Bounce Back Loans scheme for small businesses

The Chancellor has announced a new loans measure, known as the Bounce Back Loans Scheme (BBLS), which will allow small businesses to borrow up to 25 per cent of their turnover, up to a maximum of £50,000.

The BBLS will be 100% backed by a Government guarantee, unlike the Coronavirus Business Interruption Loan scheme (CBILS) and will offer an interest-free period for 12 months.

Businesses will be able to apply online via a short and simple two-page self-certification form and because the loan is entirely Government-backed it is hoped that lenders will have the confidence to offer finance without the lengthy and complex red tape associated with CBILS and other loan schemes. 

Importantly, firms applying for the new loans will only have to prove that they were viable in the past before the crisis, not that they will remain viable after the crisis.   This future viability criteria has been a major issue with CBILS. 

There remains some concern that banks will still wish to assess the latest financials through a ‘cash available to service debt’ calculation. Where there isn’t sufficient cash to service the debt then there are fears that the loan may still not be granted despite the Government guarantee. Further clarification is expected soon.

The scheme has been designed specifically for small firms, including sole traders, that require ‘vital cash injections’ to help them operate during these challenging times.    It will launch for applications from 9am on Monday 4 May and the loans will be provided through a network of accredited lenders.

The Government said that loans will be “advanced as quickly as possible” and that they will “agree a low standardised level of interest for the remaining period of the loan.”

We will keep you up to date on the application process once more is known. 

Webinar – Legal Issues for Businesses during COVID-19

OGR Stock Denton LLP would like to invite you to join our live webinar on the Legal Issues for Businesses during COVID-19

10am, Friday 1st May 2020

Zoom webinars

Join our live session where our panel of experts consider the various issues for businesses in light of COVID-19 including:

  • Enforceability of Commercial Contracts
  • Top tips for Commercial Tenants
  • Top tips for businesses to recover Debt
  • Employment issues for businesses to consider

The webinar will be hosted by Ian Pearl, who will be joined by Robert Rosenberg, Hayley Trovato and Stephen Silverman.

This interactive discussion will have an open Q&A for you to ask any questions relating to your business or personal situation.

If you would like to join this webinar, please email Ali Kabani:

 020 8349 5514

Webinar – Impact of COVID-19 on Financial Remedies on Divorce

OGR Stock Denton LLP would like to invite you to join our live webinar on The impact of COVID19 on Financial Remedies on Divorce

5pm, 30th April 2020

Zoom webinars

The COVID-19 outbreak is a point in time that throws up key questions in relation to the practice and application of the law relating to matrimonial finance and Schedule I cases.

Join our live interactive discussion, offering smart and quick solutions to issues arising during COVID-19, and how we expect the landscape to change as the lockdown restrictions are eased.

Hosted by Graeme Fraser, Partner and Head of Family team at OGR Stock Denton LLP, and by guest speaker Max Lewis, Barrister and qualified Arbitrator at 29 Bedford Row Chambers.

If you would like to join this webinar, please email Ali Kabani:

 020 8349 5514

Applying for finance? – Check the loan agreement beforehand

Thousands of businesses are likely to apply for finance as they attempt to deal with cash flow issues related to the coronavirus pandemic, including via the Government-backed Coronavirus Business Loan Scheme (CBILS), Large Business Loan Scheme (CLBILS) and COVID-19 Corporate Financing Facility (CFF).

These loans, although backed by the Government, are not without risk and businesses will remain 100 per cent liable for the finance they take out.

The commercial terms on these loans are likely to differ drastically as they are being provided by different accredited lenders via the British Business Bank.

As a result, the loan agreements that you are required to agree to may vary depending on the requirements of each lender and your financial position.

Loan agreements will typically include the following points, which should be carefully reviewed:

Conditions Precedent –
conditions a lender needs to be met by a borrower before agreeing to release the funds.

Interest – the agreement should clearly set out whether interest is payable on the loan being made and if so, at what rate. 

Repayment – the loan agreement should set out how the loan is to be repaid and whether additional voluntary payments can be made to settle the debt early. Be careful as early repayment could result in additional fees being charged.

Indemnities – lenders may require indemnities that promise to pay to the lender on a pound-for-pound basis on a particular type of loss arising, such as in the event of a default on the loan.

Representations or warranties – lenders may use representations and warranties to limit their lending risk.

Financial covenants – in a commercial loan these define the parameters within which a borrower may operate its business and can include:

  • How a lender monitors a borrower’s financial position during the loan;
  • Early warning requirements of financial difficulty; and/or
  • Means to enforce financial discipline.

Default Events – the agreement should specify under what circumstances would give a lender the right to demand early payment. These should be tailored and negotiated as appropriate and in light of the current crisis.

Securities – lenders may ask for security against the loan they are making, this is usually an asset that can be sold to recover debts. The Government has already stepped in to prevent the requirement for personal guarantees for loans of £250,000 or less, but it is important to check whether any securities are listed.

Loan agreements can be complex and very onerous, and so it is important that they are checked thoroughly beforehand by a legal professional to ensure you aren’t obligating yourself to a condition you aren’t comfortable with or cannot meet in future. Speak to our team to find out how we can help.

What if I need to make employees redundant?

Unfortunately, some businesses may be unable to furlough certain employees or they may feel that they are unable to retain a position after the furlough period ends and the organisation is therefore required to make a person redundant.

Many businesses are now considering whether they need to start the redundancy process when the Coronavirus Job Retention Scheme (CJRS) comes to an end on 30 June 2020.

The rules around redundancy are complex and so to help we have prepared a useful FAQ for you to follow.

Can I make employees redundant during this uncertain period?

As long as you do not intend to furlough a staff member, then yes you can make them redundant, as long as you follow the right procedures. 

Of course, many employers are aware that if they can make a person redundant then they could also furlough them to retain their position. Because of this, some employees may feel they have a claim for unfair dismissal if they have at least two years of service and you choose to make them redundant rather than furloughed. 

Any employment tribunal would consider an employer’s resources at the time of redundancy and see if the company had no or minor cash flow issues at the time or whether an employee had accepted a cut in pay or a delay in payment of their salary to assist the business.

Depending on the circumstance, a judge may decide that a business acted unfairly to make a person redundant instead of furloughing them to deal with the economic slowdown created by the pandemic. 

An employee could also bring a claim for discrimination if they think they were made redundant because of a protected characteristic, such as sex or disability. Employees do not need a minimum length of service to bring such a claim, so take care. 

Can I begin the redundancy procedure now?

A statutory redundancy situation arises where either:

  • an employer’s need for an employee to do work of a particular kind ceases or reduces; or
  • the business in which an employee is employed is shut down, either entirely or at a particular location.

What type of redundancy procedures do I need to follow?

Depending on the numbers of redundancies an employer needs to make they may have to consult collectively with affected employees under the Trade Union & Labour Relations (Consolidation) Act 1992.

The collective consultation period is 30 days if an employer is proposing to dismiss 20 or more employees within a 90 day period, rising to 45 days if it is 100 or more employees.

The CJRS is due to run until at least 30 June 2020, which means that if an employer wants to time redundancies to be effective from the end of the CJRS period before they are contractually bound to pay 100 per cent of the employees’ salaries again, then they will need to start considering commencing consultations shortly. 

This means they needed to have started this process on the following dates if they intend to make redundancies on the 30 June 2020:

  • 20 or more employees – 31 May 2020
  • 100 or more employees – 16 May 2020

If these dates haven’t been met then the employer would have to continue consultation after the employee has returned from furlough, if the CJRS is not extended, and continue to pay wages.

There is an exception to the collective redundancy rules. This rule provides that where special circumstances render it not reasonably practicable to consult in good time or provide the statutory information to employee representatives, the employer need not fully comply with the duty, but must still take such steps towards compliance as are reasonably practicable. 

It is not yet fully clear whether this applies to the current pandemic, but businesses should be cautious as they could be penalised if they get this process wrong.

What happens if I intend to make fewer than 20 redundancies?

There are no set rules to follow if there are fewer than 20 redundancies planned, however, it is good practice to consult employees and their representatives before undertaking any redundancies. If you don’t conduct any form of consultation with employees an employment tribunal could decide that you have dismissed your staff unfairly.

What penalties exist if I don’t complete the process properly?

Where an employer fails to comply with its obligations, representatives of those employees affected, or the employees themselves, can make a complaint to an employment tribunal. If the complaint is upheld, the tribunal could order the employer to pay a ‘protective award’ of up to 90 days’ pay per affected employee.

How do I choose who to make redundant?

If the redundancy is being made to reduce your workforce, rather than due to a total closedown of the business, you will need to carefully select who you make redundant. 

You can initially consult with your workforce to see whether anyone wishes to be made voluntarily redundant. This will help to reduce the potential pool of candidates and can make the selection and consultation period simpler. 

When selecting which employees face compulsory redundancy, employers must ensure they are objective and do not discriminate against the employee(s). 

They may wish to use the following criteria as a basis for making their selection:

  • qualifications;
  • experience;
  • performance;
  • timekeeping and attendance;
  • disciplinary record.

In the past, many redundancies have been conducted on a ‘last in, first out’ basis, but this has become less common due to the risk of indirectly discriminating by age against younger employees. 

It is recommended that you use a scoring process for each employee against these criteria, which is moderated by different scorers to ensure fairness and consistency. Make sure you record this process in writing.

How much will I need to pay a staff member who is made redundant?

When an employee is made redundant they will be entitled to notice pay. The statutory minimum period of notice is one week’s notice for each year of continuous employment, up to a maximum of 12 weeks. 

Employees are also eligible for statutory redundancy pay if they meet the qualifying criteria. The amount that they will receive can be calculated here. Some employees may be entitled to more depending on their contract.

Can I pay some staff members more? 

It is not uncommon for employers to pay an enhanced redundancy package where they intend to:

  • Preserve goodwill of both departing and remaining employees;
  • Match market rates or industry norms for such payment; or
  • Sign a compromise agreement.

Can I offer a staff member alternative employment?

It is strongly encouraged that you look at alternative employment options within a business for ‘at risk’ employees. If you operate across more than one site and have capacity at another then you may wish to offer them a position elsewhere, if practical. The employer should also consider whether alternative employment is available via an associated employer.

If you offer suitable alternative employment, and an employee makes an unreasonable refusal to undertake the work, then they may lose their entitlement to a statutory redundancy payment.

I have already made an employee redundant because of covid-19. Can I re-employ them and furlough them? 

This is tricky. If they were made redundant between the 28 February 2020 and the 19 March 2020 then employers are entitled to rehire employees that were previously made redundant, as long they were still on the payroll as of 28 February 2020.

Unfortunately, if you chose to make someone redundant from 20 March 2020, when you knew the CJRS would be in place, the employee will not be eligible for support. 

Next Steps

If you intend to make an employee or group of employees redundant it is strongly advised that you seek professional advice and assistance from a solicitor. To find out how we can help, please contact us.

Statutory Residence Test changed to allow skilled workers from around the world to assist the UK’s coronavirus response

The Chancellor, Rishi Sunak, has written to the Treasury Select Committee, to inform it that the Statutory Residence Test (SRT) is being relaxed temporarily so ‘highly skilled’ individuals from around the world can join the UK’s coronavirus response without jeopardising their tax status.

The measures apply to workers such as anaesthetists and engineers working on ventilator design and production.

The move means that time spent in the UK working on the country’s coronavirus response between 1 March and 1 June 2020 will be disregarded for the purpose of the SRT. The period the relaxed measures apply to may be extended.

Without the measure, these skilled workers could have seen their global earnings becoming taxable in the UK.

Full details of the changes to the SRT are set to be included in the Finance Bill 2020.

Coronavirus Job Retention Scheme extended to end of June

The Chancellor, Rishi Sunak, has announced a further extension to the Coronavirus Job Retention Scheme (CJRS), which will see employers able to furlough employees for an additional month.

The CJRS allows employers to retain employees on the PAYE Payroll who are not carrying out work for them by placing them on furlough and to claim a grant of 80 per cent of a furloughed employee’s usual pay, plus employer National Insurance Contributions (NICS) and minimum employer auto-enrolment pension contributions.

It means that employers can retain their workforce while reducing their staffing costs, although furloughed workers cannot carry out any work for the employer.

Business groups had sounded the alarm that employers could start the ball rolling on the redundancy process if the scheme was not extended beyond the end of May, because of the requirement for consultation periods if employers expect they will have to make collective redundancies.

Employers expecting to dismiss 20 or more employees within a 90-day period must hold a 30-day consultation, while those expecting to dismiss 100 or more employees must consult for 45 days.

This means that had the CJRS ended on 31 May, employers expecting more than 100 redundancies would have needed to have started consultations on 16 April 2020 if they planned to make employees redundant at the end of their furlough period. Meanwhile, Those expecting more than 20 redundancies would have needed to begin consulting on 1 May 2020.

Coronavirus Job Retention Scheme online portal launches

The Coronavirus Job Retention Scheme (CJRS) online application portal went live at 8am on Monday 20 April 2020.

The CJRS allows employers to retain employees on the PAYE Payroll who are not carrying out work for them by placing them on furlough for a period of between three weeks and four months, unless the scheme is extended further.

The employer can then claim a grant of 80 per cent of a furloughed employee’s usual pay, plus employer National Insurance Contributions (NICS) and minimum employer auto-enrolment pension contributions.

According to HM Revenue & Customs (HMRC), the portal can handle as many as 450,000 applications an hour. It says that grants will be in employers’ bank accounts within six days of applying.

At the same time, HMRC has published detailed guidance on how employers can calculate the amounts they are entitled to claim, including for those where salaries vary or there is other complexity in the employment relationship. The new guidance is available here.

Amid fears that the scheme is vulnerable to fraud, HMRC has also launched an online portal for employees and members of the public to report suspected fraudulent claims.

Coronavirus Job Retention Scheme (CJRS) cut-off date extended

The Government has announced that the cut-off date for the Coronavirus Job Retention Scheme (CJRS) has been extended from 28 February 2020 to 19 March 2020, potentially enabling employers to furlough employees taken on during that period.

The CJRS allows employers to retain employees on the PAYE Payroll who are not carrying out work for them by placing them on furlough and to claim a grant of 80 per cent of a furloughed employee’s usual pay, plus employer National Insurance Contributions (NICS) and minimum employer auto-enrolment pension contributions.

The updated guidance published on Wednesday 15 April 2020 states that to be eligible for the scheme, an employee must have been on the employer’s PAYE payroll on or before 19 March 2020 and HM Revenue & Customs (HMRC) must have been notified of a payment through Real Time Information (RTI) by that date.

The Treasury says that it expects the extension of the cut-off date to benefit more than 200,000 employees, who employers would otherwise have been unable to furlough.

The new guidance also changes the arrangements for employees made redundant or who left their employment voluntarily in recent months. The guidance now states that anyone on an employer’s payroll on 28 February 2020 and notified to HMRC on an RTI submission on or before that date who stopped working for their employer prior to 19 March 2020 can be re-employed and furloughed.

At the same time, the Treasury has issued a Direction, giving instructions to HMRC for making payments under the CJRS.

Crucially, the direction confirms that the scheme applies to anyone who is furloughed “by reason of circumstances as a result of Coronavirus disease.”

The Direction also provides an exemption for company directors who are also furloughed employees to carry out duties “relating to the filing of company accounts or provision of other information relating to the administration of the director’s company…”

At the same time, it confirms that there must be a written agreement between the employer and the furloughed employee “that the employee will cease all work in relation to their employment”.

HMRC has confirmed that it expects the scheme to come into effect next week.