We welcome the changes to Insolvency legislation to help directors at this difficult time, more details to follow as there are still many antecedent transactions that directors should be aware of.
WHATS BETTER ABOUT THE CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS)
WHAT WE ARE SEEING
We have seen numerous comments on social media and from directors with regards to the Coronavirus Business Interruption Scheme Loan Scheme (CBILS) not providing guarantee to "good directors", when they have to personally guarantee the lending,. As well as many surprised that security or personal guarantees are even requested.
The truth of the matter is, this was announced by the Chancellor in the Budget 2020 as a scheme to temporarily replace the Enterprise Finance Guarantee (EFG) Scheme.
Both are government backed lending schemes, in which the lenders can seek personal guarantees and security.
The government back guarantee is for the lender, not the business. The guarantee is designed to facilitate the lending by banks in uncertain times, giving them more confidence to do so.
This is also a loan or overdraft, and there is a responsibility for the finance to be repaid by the business (just like any finance facility). If a business is later unable to repay the finance the lender has a duty to pursue all options to recover the monies, including from directors personally where personal guarantees are given. The government guarantee will only take effect when the lender is unable to recover the funds.
SO WHAT ARE THE IMPROVEMENTS?
As mentioned the scheme temporarily replaces the EFG Scheme, but with added benefits. These are:
In conclusion, the CBILS is an Improved version of the EFG.
For further details on CBILS see our COVID-19 HUB at https://www.lminsolvency.co.uk/funding--support-for-businesses-effected-by-covid-19.html
Chancellor has announced support for Self employed.
More details to follow shortly in our COVID-19 Hub
Many are impacted by the coronavirus outbreak, but for those in an Individual Voluntary Arrangement (“IVA”), this could lead to greater uncertainty and concern.
We have contacted all our debtors in Individual Voluntary Arrangements (IVAs) and agreed terms for the short term in this uncertain time.
The changes however could have significant impacts for those in IVAs, especially where the proposals are written in such a way that they do not allow for flexibility, reduction in income, payment holidays or the discretion of the Supervisor etc.
Any change from the proposals of an IVA require a variation approved by creditors, and this is still the requirement under the Insolvency Act 1986 (as amended, and enacted). It would hard to known how creditors would vote at this time, when many may be impacted themselves by the outbreak.
Anyone in an IVA concerned, should
We have consulted with all our debtors in IVAs to advise of them of the support they can obtain, those still working have at least 80% of their wages, and fortunately our IVAs allow for a degree of flexibility to reduce payments by 15% without further creditor approval. Our proposals also offer repayment holidays, and as such we see no reason for any our of our Individual Voluntary Arrangements to be breached at this stage.
THREE MEASURES TO HELP PROTECT RENTERS AND HOME OWNERS
Government have announced mortgage lenders are to help those struggling to pay as a result of the coronavirus outbreak by providing 3 month payment holidays. However, if you were already in arrears prior to the outbreak this may affect you ability to obtain such support.
Protection is also offered to renters, as landlords will be able to seek support from mortgage lenders. Again if you were already in arrears prior to the outbreak this may affect you ability to obtain such support.
If you are struggling, in the first instance you should contact your mortgage provider or landlord
British energy suppliers have joined with the Government to help the most in need. Vulnerable customers can seek support with their utilities on the whole for a period of 3 months.
This include those on pay-as-you-go meters. who are unable to leave their house. Which could include sending someone else to top up their card, having a pre-loaded gas or electricity card sent to them in the post, or having funds added to their credit.
The Department for Business, Energy and Industrial Strategy has said that customers whom cannot afford to pay their bills will get support from their suppler.
Those in financial difficulty could get their payments reassessed, or reduced where needed, furthermore no credit meters will be disconnected during the outbreak
Many furlough workers will however be supported with wages throughout the outbreak, so support will be prioritised for those that need it most.
If you are struggling speak to your utility provider for the options they are offering.
We will provide further information on the implications of IR35 in due course, but for now rest assured that there are no changes as IR35 is delayed
The 2020 Budget saw the Chancellor unveil an ‘historic’ spending rise with some eye-watering sums, covering both the immediate challenge of the corona virus and the threat of recession, identified by the Office for Budget Responsibility.
Funded through £130 billion of extra borrowing rather than tax rises, though revenue raised from Corporation tax and Entrepreneurs’ Relief, and deficits becoming permanent rather than being phased out.
BUDGET FOR THE CORONAVIRUS
The measures complemented the emergency rate cut from the Bank of England and provide financial bridge during the outbreak, these measure include;
OTHER KEY MEASURES
For other key budget measures and their implications of these, See Our News section
- Budget 2020
Lucinda Matkin - Licensed Insolvency Practitioner & Chartered Accountant