This informal CPD article on Changes in regulations and law was provided by Capitalise an Adviser-led capital advisory platform, designed to help businesses build stronger, healthier balance sheets
Over the next few weeks there are several significant changes to regulations, schemes and law. Capitalise Accountant-in-Residence, Kirsty McGregor has identified which types of clients you may wish to focus on, so that they don’t miss an opportunity or fall foul of some new rules.
1. Clients who took out Bounce Back Loans
Let’s ensure our clients are capitalised sufficiently to withstand the longer term implications of this pandemic. Many applications we are seeing on the platform now for CBILS are from those businesses who took a Bounce Back loan in the early days of the lockdown. Now is a good time to check again whether the rest of your clients have enough cashflow or whether applying for a CBILS would be appropriate before the scheme closes to approvals on 30th November.
2. Businesses with a range of asset finance or lease agreements
With CBILS facilities requiring no personal guarantee under £250,000, many businesses have recognised that using a CBILS loan to repay some other, more onerous credit agreements, makes sense. Clients who have multiple finance lease or hire purchase facilities may not have considered this. Double check they haven’t overlooked this idea.
3. Businesses with stock finance as a stand-alone facility or part of asset-based lending
On 1st December, Crown Preference returns to insolvency law and will particularly impact businesses who have stock finance facilities across the UK, as HMRC will take priority for any VAT, PAYE, employee NICs and CIS liabilities, over any floating charge holders. It is highly likely therefore that any lenders who are only relying on a floating charge (as opposed to a fixed charge, which trade debtor finance falls under) will seek to create an additional ‘reserve’ to allow for these HMRC liabilities. This could reduce the availability in the facility, especially as many businesses have built up large liabilities owing to HMRC during the pandemic. Check in with your clients to ensure they have considered how this will impact their headroom
4. Concerns about wrongful trading implications
On 30th September, the suspension of many laws was extended to 31st December, such as winding up petitions, statutory demands and commercial evictions. However, directors’ wrongful trading was not extended. Therefore, directors could now potentially face personal liability if creditors believe, in any subsequent insolvency, that the directors have not acted in the best interests of the creditors since 1st October. Any directors who have an insolvent balance sheet would be recommended to take commercial legal advice and pay attention to how they run the business, which creditors they choose to pay and in which order. Refinancing to stabilise the business’ cashflow and provide more ability to trade out of this period, should also be considered carefully.
5. Commercial tenants with rent arrears
Clients who are tenants and have relied upon the suspensions for eviction, winding-up petitions and statutory demands to avoid paying their rent, should be aware that from 1st January 2021 (unless the Government extends the suspension again) their landlords will be able to take action, which could have a serious impact on the business’ ability to trade. Maintaining good communication with landlords and attempting to agree a payment plan will be crucial over the coming months. Alternative solutions such as bringing in external capital or agreeing a Time to Pay arrangement with HMRC should be considered by these businesses.
Changes are still coming thick and fast so as we continue to assist our clients to gradually build their way out of this pandemic, our role is to advise them of all the possible ways they could strengthen their Balance Sheet and ensure their future survival.
We hope this article was helpful. For more information from Capitalise, please visit their CPD Member Directory page. Alternatively please visit the CPD Industry Hubs for more CPD articles, courses and events relevant to your Continuing Professional Development requirements.
