COVID-19: Force majeure, cash flow and people – three issues businesses need to manage

Here are three issues our clients are raising as they manage the impacts of COVID-19

23 March 2020

As the UK’s response to COVID-19 changes daily, we are continually receiving questions from clients.

Burges Salmon represents a wide range of UK and international businesses: large and small, publically and family owned, private and public sector, as well as private individuals and families.

We are therefore developing a substantial bank of first-hand insight into the subject. The following is a selection of the types of questions we are being asked by clients, which we thought would be helpful to share.

Of course the answers to each question usually depend on the individual circumstances of the organisations involved. If you would like to discuss your circumstances, or have any further questions, please contact a member of the Burges Salmon COVID-19 Response team, whose details are at the end of this update.

There are three principle areas of particular urgency:

1) Contracts and insurance: What does force majeure actually mean in practice?

This is by far and away the most-asked question by clients. We are being asked to look into:

  • Uncertainties over specific contracts;  
  • What is covered/not covered by individual insurance policies; and 
  • Pipeline projects that could be impacted, and the obligations of individual parties involved.

2) Cash flow

With a global recession impending, cash is king. The consensus from financial institutions is that the global economy is in far better health and has a more robust structure than 2008, so this will hopefully be short-lived. However, the social restrictions being introduced worldwide are unprecedented, certainly in recent times. We are therefore discussing with clients:

  • How they can review or renegotiate their payment obligations and agreements with suppliers and lenders;
  • What restrictions they must be aware of, or have temporarily lifted, to enable them to change their business model and create new sources of revenue;
  • How robust and flexible is their supply chain;
  • The implications if their suppliers will be reliant upon government-backed financial support – who will be eligible, what are the terms and timescales?; and 
  • The impacts of international travel bans on companies’ ability to deliver their products and services.

3) People

The care and wellbeing of your people will be critical to ensure your business is fit for the future. However, the short-term is providing numerous challenges and we are advising clients on the following:

  • Adapting ways of working, communicating with staff and the potential issues with home-working;
  • How employers deal with the impact of school and nursery closures, for example, what types of leave can be taken and what other options are available, balancing the need for flexibility with the needs of the business;  
  • What an employer’s obligations are with regards to employees self-isolating and sickness pay (including both SSP and contractual sick pay); and
  • How employers react to changes in work demand including varying working arrangements and hours and managing potential lay-off, short-time working and redundancy issues.

Government support

The Gov.UK website is the best source for direction on government support. Of course there is a lag between announcements of policy and the detail of eligibility and next steps, but it will be regularly updated.

Look out for news of:

  • Wage subsidies
  • SMEs entitlements for recovering Statutory Sick Pay
  • Business rates recovery for retail, hospitality and leisure businesses
  • Corporate Financing for larger businesses
  • HMRC Time to Pay Scheme for tax affairs

Get in touch

 The Burges Salmon COVID-19 Response team is chaired by our Senior Partner, Chris Seaton. Our contacts for respective areas of expertise are:

 This article was written by Sian Edmunds, Natalie Jeffries and Matt Evans.

Key contact

Sian Edmunds

Sian Edmunds Partner

  • Food and Drink
  • Partnership Disputes
  • Private Wealth Disputes

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