With the rapidly changing impact of COVID-19 and the associated government responses there are several legal issues which businesses need to consider. In addition to looking after the health and safety of your staff, these include:
• Financials: If you have not already, do your cashflow forecasts now. Consider if you may be looking at a breach of a lending arrangement and/or the necessity of potential insolvency or restructuring. Talk to your accountant and lawyer before you talk to your bank/financiers. Lenders may allow repayment holidays or refinancing of debt. If you are a shareholder or sole trader looking to inject funds into your company or trading entity, think about the advantages of taking security for such funds. Most importantly, monitor your debtor ledger on a day-to-day basis.
• Contractual arrangements: Pull out and review your contracts, employment agreements terms of trade and leases. Can you continue to comply with your contractual obligations, can your supplies/customers? The important provisions of these documents will be cancellation/termination, force majeure/frustration and payment/deposit clauses. Talk to those you do business with. Do you need to talk to your landlord?
• Insurance: Review your business insurance, do you have cover under business interruption, travel insurance or any other policy?
• Corporate Governance: Good governance remains vital for organisations and directors need to act on the information they have to date and monitor their businesses closely. Meet often, keep open lines of communication, take an active role in monitoring cashflow and ensure the board is re-forecasting/checking assumptions on a regular basis. The hard reality is that boards must consider their director duties and ensure they are not recklessly trading. If you continue to trade when the company is insolvent, this exposes the directors to personal liability for the company’s debt.
• Tax and Government Assistance: Talk to the Inland Revenue Department (about the tax changes available to free up cashflow, including a provisional tax threshold lift, the reinstatement of building depreciation and writing off interest on the late payment of tax) and apply for the government wage subsidy scheme.
• New Ideas: If appropriate for your business think about new ways you can get paid including possibly in advance. Review your terms and conditions, consider offering incentives for payments upfront or in stages rather than at the end of a project. Ensure you have the ability to receive payment by credit card. Is there something else you can offer your existing customers? Now is the time to make them customers for life, perhaps provide some services for free, throw in the room upgrade or something to thank them for spending money with you.
TODD & WALKER Law has a dedicated Business Team of capable lawyers. Principal Graeme Todd was in practice in 1987 during and after the share market crash. Some of the clients he assisted through that crisis remain clients today.
We are passionate about the communities we live and work in and we want to help in whatever way we can.