CASH FLOW AND CORONAVIRUS – What directors must do

Paul Cooper at Blake-Turner has for many years advised clients experiencing cash flow difficulties.  All too often an otherwise sound business hits a hurdle and all of a sudden it is “insolvent” because it realises it will not be able to pay certain debts as they fall due in the next few weeks and months.

To describe the current Coronavirus pandemic as a “hurdle” would be a massive understatement, but the responsibilities of directors remain exactly the same.

What directors must do

1.     Change your priorities:

As soon as the directors of a company realise that there is a real prospect of them not being able to meet their debts as they fall due (“cash flow insolvent”), whether now or in the future, then when making decisions they must make the interests of creditors paramount.  If they fail to do this, then they risk making themselves personally liable for some of the debts of the company.

2.     Plan carefully:

Whilst it is far from clear when the current crisis will end (this blog was created in March 2020), we are being given assurances by the Government and international organisations that will possibly be in around 3 months’ time. Also, that the government will assist by way of backing bank loans and paying 80% of furloughed employees’ wages.

Therefore, if you are a director of a company who envisages being cash flow insolvent in the coming three months you need to plan now.  If your business is fundamentally sound, you may well be justified in continuing to trade, even if that incurs a lot of debt, provided that you reasonably consider that when we emerge you are likely to be able to trade through those losses and pay off those loans. In those circumstances, creditors will obviously be far better off than they would be were you to simply give up now and allow the company to go bust.

3.     Record your decisions to protect yourself:

It is important to protect yourself personally as a director by keeping minutes of your board meetings at which you make the decision to continue to trade. Also, to regularly review that decision and minute each review and the reasons for your decisions. Also, keep copies of your cash flow forecasts as they evolve over time. If the worst subsequently happens, a contemporaneous record of your thought processes and decisions will be of great assistance in defending any claim against you personally by a liquidator or the Official Receiver.

4.     Seek advice:

If you carry out your cash flow forecasts, and budget thereafter, and come to a view that it is unlikely that you will be unable to trade through and/or recoup your losses and/or pay off the short term debt, then you must immediately seek advice from an insolvency lawyer such as Paul Cooper at Blake-Turner, or an insolvency practitioner.  A director can be made personally liable for certain debts if they continue to trade and spend money where it is not reasonable for them to do so, and in continuing to spend money and incur liabilities they will ultimately make the creditors worse off. Taking professional advice and minuting decisions will show you acted reasonably at all times and be crucial in ensuring you do not become personally liable.

5.     If it comes to the worst:

A business can often be saved by putting the company into administration and selling that business.  This is often by way of a pre-pack sale in which most if not all of the current debts of the company can be left behind and a new company continue to trade the business and save the employees’ jobs. Blake-Turner have extensive experience in this area.

There are also other options if you decide you cannot continue to trade, such as liquidation or a CVA.  Please click on the foregoing links for further information in that regard.

At Blake-Turner we have years of experience of assisting distressed companies.  We understand the desire to save and restructure where possible and we can advise you of various strategies by which you can do this.  Please contact Paul Cooper on +44 (0) 7967 014788 or at paul.cooper@blaketurner.com

How to correctly conclude a claim by way of a consent order

How to correctly conclude a claim by way of a consent order

In the matter Spice and Anor –v- Tuli and Anor [2012] which was heard in the Court of Appeal, the Defendant appealed the decision that the Claimant was allowed to bring a claim by way of a consent order based on the same set of facts as a claim which they agreed to dismiss.

The case discusses the use of the words “withdrawn”, “dismissed” and “discontinued” when concluding cases by way of consent. The word “withdrawn” is not appropriate as there is no provision in the CPR for a claim to be withdrawn, only discontinued or dismissed.

Facts

Spicer and Anor originally bought proceedings for possession. The day before the final hearing the Defendant provided disclosure. As the Claimant needed more time to investigate this disclosure they agreed a Consent Order dismissing the proceedings. In agreeing the consent order the Claimant’s Solicitor made it clear they would be investigating the disclosure and its validity.

Two months after the Order was filed the Claimant filed new proceedings, including the original claim for possession. The Defendant sought to strike out the claim on the basis that the claim for possession was barred as a result of cause of action estoppel. In addition, they argued that the fresh action was an abuse of process.

The application was unsuccessful and the Claimant was allowed to bring the second claim. The Defendant appealed the decision.

Decision

At the appeal it was concluded that there was no abuse of process. First, it was in the public interest that the disclosure was investigated for validity and secondly that the Claimant’s Solicitors had made it clear they would not stop the investigation just because the claim had been dismissed by way of consent.

The Court of Appeal considered the principle of cause of action estoppel. Whilst the principle of estoppel relies on the principle that there is finality of litigation it was created as “judge-made law”. As Judges often avoid setting absolute limits to any rule the Court of Appeal could understand why, in previous cases, the principle had been applied with a degree of flexibility rather than using a rigid application.

The case of Ako v Rothschild Asset Management Limited [2002] was considered. This is an Employment Tribunal case in which Dyson LJ concluded that a withdrawal or judgment by consent invariably results in a cause of action or issue estoppel. It was concluded that if it is clear that a party withdrawing their claim is not intending to abandon it or any issue within it then they cannot be barred from raising the point in subsequent proceedings unless it would be an abuse of process.

Although the Ako case was an Employment Tribunal case, and therefore subject to different rules than the Courts, Lewison LJ applied the case outside of Tribunal proceedings.
The appeal was dismissed and the Claimant was allowed to bring their second claim.

Comments

As a Claimant, care needs to be taken when signing consent orders. If there is an intention to bring the claim again in the future then proceedings need to be discontinued and not dismissed. In addition, it should be made clear to the Defendant’s Solicitors that there is an intention to bring future proceedings based on the same claim.

As a Defendant, before signing consent orders the Claimant’s intentions need to be clear. Defendant’s need to be aware of the implications in relation to the possibility of future proceedings against them.

IMPORTANT: This blog is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

For further information on this please contact [ ] on: [ ] or [ ].

The ruling in Tyco and an Employees Travel Time to Work

The ruling in Tyco and an Employees Travel Time to Work

The recent ruling by the ECJ in the case of Federación de Servicios Privados del Sindicato Comisiones Obreras v Tyco Integrated Security SL and Tyco Integrated Fire & Security Corporation Servicios SA (Case C-266/14) [2015] All ER (D) 55 (Sep) determined that the employees travel time to work count as part of their working hours. This decision will likely affect those who provide employees for client visits and is estimated to affect up to 1 million companies in the UK alone.

The ECJ considered where an employee travelled for their employment that this would form part of their ‘working time’. This was on the basis the employees were working by travelling to and from their jobs as part of their employment. Further, during this time the employees were at the employer’s disposal and these journeys were solely for the employee to carry out their duties required by their employment.

UK Employers will need to consider, where they employ employees with no fixed or habitual place of work, what changes need to be made in order to comply with Tyco. Most UK employers do not currently include journeys by mobile workers as part of their working hours. Accordingly, careful consideration will need to be made to ensure EU Working Time Directive on an employee’s maximum work hours of 48 hours per week is not breached.

Employers will need to consider if their employees are affected by Tyco and may have to seek to negotiate opt-outs with those employees who will exceed the 48 hour threshold. Employers should also consider whether appointments can be allocated in a way that allows an employee’s first and last appointments to be located close to their homes. Employers will also need to monitor affected employees to ensure their travel time is being solely used for employment purposes.

Read more blogs from Blake-Turner Solicitors.

Zero Hour Contracts and Unfair Dismissal

Zero Hour Contracts and Unfair Dismissal

On 11 January 2016, the Exclusivity Terms in Zero Hour Contracts (Redress) Regulations 2015 came into force.

In May 2015, exclusivity clauses were rendered unenforceable under the Small Business, Enterprise and Employment Act 2015; however there was little opportunity for an employee to enforce the ban against their employers.

Under the new legislation, a zero hour contract worker can now bring a claim for unfair dismissal where the reason for the dismissal is due to the worker breaching a contractual clause, prohibiting him from working for another employer. Additionally, a worker who has suffered detriment, as a result of their breach of the exclusivity clause, will now have the right to bring an action against their employer.

Employers and zero hour contract workers should be aware that, unlike other unfair dismissal claims; there is no qualifying period for a worker to be able to bring this claim.

For further information on this or any other employment related matter please contact Rupert Farr on: 020 7952 6216 or rupert.farr@blaketurner.com.

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Personal Communications at work. Private or not? Bărbulescu v. Romania.

Personal Communications at work. Private or not? Bărbulescu v. Romania

The recent ruling, by the ECHR, in Bărbulescu v. Romania, confirmed there was no violation of an employee’s Article 8 human right to privacy, where the employee had used his company’s internet for personal communications uses during work hours, and was consequently dismissed.

Mr Bărbulescu was employed by a private company who had directed him to use Yahoo messenger as a means to liaise with clients. Mr Bărbulescu used the account for personal messaging including discussing his health and sex life. This constitutes a breach of his employment contract and as a result he was dismissed. Mr Bărbulescu proceeded to bring a claim against his employer for a breach of his Convention rights to privacy. Mr Bărbulescu considered that the Romanian courts should have excluded all evidence of his personal communications on the basis they were, by their very nature, private.

The ECHR considered that whilst the employee’s Article 8 rights to privacy were engaged the Romanian courts has struck a fair balance between his rights and the interests of the employer. The ECHR considered in accessing the data from Mr Bărbulescu’s work messenger account was not unreasonable, especially given the original access was on the basis it contained professional communications only. Further, the ECHR considered it reasonable for an employer to verify an employee was undertaking the work required within work hours.

Whilst this ruling does not give an employer an automatic right to monitor an employee’s personal communications, employees will no doubt be aware that private communications via work channels cannot be expected to be completely private.

IMPORTANT: This blog is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

For further information on this or any other employment related matter, please contact Rupert Farr on: 020 7952 6216 or rupert.farr@blaketurner.com.

Read more blogs from Blake-Turner Solicitors.