In a time of such uncertainty it may feel counter intuitive to be focussing on the future, however taking time to secure your business as we approach the possibility of lockdown restrictions lifting could be time well spent.
With this being high priority on the Governments agenda, our Company and Commercial team have put together a series of key issues to consider.
Terms and Conditions
If you are a business that supplies goods and/or services you will be used to trading on your standard terms and conditions, however you may have found that whilst they are comprehensive and were working well for you previously, they have not met the challenges of Covid-19.
One of the risks highlighted by the Government is a ‘second wave’ of the current pandemic. If your existing terms and conditions do not currently contain a force majeure or material adverse change clause, including one may be wise. Whether it will apply to a further wave of this pandemic, or any future ones, will broadly depend on how the clause is drafted.
Where a contract term is weighted heavily in favour of one party this may fall foul of the Unfair Contract Terms Act 1977 (where both parties are businesses) or the Consumer Rights Act 2015 (where one party is not a business).
It would be very surprising if you had not had cause to look at your refund and cancellation policies as a result of Covid-19. Whilst your terms may give you the right to retain deposits and/or your customers the right to cancel, being pragmatic and understanding of your customers’ circumstances and considering other options such as postponement or amendment are likely to serve you and your business well going forwards.
The restrictions imposed by the Government have seen a substantial increase in businesses diversifying and moving their operations online. This type of trading requires specific terms and conditions to ensure they comply with distance selling and data protection regulations. It is likely that this trading model will continue to be popular once the restrictions are relaxed, so it is crucial that your terms and conditions reflect any changes to the way your business operates currently, and in the future.
We all have those jobs at the bottom of the list that never quite make it to the top because of the everyday demands of running a business; Lockdown may be the perfect time to undertake some corporate housekeeping and take stock of your business and the way it operates to navigate the challenges of the post Covid-19 economy.
If you are a sole trader or partnership you may have found that lack of a corporate structure is a concern due to the potential unlimited liability. Incorporation as a limited company may give you both greater certainty and flexibility going forwards.
Restructuring and reorganisations of companies can be an efficient way of separating elements of the business to achieve future goals, such as a sale of part of the business, review of an underperforming element of your operations, or focus on your core offering. Demergers are often used to split distinct parts of a business, however, careful planning and appropriate professional advice is key to ensure the elements of business being separated end up where you want them to be and that there are no adverse tax implications. Restructuring can also be a good way of reducing costs and streamlining your operations making your business more cost effective and profitable.
Other advantages of restructuring are, for example, creating subsidiaries and dividing the business between them meaning staff with specific skills are utilised to their best effect, ringfencing assets from what may be riskier elements of your business, or consolidating debts to free up cash where it is most needed.