parties; and, in some circumstances, with managing their own outgoing payments and rental commitments.

These are uncertain times and we, like everyone else, are finding that in some cases the usual advice for solving problems simply does not fit with the practical circumstances. As an example, in these pressured times, the court system is even more overloaded than usual and so the usual threat of proceedings to force a payment is not always effective due to the reality of the timescales which that route could involve. It is always hugely important to be aware of your legal position and rights; however, where there is a practical commercial resolution available to pursue with the benefit of that understanding then this is always something worth considering.

Our key recommendations to all businesses during this difficult time are:-

1. Employment/staffing - consider whether there are any Government Schemes available which would assist you with managing employee costs in the event that your business is affected and/or you are unable to operate. Consider whether your policies on remote working and GDPR compliance in particular are sufficiently clear and whether any of your policies and processes need updating to reflect any new ways of working introduced.

2. Contract management - review your contractual obligations. Where you have concerns regarding performance consider whether alternative timescales can be agreed and/or whether there is a sensible practical resolution which may suit both parties. If there is, then where you are the party who is unable to perform, and/or you are proposing accepting something less than your contractual entitlement, then you should ensure that any discussions to reach an alternative solution are on a "without prejudice" basis initially and, once agreed, ensure that any decisions are properly recorded in line with your contract.

3. Asset/cash flow management - it will be necessary to think further ahead than usual regarding projected incomings and outgoings. Consider whether there are opportunities to negotiate outgoings during the lockdown period, for example by agreeing a rent holiday in respect of any property and/or by agreeing alternative payment timescales for any sums which might be payable to manage the assets which you do have.

4. Managing incoming debts - in some cases there may be old debts owed to your business which have not yet been paid as a result of the lockdown. There are a number of the usual mechanisms available to pursue these; however, it may be worth considering whether a commercial settlement can be agreed to avoid the need for court or insolvency proceedings to be pursued as these processes often come with additional costs which may not be recoverable.

5. Restructuring opportunities - in the event that you are experiencing difficulties with managing debts and/or cash flow then consider seeking early advice from an insolvency practitioner and/or specialist solicitor as there may be mechanisms available to assist with cash flow management, e.g. invoice financing, or debt management, e.g. entering in to a CVA, and there may be restructuring opportunities to avoid insolvency and manage the business in a different way.

The overall message is to take early steps to ensure that you understand your position and then to consider whether there are alternative practical options which would assist you as, in most cases, addressing issues head on will allow for early management and a wider range of options than trying to manage matters retrospectively.

Emma Stevens is a Partner in the dispute resolution team at Coffin Mew