New updates published today suggest that the government backed loans and grants are not reaching small businesses. Regardless of the direction given to the high street banks by the government to be flexible and relax the normal lending criteria to shore up fragile businesses prevent the wholesale shut down of businesses that are salvageable. The BBC has today announced that between 800,000 to one million businesses are in the position of not being able to cover rent, salaries or pay their outstanding invoices. The situation is particularly difficult for businesses that trade in a cross-border environment, particularly as it is possible that the rules and obligations that apply in the UK may not be entirely obvious to an Italian or Spanish company that has set up a business in the UK. There are a number of significant differences relating to business law and how it impacts on the directors of a company in the UK compared to Italy and Spain.

The Chancellor of the Exchequer, Rishi Sunak, announced as recently as last month that a Coronavirus Business interruption loan was available to “any good business in financial difficulty” under very favourable terms. It seems that the scheme is not quite as straightforward as first expected. There are many anecdotal stories of business owners being asked to sign personal guarantees meaning that in the event of business failure all their personal assets can be attacked, including their main home. Banks have been accused of not acting ‘within the spirit of the rules’ and the length of time alone before financial help arrives will be enough to close some businesses.

Legal Law Limited’s corporate and commercial lawyers recognise the difficulties faced and can advise on alternative steps that may be able to be taken to help a business survive. The government has brought forward the 2018 planned restructuring framework modelled on the far more insolvency friendly Chapter 11 in the United States. The proposed measures that the government has fast tracked include a moratorium for companies, giving breathing space from creditors enforcing their debts for a short period of time whilst a rescue or restructure is sought; protection of your company’s supplies to enable you to continue trading during the moratorium; and binding creditors to any new restructuring plan regardless of whether they do not agree.

The back-dated suspension of the wrongful trading rules is designed to protect the directors and the business from the sudden and unexpected consequences of the coronavirus pandemic which have placed directors in the position of inadvertently trading whist insolvent. However, it should be made clear that this is not a rogue’s charter, fraudulent trading and misfeasance, are to remain in full force to guard against misconduct by directors. Also, any business that is very close to zone of insolvency must still consider the interests of your creditors over those of shareholders.

There will be few businesses across the globe that will not feel the effects of this exceptional crisis. Legal Law Limited’s corporate and commercial lawyers are equipped to assist your business find a way through the challenges and problems that the coronavirus pandemic has delivered to the economy and can rapidly pull together a team of skilled experts including those in our offices across the UK, Italy and Spain who are adept in assisting businesses and also including other professionals with expertise in other aspects of restructuring, to provide comprehensive assistance for a wide variety of businesses.