Keeping Your Business Afloat Through Hard COVID Times

Holly Brewster of our litigation team looks at some of the commercial issues facing businesses during the current pandemic. For a free consultation on how we may be able to assist you, please call Holly Brewster on 01905 900919 or email Holly@bradleyhayneslaw.co.uk.

COVID-19 has had a huge impact on businesses in the UK, with many companies unable to carry on “business as usual” through lockdowns, downturns in business and all the resulting uncertainty in the market.

If you are struggling to keep your business afloat, there are several options open to you to weather this period of struggle and come out stronger on the other side.

Difficulties with suppliers

Many businesses in the current climate are struggling to fulfil their contracts with other businesses in their supply chain or may be doing business with companies which are struggling. These circumstances, exacerbated by the unique economic climate we currently find ourselves in, have the potential to lead to costly litigation between businesses – either your business could be sued for non-performance or breach of contract or you may wish to pursue another business for your losses related to them not fulfilling the terms of their contract with you.

Litigation is costly and time consuming and should be a last resort. You probably want to preserve the relationships you have built up over time with businesses in your supply chain, until life can return to normal. If you find yourself in this position, a more cost effective and proactive solution for all concerned may be for you to attempt to re-negotiate the terms of your contracts:

Renegotiation of contracts

A positive first step to take for your business, if you are struggling to honour contracts put in place pre-COVID, is to approach the people you do business with and see if you can renegotiate the terms of some of those contracts. It may be that you are experiencing supply chain issues and are unable to fulfil certain contracts in a timely manner in accordance with the terms of your existing contracts. You may be able to fulfil parts of them, perhaps with smaller volumes or changed timelines. Often, if dealt with early enough, these contracts can be renegotiated to both sides’ satisfaction. This is the perfect time to conduct a thorough contracts review for your business and this early attention could save you problems down the line and potentially avoid litigation or insolvency.

Conversely, you may be contractually bound to deal with another business who is struggling to fulfil their contract with you. They may be relieved to receive your approach to seek to amend or terminate your contract with them, if they are unable to fulfil orders/services per your previously agreed terms.

Cash flow problems

Many businesses are fundamentally sound but are experiencing serious cash flow problems due to the pandemic. Directors of these businesses need to be mindful that they do not trade while insolvent, and you may be able to take advantage of the new insolvency regime that recently came into force to work your way out of difficulty. The new Corporate Insolvency and Governance Act 2020 gives directors the ability to stay at the helm while seeking to rescue their struggling business, as well as putting in place a new moratorium on debts which has been designed to assist in the long term survival of viable businesses. Putting your business into a corporate recovery procedure may ultimately be the thing that saves it.

For a free consultation on how we may be able to assist you, please call Holly Brewster on 01905 900919 or email Holly@bradleyhayneslaw.co.uk.