25 August 2021
Is your business feeling the immediate effects of COVID-19 on your livelihood? What are your options and what can you do? It may not be easy, but it’ll be worth it.
If you’re after a friendly ear, we can help. Give us a call or drop us an email anytime.
To get you started here are some issues and questions that you might be grappling with, and the legal implications are potentially wide-ranging and complex.
The commercial team here at Gibson Sheat is well resourced and working remotely. We will continue to work, effectively and with very little disruption to the services we provide.
While every business will be different, the following is a summary of the process we at Gibson Sheat have been through and recommend all businesses follow to ensure you are keeping your business agile and able to weather COVID-19.
- The Government’s strategy appears to assume the virus will be around for some time. Taking that into account undertake a simple but considered SWOT analysis of your business (a review of your strengths, weaknesses, opportunities, and threats), and use that to develop a strategy for your business for the immediate future.
- Prepare a financial model to help you understand your thresholds for revenue drop and your cash-flow requirements.
- Put a process in place to monitor changes in work-in-progress, sales, revenue, debtors, and available cash in real-time.
- Review all your discretionary spending.
- Review your current and potential contracts, particularly those which contain medium to longer-term financial commitments.
- Consider whether any of the Government’s support packages might be relevant to your circumstances.
While we’re in fairly new territory, we welcome any input and further suggestions to this list to help others.
Some of the key legal ‘‘must address” issues to consider and which may arise for all businesses, include
- Current contracts - Are you a party to a contract under which your- or the counter-party’s performance is made impossible by COVID-19? Many contracts entered into since last year’s lockdown will have clauses that have the effect of suspending or deferring the obligations of the parties in the event of another lockdown. You will need to check whether the contract contains such a clause or another clause e.g. a “force majeure clause”, which may have such an effect.
- New contracts - When negotiating new contracts, we will now all be acutely aware of the risks presented by the likelihood that COVID-19 will continue to circulate and impact the economy for some months to come. This means that consideration must be given to managing that risk in your new contracts. For example, who will pay the costs of setting up and then disestablishing from a venue if there is another lockdown?
- Debt Restructuring – If you have cash-flow issues which are impacting your ability to meet your obligations to creditors, talk to your creditors (including banks) promptly. Explore whether you can restructure the terms of your debt.
- Leases/Rent – Consider whether your lease contains any clauses which may provide relief. Recent standard forms of lease contain clauses that may entitle tenants to suspend the payment of rent in the event the Government requires businesses to close.
- Insurance – Consider whether you have insurance policies that could respond to the negative implications of COVID-19 on your business. To date for many businesses that is not the case but it is prudent to carefully check
- Employment Considerations – Consider your obligations to your employees. While in a strictly legal sense, employees who are required to stay at home may not be entitled to payment, in good faith, employers should be considering other options before looking to possible redundancies. Those other options will include sick leave, annual leave, a reduction in hours (and therefore pay), and, of course, the government assistance available. Don’t forget there is government assistance for salary and wages and isolation-related leave for all businesses, self-employed and sole traders, Yes, for you small businesses out there, that includes your own salary and wages.
- Insolvent Trading – If you are experiencing severe cash-flow problems, and potentially trading while insolvent, you may wish to consider the implications of that from the perspective of your obligations as directors of your company.
Government Guidance and Assistance for Businesses
For the full range of guidance and assistance announced by the Government for businesses at the date of publication of this article, please visit https://www.business.govt.nz/covid-19/.
If any of this information has raised concerns for you or would like to discuss any of these matters, please contact any of our commercial partners whose contact details are set out below, or call us on (04) 496 9990
Disclaimer: The information contained here is of a general nature and should be used as a guide only. Any reference to law is to New Zealand law and legislation. We recommend before acting on it, you consult your accountant or tax adviser