As we all adjust to our new lives under lockdown and social distancing, unprecedented pressure continues to mount on businesses internationally. Among the most notable are the challenges facing the fashion, luxury and lifestyle sector. With the rules changing as quickly as the timeline predictions, businesses face seemingly impossible questions with few or no answers.
To help protect and strengthen your business, we have put together a Covid-19 need-to-know checklist tailored to the issues and questions most important to you. This covers your employees, finances, brand and supply chains, real estate, managing risk, and your duties as a director.
Your employees
We know that for so many of you, your employees are what make your company special and, as a result of the pandemic, a host of questions have arisen about your obligations as employers to your employees while balancing the needs of the business to survive.
See our best practice checklist including a summary of our key recommendations to tackle those difficult coronavirus-related employment questions.
For those of you who need to consider furlough leave as a means to avoid redundancies – see our FAQ guide here.
Your financial concerns
Is your business one of the many companies operating in the fashion, luxury and lifestyle sectors which have been affected by the Government’s unprecedented restriction to close all non-essential business premises effective from the 23 March 2020?
If so, consider the wide range of supportive measures put in place to help your business including the Coronavirus Business Interruption Loan Scheme (CBILS). It is worth considering what the CBILS offers, whether it is appropriate for your business and, if so, does your business meet the eligibility criteria. For further information read our corporate team’s article on the CBILS here.
Have you assessed your current borrowing and are you worried about scheduled drawdowns? Our banking and finance team consider whether the outbreak of Covid-19 could be a material adverse change that lenders could rely on.
A much welcomed “business rates holiday” will be key to many fashion, luxury and lifestyle businesses. Learn what premises will be eligible and how this will be provided. You can also find details on what payments are covered by the Government grants for employee costs, how to delay your next VAT payment, and what other actions you could take as a business to retain and incentivise your staff.
Your brand
Adverse PR resulting from steps taken as a result of COVID- 19 causes long-lasting damage to your brand’s reputation. You should be considering how to adapt the business’s social media strategy and PR to be sensitive. See our guide to this here.
In addition, the UKIPO, EUIPO and WIPO have put measures in place to help brand owners meet or postpone deadlines during this period. See our guide on this here.
Your supply chains
Following the recent Government restriction requiring all non-essential business premises to close, your business may be facing issues such as whether it is bound by law to fulfil existing customer orders; how its e-commerce channel may be affected; whether it can extricate itself from now disadvantageous contracts; and whether there is a risk that its customers or suppliers may do the same. See our guide to these issues here.
Your real estate
Whether this comprises your office headquarters or a number of leased premises, the new Coronavirus Bill brings some comfort to tenants including restrictions on termination by re-entry or forfeiture proceedings for non-payment of rent.
Follow our property team’s six guidelines and practical considerations aimed at both commercial landlords and tenants. You can also find more detailed advice for tenants on rental obligations and the ban on forfeiture of commercial premises.
Your compliance and managing risk
For many FLL businesses, an obvious place to start in managing business risk is insurance. Businesses hold numerous insurance policies to protect themselves against the various risks arising from their day-to-day operations. For instance, public, product, and employer’s liability protect against third party claims for damage to property or personal injury. You may also have purchased policies to cover travel, event cancellation or business interruption.
At an individual level, directors and officers may have D & O insurance against claims from employees, regulators, clients, investors or shareholders. For more information, see our review of how the coronavirus will be responsible for a steep increase in insurance claims.
But there will also be risks to your business that are not covered by insurance. To see what risks might affect you, and what you can do about them, see our guidance on identifying and managing risks in a global pandemic.
One of the key questions facing FLL businesses is whether they can continue to operate as an “essential service”. While businesses and venues have been closed, online retail has been authorised to run as normal. However, many have turned their resources to the production of hand sanitiser and medical products to aid in combatting the coronavirus.
For guidance on the regulatory considerations relating to these products, see our essential luxury article written by John Doherty and Emma Davies.
Your duties as a company director when facing insolvency
For businesses across the fashion, luxury and lifestyle sector, most can and will avoid insolvency. However, this will require prompt and decisive action, tough decisions and making full use of the tools available.
Under UK insolvency law, in the event that you - as the company director(s) - know or ought to know that there is no reasonable prospect of avoiding insolvent liquidation or administration, you must consider your next steps very carefully.
Ordinarily, in such circumstances, if a director continues to trade (or fails to act) without taking every reasonable step to minimise potential losses to the creditors, they can be required to personally contribute to the company’s debts or liabilities. However, as part of the Chancellor’s “whatever it takes” response to combat the economic effects of the coronavirus, the Government has proposed suspending these wrongful trading laws for three months from 1 March 2020.
While this comes as a welcome and necessary relief for directors, the true effects of the suspension will only become known over time. Therefore, particularly in such volatile and uncertain times, understanding the risks of insolvency to you and your business have never been more important. For an in-depth look at what you need to know, see our guidance on insolvency for company directors.
In respect of facilitating emergency funding, the Pre-Emption Group (PEG) has published a statement recommending that investors temporarily consider supporting issuances of up to 20% on a case-by-case basis. This is instead of the normal limit of 5% for general corporate purposes with an additional 5% for specified acquisitions or investments, as set out in its Statement of Principles. These recommendations will remain in place until 30 September 2020. |
