April 2020 - MLP Law

MLP Law – COVID-19 – Frequently Asked Questions

Answers to some of the frequently asked questions we’re seeing across our practice areas.  If we can help and you need advice tailored to your particular circumstances, please get in touch.
 
As this is a fast moving area the advice is correct as at 24th April 2020. 

  1. Can I force employees to take annual leave during a period of furlough?
  2. What factors should I consider in deciding which employees to furlough?
  3. Can my employees on furlough leave do any work or training?
  4. What is Force Majeure and does it apply to my supplier or customer agreements?
  5. Do I need to agree a variation to an agreement in writing?
  6. Our business is struggling to pay rent as a result of the Coronavirus outbreak.  What options do we have?
  7. I have heard that our landlord cannot evict us from our business premises at present due to the Coronavirus outbreak.  Is this correct?
  8. Can I take a payment holiday from each of my suppliers?
  9. Why can’t a will be witnessed via video-conferencing or Skype?
  10. Can I still apply for a grant of probate during the coronavirus lockdown?

Employment FAQs 

Q. Annual leave – can I force employees to take annual leave during a period of furlough?

 Although the law isn’t crystal clear here, we are of the view that you can enforce annual leave during furlough, as you could under normal circumstances.  It should, however, be paid at 100% (rather than the 80% of normal salary associated with furlough), so employers should top up furlough pay during any annual leave to full pay.

To enforce annual leave you must provide double the amount of notice compared to the leave i.e. 1 week’s annual leave will require you to give 2 weeks’ notice to the employee. 
Employees are also to be allowed to carry over up to 4 weeks of their annual leave entitlement for up to 2 years.

Q. What factors should I consider in deciding which employees to furlough?

 It would appear that employers are being given huge leeway in determining which employees to furlough.  Provided an employee meets the criteria of the scheme (primarily requiring that they were on your PAYE system on or before 19 March 2020) and your reasons for choosing that employee are not discriminatory, you can tailor the benefits of the furlough scheme to suit the needs of your business.  It should be noted that records relating to employees who are furloughed should be kept for 5 years.

Q. Can my employees on furlough leave do any work or training?

 You can ask employees to help with any questions they have from team members still working. You can’t ask them to do anything that could give financial gain to the company. You can ask your employees to attend training sessions.

Corporate and Commercial FAQs 

Q. What is Force Majeure and does it apply to my supplier or customer agreements?

 A clause that allows the contract to be temporarily suspended in certain circumstances, isn’t always labelled force majeure though usually is.  Whether you have the right to exercise the force majeure clause in a particular circumstance is very strictly dependant on the exact wording of the clause.  Some refer to acts of government (or can be deemed to include acts of government) and even epidemics and pandemics. Some don’t.  If a force majeure clause failed to mention pandemics /epidemics as a force majeure event, then it is arguable that the force majeure clause would not apply. There is likely to be much discussion as a result of the Covid -19 pandemic on the construction of force majeure clauses: for instance  is a pandemic an Act of God? Our advice is that it is unlikely Corona virus will be held to be an act of God.  Unable to obtain a delivery of material due to borders closed and government enforced lockdowns can be said to be an act of Government.  In any case, a party relying on force majeure event must be subject to circumstances beyond its control  in which  no reasonable steps could have been taken to avoid or mitigate the supervening event e.g. a failure to follow COVID-19 government guidelines could be an example of a party not taking reasonable steps to mitigate risk of the supervening event. We have also advised clients to Consider Frustration (a supervening event affects the performance of the contract or the reason the contract had been put in place) and Supervening Illegality (a contract is discharged if its performance becomes illegal by English law) 

Q. Do I need to agree a variation to an agreement in writing?

 You’ve agreed, new delivery dates, timescales, pricing or the suspension of service for a month or two (subject to review).  How do you record and ensure that is formally recorded and binding on all parties?  This will depend on the terms of the original agreement.  Many (most) Agreements require any variations to be agreed and signed in writing by the parties.  In most cases if the parties behave and agree in accordance with the agreed variation then they will be deemed in high value / high risk contracts the variation would need to be put in writing and signed.  For most agreements, an agreement via email and or electronic signature will be enough.  Deeds and signatures required to be witnessed must still observe the rules of “being in the presence of”.   For most documents (except Wills and Property Contracts) doing this via video will be acceptable.  Particular formalities need to be observed for Wills and certain Property Contracts to be signed and witnessed.  We’ve attended a number of clients to witness documents using social distancing, glass doors and windows as appropriate and practical to keep all involved safe.  

Property and Financial FAQs

Q. Our business is struggling to pay rent as a result of the Coronavirus outbreak.  What options do we have?

 Under most leases, rent will continue to remain contractually payable in the same manner as before the outbreak.  It is also highly likely that contractually a landlord will be entitled to interest on unpaid rent under a lease.  If you are struggling to pay your rent, speak to your landlord or their agent at the earliest possible opportunity.  We are seeing a lot of landlords and tenants working together to come to a compromise which has benefits for both parties.  This could include extending the term of the lease or restructuring the rent payments in various ways.  The tenant benefits from breathing space due to lockdown restrictions and the landlord has the benefit of a tenant remaining solvent, paying rent and receiving what is owed to them under the terms of the lease.  We would advise that any terms which are agreed by a landlord and a tenant are properly documented in writing. 

Q. I have heard that our landlord cannot evict us from our business premises at present due to the Coronavirus outbreak.  Is this correct?

 Section 82 of the Coronavirus Act 2020 provides that a landlord cannot forfeit a lease (ie:  bring the lease to an end and evict a tenant) due to the tenant not paying rent at present.  Under the legislation, rent will include the annual rent, service charge, insurance rent and any other sum the tenant is liable to pay under the lease. This will remain the position until 30 June 2020, although the government will continue to monitor this timeframe as the outbreak develops. As always, there are exceptions to the rules and tenants on short leases of less than six months will not benefit from the protection afforded under section 82 of the Coronavirus Act 2020.  Landlords also do retain their other options available to them other than forfeiture, such as serving a statutory demand and litigating for the unpaid money owed.  As outlined above, we would advise you to speak to your landlord or their agent at the earliest possible opportunity to agree a compromise which works for both parties. 

Q. Can I take a payment holiday from each of my suppliers?

 In our experience most suppliers are happy to help set up a payment plan to lengthen out original payment agreements but they are not obliged to do this.  It is common and the choice is between helping and preserving the relationships where there has genuinely been a downturn in revenue for the customer(s) and protecting their own cash revenues.  Some companies are obliged to waive some enforcement options and rights such as landlords (though see above on other ways landlords may enforce the rent debt), Finance companies and Business Rates.  Even if you are not in a group benefiting from the council grants or rate reliefs it is worth asking the council to defer rate payments.

Wills, Trusts and Probate FAQs 

Q. Why can’t a will be witnessed via video-conferencing or Skype?

 There is currently no law that says witnessing a signature via video-conferring or Skype will count as “being in your presence”.  Although electronic signatures on contracts or deeds done through video or Skype are legally valid, witnessing a will is the exception.

Under the Wills Act 1837, it is not permitted to witness a Will via video conferencing facilities as both witnesses must be physically present. However, they may socially distance themselves from one another during the process as long as they are present and have clear sight of the signing process.

Q. Can I still apply for a grant of probate during the coronavirus lockdown?

Yes, you can still make applications to the probate registry during the lockdown period. With social distancing measures in place across the country, solicitors are no longer able to offer face to face appointments, however, these matters can be dealt with by telephone and postal communication.

Our specialists are still able to offer you advice and deal with your enquiries under the current circumstances. We can take instructions over the telephone, documents can be sent by post and we can also undertake a video-conference.  We will talk you through the process and what is required to get your application sorted as quickly and safely as possible. Once the application has been submitted the Probate Registry will action it and once granted, will send the sealed grant of probate to you by post.

You can then proceed to dealing with the administration of the estate upon receipt of the grant. This includes, closing accounts and collecting the funds from the estate, selling the property and paying liabilities.

If you have any questions or queries please here contact us on 0161 926 9969, or hello@mlplaw.co.uk.

The Coronavirus : What happens when there is no Will?

The global pandemic, Covid-19, has led to an increased focus on Wills and estate planning as more people take time to consider what would happen to their estate if they passed away. 

At MLP Law, we have already adopted measures to offer alternative arrangements for our Will writing service such as video-conferencing and telephone-based service to ensure you can create a Will or update an existing Will during this unprecedented time. However, it may not be possible in all circumstances for a new Will to be prepared, so we need to understand what happens to the estate where someone dies without making a Will.

In these circumstances, the estate is distributed in accordance with the intestacy rules (a flowchart of the intestacy rules can be found at the end of this blog). The rules determine who should inherit from the estate of the deceased based on the surviving family members. The rules do not take into account personal relationships and who is at need but simply look at the family connections and bloodline.

The rules will enforce the division of your estate in a fixed order depending on your surviving relatives. In the scenario where the deceased leaves a surviving spouse or civil partner and has children, the surviving partner will receive the statutory legacy of £270,000 plus all personal possessions of the deceased. Anything above the statutory legacy is divided in two, half of the remainder passes to the spouse absolutely and the other half is split equally between any surviving children at age 18.

Unmarried partners and step-children have no automatic right to benefit from a deceased’s estate and this can cause numerous issues following death, particularly given the increase in cohabitees and blended families.  However, these rules can be overridden if all of the rightful beneficiaries under the intestacy rules agree to making a post-death variation.

What is a post death-variation?

A post-death variation is created by deed, commonly known as a ‘deed of variation’. This deed enables beneficiaries of an estate to alter a Will or the Intestacy rules, when all entitled beneficiaries agree to vary the distribution.

The deed allows them to redirect their entitlement to another person or organisation, without suffering tax consequences. The effect of the deed is that the terms of the document are regarded as being written back, as if the gift had been made by the deceased themselves.

To be effective for inheritance tax, the deed must be made within two years of the death and signed by all beneficiaries relinquishing or altering their benefit.

There are several reasons why variations are made and used as an effective form of estate planning, post-death. They allow for making distributions equal between beneficiaries, providing for someone who would otherwise have been left out (cohabitees), settling disputes and reducing the amount of inheritance tax payable.

Given the unprecedented circumstances we find ourselves within and the increase in concern regarding Wills and estate planning, this may be the only option available where a individual is unable to update their wishes prior to death.

How can MLP help me?

If you’re thinking about making or updating your will or require assistance with post-death variations, please get in touch with our Wills, Trust and Probate team who would be happy to have a chat with you to discuss the best way to do this, whilst following all the guidance and protocol on staying safe during the coronavirus.

Please contact either Jane Hunter on 0161 926 1542 janeh@mlplaw.co.uk or Samantha Kennedy on 0161 926 1514 samanthak@mlplaw.co.uk.

The Intestacy Rules explained

Coronavirus Job Retention Scheme – Portal Open

The Coronavirus Job Retention Scheme portal, allowing employers to reclaim up to 80% of a furloughed employee’s salary from HMRC, opened at 5:30am.  It can be accessed through the Government Gateway.  Early reports indicate that it is fairly easy to use, with the relevant guidance to be found on the HMRC website.

The Employment Team at MLP Law can help you with any questions or queries in relation to the Coronavirus Job Retention Scheme. If you require any assistance, please contact us on 0161 926 9969, employment@mlplaw.co.uk or on our employment law-specific Twitter account @HRHeroUK.

Update – Further guidance on the Coronavirus Job Retention Scheme

The Chancellor, Rishi Sunak, has recently announced that the Coronavirus Job Retention Scheme is to be extended for an additional month, allowing employers to furlough employees until the end of June 2020.

For more information and guidance on the Coronavirus Job Retention Scheme, read our previous blog linked here.

The Employment Team at MLP Law can help you with any issues raised in the update. Just contact us on 0161 926 9969, employment@mlplaw.co.uk or on our employment law-specific Twitter account @HRHeroUK.

Coronavirus Business Interruption Loan Scheme

Following the Chancellor’s budget measures aimed at this period of disruption due to COVID-19, the Coronavirus Business Interruption Loan Scheme (CBILS) became live on 23 March 2020.  This aims to support small to medium-sized enterprises (SMEs) in these uncertain times.

Key Features

The government will provide lenders with a guarantee of 80% on each loan, aiming to give lenders confidence in continuing to provide finance to SMEs.

The Scheme will support loans of up to £5 million in value.

Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.

The government will grant payment to cover interest and initial fees for the first 12 months.

A borrower always remains 100% liable for the debt.

Eligibility

You are eligible to apply for the scheme if:

  1. Your business is UK based; and
  2. You have a turnover of no more than £45 million per annum.

Note:

  • self-employed people may also apply.
  • the following trades and organisations are not eligible to apply: banks, building societies, insurers and reinsurers (insurance brokers are eligible); the public sector including state funded primary and secondary schools; and employer, professional, religious or political membership organisations or trade unions.

You are eligible to get finance under the scheme if:

  1. Your borrowing proposal shows that, were it not for the current pandemic, you would be considered viable by the lender under normal lending requirements; and
  • You can show that the provision of finance will enable the business to trade out of any short-to-medium term difficulty

Note:  certain businesses including fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.

Applying

All major banks are offering this scheme.  To apply, you should talk to your bank or one of the 40 accredited finance providers (not the British Business Bank) as soon as possible, to discuss your proposal.

Please also see our blog Coronavirus: Support for SMEs

For help and advice, please speak to our Corporate and Commercial team on 0161 926 9969 or email corporate@mlplaw.co.uk.     

Sole Directors and the Coronavirus Job Retention Scheme

Following the Chancellor’s budget measures aimed at this period of disruption due to COVID-19, the Coronavirus Job Retention Scheme was introduced.  Please see our blogs on the Coronavirus Job Retention Scheme for further details on this.

This blog focuses on small businesses with a sole director and/or a sole shareholder and whether the Coronavirus Job Retention Scheme (CJRS) can apply to them.

In a sole director/shareholder business, the director will usually take some (often limited) remuneration through PAYE and take the remainder as dividends. 

Can a sole director make use of CJRS?

The answer is yes, they can, but this subject to the rules of the scheme and the provisos detailed below:

  • this can only be based upon their PAYE salary and not any sums they take in dividends
  • the director must stop working in the business
  • they can continue to do their statutory duties as a director, but cannot do any revenue generating work (For further details on statutory duties of directors, please see our blog on Directors’ Duties and Responsibilities.)
  • both full-time and part-time directors can apply under the scheme
  • it is advisable that the Company write a letter to the director advising them that they are being furloughed, so there is a formal paper trail

Conclusion

A sole director can apply under the CJRS, subject to the provisions of the scheme and the additional points noted above.  They can continue to do their statutory duties as a director, but cannot do any revenue generating work for the company.

For help and advice, please speak to our Corporate and Commercial team on 0161 926 9969 or email corporate@mlplaw.co.uk.     

Further guidance on the Coronavirus Job Retention Scheme

Very early on Saturday morning (4 April 2020), further Government advice on the Coronavirus Job Retention Scheme (”the Scheme”) was published on the Government website – a link to the latest guidance can be found here.

The updated guidance offers some clarification on key aspects of the Scheme, but remains silent on other questions being asked by employers.

A note on the key updates is set out below:

  • Employees are able to commence new employment with new employers and remain on furlough from their existing employers, although this is subject to their employment contracts not prohibiting this (which could be waived by an employer). This perhaps offers a windfall to furloughed employees, enabling them to receive 80% pay from their existing employer and 10% pay from their new employer.
  • Furlough pay should now include 80% of commission payments, as well as basic salary, albeit subject to the overall cap of £2,500 per month. Non-monetary benefits, such as private healthcare or cars are not to be included.
  • Company directors can be furloughed and can still perform their statutory duties, but no other work. For further details on statutory duties of directors, please click here to see our blog on Directors’ Duties and Responsibilities.
  • Employees can be furloughed multiple times, which means they can be furloughed, brought back and then furloughed again, provided always that each period of furlough leave lasts for a minimum of 3 weeks.
  • Employees must provide written notification to employees when furloughing them and must keep a record of the notification for at least 5 years. This is presumably an anti-fraud measure, enabling HMRC to request records proving employees were in fact furloughed. HMRC has already made it clear that it reserves the right to audit all applications made under the Scheme.

The updated guidance is still unclear on the issue of holidays during furlough leave, specifically whether employees can take, or be made to take, holidays whilst they are on furlough leave without disrupting their furlough leave and, if they can, how the employees should be paid for such holidays.

We hope further guidance will be forthcoming in subsequent days and weeks to address some of the outstanding issues for employers. As soon as we learn more, we will make sure you are kept up to date.

The Employment Team at MLP Law can help you with any issues raised in the update. Just contact us on 0161 926 9969, employment@mlplaw.co.uk or on our employment law-specific Twitter account @HRHeroUK.

UPDATE: Coronavirus Business Interruption Loan Scheme

The Coronavirus Business Interruption Loan Scheme (CBILS) became live on 23 March 2020.  See our blog Coronavirus Business Interruption Loan Scheme.

Following initial difficulties, with many small firms say they have struggled with onerous eligibility criteria for the government-backed loans, which are being issued by high street banks and other lenders, the scheme has since been updated to include the following:

Applications will not be limited to businesses that have been refused a loan on commercial terms

So the requirement for companies to have first tried to get a normal commercial loan elsewhere, will be dropped extending the number who benefit.

Banks will be banned from asking company owners to guarantee loans with their own savings or property when borrowing up to £250,000

For loans over £250,000, personal guarantees will be limited to just 20% of any amount outstanding on the CBILS lending after any other recoveries from business assets. Lenders were already prohibited from asking business owners to put their house on the line, but these changes will provide further reassurance regarding personal assets during this difficult time.

Larger firms with a turnover of up to £500m will also be eligible for more help – with state-backed loans of up to £25m available to firms with revenues of between £45m-500m under the Coronavirus Large Business Interruption Loan Scheme (CLBILS)

The Chancellor has pledged £90 million of business interruption loans approved for nearly 1,000 firms and £1.9 billion corporate finance provided to firms hit by COVID-19.

However, SMEs need to be clear that they are still loans. Companies wishing to take them out will be 100% liable for the debt and the government has not capped the interest rate banks can charge even though banks are able to borrow at close to 0%.

The loans may now be available to more businesses but what is not clear is to what extent firms want them.

For help and advice, please speak to our Corporate and Commercial team on 0161 926 9969 or email corporate@mlplaw.co.uk.