The news in June 2020 that the UK government had amended section 58 of the Enterprise Act to add an additional public interest consideration – “the need to maintain in the UK the capability to combat, and to mitigate the effects, of public health emergencies” – captured much interest.

It also prompted the Department for Business, Energy and Industrial Strategy (BEIS) to publish guidance as to what motivated this amendment, what practical impact it would have, and what moves businesses might wish to make in response to the changes.

These changes to the Enterprise Act have been prompted by the government’s concern that some mergers and acquisitions may imperil the ability of the UK to respond to and recover from public health emergencies.

This, however, has brought forth certain questions in terms of exactly what is meant by the aforementioned “capability”.

What is meant by “the need to maintain… capability”?

BEIS has explained that the new consideration is centred on preserving the UK’s existing capability to combat and mitigate the effects of public health emergencies.

One such relevant capability that already exists in the UK would be the capability of a UK company that produces personal protective equipment to manufacture a certain number of facemasks each day.

Also falling within the scope of the new consideration, as far as the government is concerned, are repurposable capabilities. An example of this would be an engineering company that designs and makes car parts, but which might also possess the engineering expertise and machinery that could be repurposed for the design and manufacture of ventilators during a public health emergency.

However, the government would have to act reasonably in making a link like this, and intervention on such grounds is not expected to be frequent.

What about the capability to combat public health emergencies?

The government anticipates that the new public interest consideration will most often be used in order to help maintain the UK’s capability to combat public health emergencies.

Firms active in the public health sector, such as vaccine researchers, medical supply firms and drug manufacturers, are examples of organisations that possess relevant capability.

Other companies might also have relevant capability, such as those that may assist in modelling the spread of a public health emergency.

The amendment’s role in mitigating the effects of public health emergencies

The government recognises that concerns do not arise for the vast majority of investment, which is usually overwhelmingly positive for the UK in terms of the jobs created and the allowance for greater innovation and productivity by UK firms.

However, the government has signalled that it may need to intervene in the takeover of a company that provides, or could provide, the UK with the ability to mitigate a present or future public health emergency’s effects.

Such firms could include the likes of internet service providers or food supply chain companies, given the scope for heightened demand for internet services in a lock-down situation, or disruption to food supply.

Ask about our company secretarial services

Whatever the uncertain coming months and years bring, we are dedicated here at London Registrars to serving the needs of the various organisations for corporate governance and compliance solutions they can depend on – ranging from registered office and directors’ service addresses, right through to meeting management and the maintenance of minute books and register of shareholders maintenance.

Contact us now for more information, whether by sending an email or calling 020 7608 0011 / 07415 107 436.

September 2020

As wealthy nations around the world – including the UK and US – buy up vast quantities of COVID-19 vaccine candidates amid fears of ‘vaccine nationalism’, clients of London Registrars’ company secretarial subscriptions may be interested to learn of the British government’s addition of a new public interest consideration to existing law.

The background of the Enterprise Act

According to section 42 of the Enterprise Act, the Secretary of State may issue an intervention notice to the Competition and Markets Authority (CMA) if they believe that one or more public interest consideration is or may be relevant to a relevant merger situation. It is also possible for special interventions to be made under section 59, as well as European public interest interventions under section 67.

For these purposes, a public interest consideration is a consideration that – at the time the particular intervention notice is given – is specified in section 58 of the Enterprise Act, or is not so specified but ought to be so in the opinion of the Secretary of State.

The Department for Business, Energy and Industrial Strategy (BEIS) announced on 21 June 2020 the government’s intention to introduce a new specified public interest consideration related to public health emergencies.

Two days later, the Enterprise Act 2002 (Specification of Additional Section 58 Consideration) Order 2020 (the Order) came into force. This Order amends the Enterprise Act, section 58 to include an additional public interest consideration: “The need to maintain in the UK the capability to combat, and to mitigate the effects, of public health emergencies”.

Why has the government amended the Enterprise Act?

Accompanying the Order’s entry into force, BEIS has published guidance on the government’s reasons for the amendments, as well as the practical difference these changes make.

The government has justified the new provision amid the disruption brought by the COVID-19 pandemic, on the grounds that some mergers and acquisitions may imperil the UK’s ability to respond to and recover from public health emergencies.

The amendments are therefore designed to improve the government’s position to address such risks, including those arising from the takeover of companies that can combat public health emergencies or that can assist in mitigating the effects of public health emergencies.

Risks related to the effects of COVID-19 have further motivated the government to introduce these amendments, with the economic uncertainty brought by the pandemic potentially impacting on the share price or profitability of some businesses in the short term. This has been recognised as potentially leaving UK enterprises with critical capabilities more vulnerable to takeover.

Consult the London Registrars team for advice on the latest legal changes

The UK’s current fast-moving legal landscape necessitates organisations of all sizes and sectors being well-positioned to move just as quickly, including to ensure continued compliance with changes to the law that may arise partly or entirely due to the corona virus pandemic.

We would therefore urge you to contact our corporate governance professionals directly if you have any related queries, or to learn more about specific services such as our basic company secretarial support packages and subscriptions.

September 2020

With our wide-ranging and in-depth know-how and experience in the finer details of company secretarial practice for PLCs and other organisations, we are constantly keeping a lookout here at London Registrars for the latest guidance on how General Meetings are to be held amid COVID-19.

Sure enough, The Chartered Governance Institute (ICSA) has recently issued guidance on General Meetings under the Corporate Insolvency and Governance Act 2020.

What does the guidance say?

The qualifying and membership body for governance professionals published the new guidance on 9 July 2020, to aid companies seeking to hold shareholder meetings in accordance with the terms of the Corporate Insolvency and Governance Act 2020. This follows the guidance published by the institute in March.

The latest guidance covers various matters. One subject addressed, for example, is exactly how companies can hold shareholder meetings. With the Act no longer requiring the participants to be together in the same location, companies are now permitted to hold partial or fully virtual shareholder meeting by telephone or video conference, irrespective of their individual articles of association allowing or forbidding this.

Also addressed in the guidance is a company’s right to restrict attendance at shareholder meetings until 30 September 2020 – or, if later, until the end of any extension of the period during which this flexibility is granted by the Act.

Those who wish to learn more about shareholders’ voting rights under the Act, and the manner in which these can be exercised, may also be interested in consulting the new guidance. ICSA has observed that companies are likely to provide facilities for members to appoint the meeting’s chair as their proxy. Some companies may also permit shareholders to use an online facility or app to vote, although the Act does not require this.

Other relevant advice for companies holding General Meetings at this time

Also covered by The Chartered Governance Institute’s guidance is the position of a company that has already issued the notice of its General Meeting, but wishes to amend the location or date of the meeting. ICSA has recommended that with the Act not explicitly allowing such details to be changed, companies should seek specific advice on this.

ICSA has also addressed in its guidance the key factors that companies should consider when determining whether to delay holding an AGM or laying annual reports and accounts prior to a General Meeting in accordance with the Act. The Institute has drawn attention to the Act not extending the expiry date of corporate authorities.

The guidance considers, too, how the Act’s General Meeting provisions apply to charities. Finally, ICSA has also noted that the temporary measures in the Act will override any provisions to the contrary in a company’s articles of association.

Contact us now to benefit from our specialist expertise

The London Registrars team remains ready and waiting to guide you through the maze of these temporary laws as well as assisting all types of organisations with their specific governance, risk and compliance requirements. Our areas of expertise cover all aspects of corporate governance to the highest standard of company secretarial practice for PLCs and other entities.

Call, fax or email us today to learn more about the advice and assistance we can provide for your own particular situation, at this time of uncertainty that can present such challenges for organisations of all sizes, sectors and circumstances.

August 2020

 

While legislation against discrimination on the grounds of disability has existed for many years and is a broadly well-understood concept, employers often struggle to ensure they are on the right side of the law with regard to such matters as when protection is engaged, and what accommodations are required of them. Many firms are also unsure about the extent of their duty to make reasonable adjustments for disabled employees.

The Equality Act 2010 defines disability in a broad sense, encompassing both physical and mental impairments. However, employers are still frequently uncertain as to what constitutes “disability”, especially when employees may be absent from work for extended periods due to such conditions as stress or work-related stress, which may sometimes be a symptom of a disability of which the employer is unaware.

The question of whether an employee is “disabled” as far as the 2010 Act is concerned, then, often hinges on whether there is a sufficiently long-term impact on the worker’s normal day-to-day activities. It is not always immediately clear, even to well-placed observers, whether a given employee could be said to be suffering from short-term stress or long-term mental impairment.

What categories of protection should employers be especially mindful of?

Two protection categories are particular to disability: the prohibition on discrimination arising from disability, as laid out in section 15 of the 2010 Act, and the duty to make reasonable adjustments, as sections 20 and 21 of the same Act explain.

Employers have far-reaching obligations as a result of these aspects of the law, the aim being to prevent employees with disabilities from being disadvantaged at work.

Discrimination arising from disability can be defined as a situation in which an employer treats someone unfavourably because of something that arises as a result of their disability, and the employer is unable to show that the treatment represents a proportionate means of achieving a legitimate aim. The employer may be liable even if they were not aware that the disability caused the “something” that prompted them to treat the employee unfavourably.

Employers are able to defend a complaint of discrimination arising from disability under section 15 by showing that they genuinely did not know, and could not have been reasonably expected to know, of the disability of their employee.

It is the employer’s knowledge at the time of the supposed unfavourable treatment that is assessed. Employers may not realise, however, that knowledge gained during the course of an appeal will still be pertinent to determining whether a dismissal was discriminatory.

Do employers accused of disability discrimination have any other options?

Another option that employers have, is objectively justifying the alleged discrimination arising from the employee’s disability. In practice, it tends to be the case that employers can identify a legitimate aim, but struggle to demonstrate that the means of achieving this aim were appropriate and reasonably necessary.

The employer’s aims must naturally be considered alongside the discriminatory effect on the given employee, including whether the employer could have taken a less discriminatory approach to achieving their aims.

The employer’s duty to make reasonable adjustments includes taking positive steps to ameliorate the disadvantages that a disabled employee may face in the workplace. This encompasses the premises’ physical features, a failure to provide auxiliary aids, and any provision, criterion or practice (PCP) that puts a disabled employee at a substantial disadvantage compared to non-disabled employees. “Substantial”, in this context, means more than minor or trivial.

It is this PCP element that is often especially challenging for employers, as it covers aspects of working arrangements that aren’t as tangible as physical barriers. To ensure their compliance with the duty, employers will need to listen to their staff, in addition to seeking the guidance of occupational health advisers.

We can assist your firm with its corporate governance and compliance efforts

Whether your organisation is on the lookout for general business support, corporate governance guidance or company secretarial subscriptions – to name just some of the areas we specialise in – here at London Registrars, we would be happy to lend you the benefit of our know-how and experience.

Enquire to our team of corporate governance professionals today to learn more about how we can help you to better steer your organisation through the current challenging times.

July 2020

The passage of the Corporate Insolvency and Governance Act 2019-21 into law on 25 June has provided an important lifeline to companies and other entities that may presently be dealing with financial difficulties in the wake of the ongoing corona virus pandemic.

The extension incorporated into the Act of the period for filing public company accounts is just one aspect of the legislation that impacts on the operations of such firms. Nonetheless, it is a potentially very significant one for many companies.

How has the period to file public company accounts been extended?

The Act includes a provision for a temporary extension of the period within which a public company is required to file its accounts and reports with Companies House, where section 442 of the Companies Act 2006 necessitates such accounts to be filed on a date between 25 March 2020 and 30 September 2020.

In the changed circumstances of the COVID-19 crisis, the new law now considers the period within which directors are allowed to file the accounts to be a period ending on the earlier of 30 September 2020, and the last day of the 12-month period immediately after the conclusion of the relevant accounting reference period.

To provide an example, a given public company’s accounting reference period may end on 1 December 2019 – thereby meaning that in accordance with the aforementioned section of the Companies Act 2006, the directors are required to file the company’s accounts and reports on or before 1 June 2020. The Corporate Insolvency and Governance Act 2020, however, extends this deadline to 30 September 2020.

Powers have also been put in place to extend filing periods

Another clause in the Act hands temporary powers to the Secretary of State to introduce regulations that extend the period during which particular returns or filings are required to be lodged with Companies House.

This provision has been put in place in recognition of the difficulties that the circumstances created by the corona virus pandemic may bring for companies in their efforts to meet existing statutory filing deadlines.

Listed in the Act are the relevant filing deadlines that may be subject to an extension. They include the periods for filing company accounts and annual confirmation statements, as well as for registering a charge under section 859A or 859B of the Companies Act 2006.

Also potentially able to be extended under the new law are the periods for making certain event-driven filings – such as notifying a change in directors or registered office – under the Companies Act 2006, as well as for registering changes to a limited partnership in accordance with section 9 of the Limited Partnerships Act 1907, and for notice of membership changes in accordance with section 9 of the Limited Liability Partnerships Act 2000.

In the event of these powers being exercised, the extended filing period is not permitted to exceed 42 days, in a case where the existing filing period is 21 days or less. If the existing filing period is between three and nine months, meanwhile, the extended filing period must not exceed 12 months.

Finally, the Act also has a clause conferring that these temporary powers to extend the various filing periods expire at the end of the day on 5 April 2021. The expiry of these powers, however, will not impact on the continued operation of any regulations made under this section of the legislation for the purpose of determining the length of any period beginning prior to the expiry.

We can be by your company’s side

Do you have any further questions about the implications of the Corporate Insolvency and Governance Act 2020 for your own organisation?

If so, our corporate governance experts – with their know-how in such key areas as company secretarial practice for PLCs, minute book maintenance and Companies House filing deadlines – are ready and waiting to provide the necessary targeted advice and support.

Give us a call or send us an email today, and we will gladly answer your queries and – if needed – guide you through our own solutions that could aid your company through these unstable and unpredictable times.

July 2020

Thursday 25 June saw the Corporate Insolvency and Governance Bill 2019-21 finally receive Royal Assent, following agreement by both the House of Commons and the House of Lords on its text. This legislation is very significant for companies and other entities that may currently be in financial difficulty in the wake of the COVID-19 crisis.

The Corporate Insolvency and Governance Act 2020 puts in place temporary changes to the law with regard to the governance and regulation of such companies and other entities. Among those provisions are powers that enable such firms to extend the period in which they hold AGMs.

What does the Act say on extending AGM periods?

Paragraph 5 of Schedule 14 of the Act allows a company or other qualifying body to extend the period during which it is required to hold an AGM that would otherwise need to be held between 26 March and 30 September 2020. The effect is that the company or qualifying body will have until the end of that period to hold the meeting.

Paragraph 5 outlines that in the event of a company or other qualifying body being subject to a duty – whether under the provisions of any enactment or its own constitution – to hold a general meeting as its AGM between 26 March and 30 September this year, such a provision is to be read as if it imposes, and always has imposed, a duty to hold the meeting by 30  September.

This provision means that firms that have postponed AGMs that were due to be held after 26 March now have a limited period in which to hold those AGMs, making the most of the new flexibilities relating to how such meetings are to be conducted, in paragraph 3 of Schedule 14.

With regard to how paragraph 5 is to be applied for a public company, the references to a duty to hold a General Meeting as its AGM are to be read as including a reference to a duty to hold an accounts meeting. This would be a General Meeting at which the company’s annual accounts and reports, within the meaning given by section 471 of the Companies Act 2006, are laid.

Powers to extend the period for qualifying bodies to hold AGMs

Also of note is paragraph 6 of Schedule 14 of the Act. It empowers the Secretary of State – or in certain cases, the Treasury, the Scottish Ministers or the Department for the Economy in Northern Ireland – to amend by regulations any provision that effectively imposes on a qualifying body the duty to hold a General Meeting as its AGM (or, in a public company’s case, an accounts meeting) during a period (the overlapping period) that overlaps to any degree with the relevant period.

The Secretary of State therefore has the power to amend such a provision so that it instead has the effect of requiring the relevant meeting to be held during a period that begins with the overlapping period, and ends with such period immediately following the end of the overlapping period, as the regulations specify.

Regulations made in accordance with this paragraph must not be used to extend the period for holding an AGM by longer than eight months, as set out in paragraph 6(4) of Schedule 14.

The reference to “any provision” in paragraph 6 is to be construed as a reference to any provision of an enactment or of the qualifying body’s own constitution or rules (which includes, in the case of a company, its articles of association).

Receive advice and guidance as to the next steps forward

Whether you turn to our team here at London Registrars to seek the benefits of our expertise in the maintenance of statutory registers, assistance with your AGM, or all manner of other areas of know-how, we would be pleased to be of service.

Give our corporate governance and compliance professionals a call today on 020 7608 0011, or if the office is closed due to the team working from home, on 07415 107 436, or send us an email to discover more about how we could assist you and your organisation.

July 2020

One factor among many that boards will need to consider when preparing their financial statements in the wake of the COVID-19 pandemic will be how they handle events after the reporting date.

Sure enough, IAS 10 makes a distinction between events occurring after the balance sheet date that provide further information about the conditions that prevailed on the balance sheet date – these being known as “adjusting events” – and events that are indicative of conditions that came to pass after the balance sheet date. The latter are referred to as “non-adjusting events”.

While adjusting events necessitate the adjustment of the amounts in the financial statements, in the case of material non-adjusting events, only disclosures are needed.

Is the pandemic an adjusting or non-adjusting event?

The general consensus is that for most UK companies preparing financial statements for periods ended 31^st December 2019, the COVID-19 outbreak in 2020 can be considered to have been a non-adjusting event.

However, judgement will be required from companies as to how much of COVID-19’s impact should be regarded as arising from non-adjusting events for subsequent reporting dates. This will be largely dictated by such factors as the reporting date, the specific circumstances of the business’s operations, and the particular events under consideration.

Companies seeking to reach this judgement will need to look at the importance of the conditions at the balance sheet date. Does the event in question shed greater light on those conditions, or was it only after the reporting date that conditions changed?

If the judgement significantly impacted on the amounts in the financial statements, then the company is expected to disclose and explain that judgement.

The appropriate reporting of non-adjusting events

In the event that a particular event is considered to be non-adjusting, then the nature of the event ought to be disclosed. Where it is possible to estimate the financial effect on the company, then this should be disclosed. If, however, the financial effect cannot be estimated, the fact that it cannot be estimated should be disclosed.

There is no need for an exact estimate – it is better to provide a range of estimated effects than no quantitative information at all. If no quantitative estimate is provided, boards are urged to give a qualitative description instead.

How can London Registrars continue to assist you during this time?

The COVID-19 pandemic is still bringing wide-ranging and frequently unpredictable impacts for organisations across the sectors – but one thing that your company can still be sure of is the highly professional and responsive corporate governance service of London Registrars.

For a suitably detailed discussion about the many ways in which we can serve your firm through this uncertain and challenging period – encompassing every key aspect of company secretarial practice for PLCs, among other types of company – please do not hesitate to enquire to us via phone, fax or email.

May 2020

 

Firms in receipt of such services from London Registrars as register of shareholders maintenance, registered office addresses and the preparation and submission of the annual Confirmation Statement may also be appreciative of corporate reporting guidance on the subject of going concern and material uncertainties.

Indeed, anxiety about this topic is likely to be even more pronounced amid the current unpredictability and chaos brought by the ongoing COVID-19 pandemic.

Defining ‘material uncertainties’

International Accounting Standard 1: Presentation of Financial Statements, otherwise known as IAS 1, generally requires financial statements to be prepared on a going concern basis. The exceptions to this would be if management intends to liquidate the entity or cease trading, or if it has no realistic alternative but to do so.

However, the term “material uncertainties” is not always well understood. This is especially unfortunate given the Financial Reporting Council’s (FRC) expectation that the current circumstances will probably cause more companies to disclose material uncertainties to going concern.

The term refers to certainties related to events or conditions that may cast considerable doubt on the ability of an entity to continue as a going concern. In other words, if a board foresees possible events or scenarios – aside from those that are only remotely likely to occur – that could lead to corporate failure, then the board should disclose such information.

Assessing the events that could precede corporate failure

When boards are seeking to identify such adverse events or scenarios, they may also consider what mitigating responses might realistically be open to them. Events can lead to corporate failure in part due to their timing, but also because of the scale of their adverse impact on the company and its ability to avoid liquidation.

A board assessing the potential existence of material uncertainties is advised to take account of both the uncertainty itself, and the likelihood of any realistically possible response actually succeeding in mitigating the uncertainty.

The unpredictable effects of COVID-19 have made such assessments even more difficult to make. Even at this stage of the pandemic, considerable uncertainties still exist about such factors as the extent and duration of social distancing measures, as well as how the outbreak will continue to affect both the economy and asset prices generally.

Boards will therefore need to carefully consider how these matters could impact on their company’s specific circumstances, bearing in mind their current and potential cash resources. The situation can differ greatly from one firm to the next with regard to its access to existing and new financing facilities, revolving facilities, invoice discounting and reverse factoring.

What boards must disclose

Not only should a given board appropriately disclose information on its access to and use of financing facilities like those referenced above, but it should also consider its eligibility for announced government support measures and the impact of various potential scenarios.

If the board concludes that a material uncertainty does exist, this should be disclosed in terms that are as specific to the entity as possible. Such a disclosure should be insightful on how and when the given uncertainty might crystallise, and the impact it could have on the company’s resources, operational capacity, liquidity and solvency.

Alternatively, the board may conclude that no material uncertainty exists that meets the criteria for disclosure. If, however, such a conclusion required the application of significant judgement, then this judgement should be disclosed in accordance with IAS 1, paragraph 122.

The provision of such disclosures will make it easier for financial statement users to fully understand the pressures on the company’s liquidity, viability and solvency.

For further guidance, please contact our team

Would you appreciate additional advice, assistance or clarification in relation to the above? Or are you interested in finding out more about such company secretarial services of ours as minute book maintenance, Companies House filings maintenance and register of shareholders maintenance?

If so, you are very welcome to get in touch with our experts in corporate governance, risk and compliance today, whether by phone, email or fax.

May 2020

Just one of the many aspects of your organisation’s corporate reporting that merit careful consideration during the coronavirus crisis, will be its approach to its strategic report and viability statement.

The adoption of a forward-looking outlook is, of course, crucial for a strategic report at any time, but particularly so in the exceptional circumstances that companies now find themselves in.

Furthermore, a strategic report compiled at this time should be entity-specific, in acknowledgement of the widely varying impacts of COVID-19 on individual companies.

It must be especially considered that not all companies have the same capacity and depth of resources to carry out mitigation plans in relation to the pandemic, in addition to withstanding the outbreak’s other effects.

So, what should your firm’s priorities be for this area of reporting?

In outlining its principal risks and uncertainties, your company will need to account for the specific resources, assets and relationships that the corona virus outbreak is putting at greatest risk, while considering what measures can be adopted to protect them.

A given company’s ability to not only survive the present uncertainty, but also to rebuild its business once the worst of the pandemic has passed, could be largely dependent on how well it protects and retains key personnel, and the associated corporate memory.

All of your company’s stakeholders, including investors, will wish to be well-informed on how the workforce is being retained and supported.

However, the present systematic uncertainties may not leave boards confident in stating a reasonable expectation that their companies will be able to continue in operation and meet their liabilities as they fall over the coming assessment period.

What is the Financial Reporting Council’s advice?

In relation to the “viability statement” that is required for compliance with the UK Corporate Governance Code, the FRC stresses the need for boards to have a “reasonable expectation” of the viability of their companies over the period of assessment.

Nonetheless, the regulator acknowledges that amid the current emergency circumstances and a pace of change that many companies have never before experienced, any reasonable level of expectation will inevitably carry a much lower level of confidence.

The body has also emphasised the importance of boards being clear about the specific circumstances of their companies and the extent of uncertainty about the future.

Furthermore, the FRC has said that a board presenting its company viability statement should also highlight any qualifications or assumptions as necessary.

Boards are advised, when describing any qualifications to their statements, to describe the predictions’ limits, as well as the level of confidence with which they have been made, and the uncertain future events of potentially critical relevance to viability.

Along similar lines, boards should explain the key assumptions made and the future scenarios borne in mind. Many firms, for instance, already develop their statements with the assistance of scenario and stress testing, which companies should continue doing as far as practicable.

Finally, it is also good practice for boards to use reverse stress testing as a means of identifying future scenarios that could precede corporate failures.

Request the help of our trusted corporate governance professionals

These current circumstances, of all circumstances, necessitate fuller disclosure from companies of all sizes and sectors.

Get in touch with our experts in Companies House filing maintenance and related services today, by emailing [email protected], and we will be pleased to lend you the benefit of our specialised and hard-won know-how.

April 2020

The World Health Organization (WHO) has long declared the current widespread coronavirus outbreak – associated with the illness Covid-19 – to have reached the status of a global pandemic, and in recent days and weeks, we have begun to see the very real consequences for the economy.

Retailers, restaurant owners and other tenant businesses have had to deal with unprecedented disruption as customers have chosen to keep their distance from such crowded spaces as shopping centres, high streets and retail parks.

Indeed, many such firms, ranging from pubs, restaurants and gyms to theatres and leisure centres, have now taken the step of closing in response to Prime Minister Boris Johnson’s recent advice to them to do so, as the government seeks to minimise the spread of Covid-19.

Meanwhile, at the time of typing, other retailers were officially allowed to remain open. However, a large proportion of these businesses – including such household names as New Look, The Body Shop and HMV – have made their own decisions to temporarily close their stores.

Managing the implications of this monumental and fast-moving situation

Notwithstanding the measures already announced by government in an attempt to support vulnerable businesses, if you are a tenant of a commercial lease, the sharp decline in footfall and the associated decrease in customer numbers may be forcing you to turn to your landlord for assistance.

If this describes your predicament, there are various questions that you may have as this fast-moving situation evolves. You may be unsure, for instance, whether you are able to vacate the premises and terminate the lease, or whether your rent will be suspended.

You may also be anxious to know whether any “keep open” obligation in your lease would require you to stay open. If you are presently negotiating a new lease, meanwhile, you might be curious to know whether any particular new protective provisions should be added to it.

The answers to these questions will differ from one lease to the next. However, below, we have set out some general information broadly applicable to a standard modern commercial property lease.

Are we able to vacate the premises and terminate the lease?

A tenant attempting to successfully argue for their commercial lease to be terminated in these circumstances would need to prove that:

• there has been a significant change in their rights and obligations under the lease, and it is impossible for them to perform any or all of their obligations under the lease. This would mean that the lease is deemed “frustrated” and could be terminated; or
• this global pandemic triggers a “force majeure” boiler plate clause in the lease. This is a clause that says unforeseeable circumstances have prevented the tenant from fulfilling their obligations under the lease. It should be noted that many modern commercial leases lack a “force majeure” clause.

The current consensus in the legal community seems to be that tenants would not be able to prove either (a) or (b) applies to their own commercial lease. However, this may be subject to change as the situation evolves.

Can we have our rent suspended?

In the case of most modern commercial leases, damage or destruction must have occurred to the premises in order for rent to be suspended in accordance with the lease.

While there are normally several caveats and varying circumstances that will dictate whether the rent can or cannot be suspended, the Covid-19 outbreak does not meet the requirements for rent suspension under a standard commercial lease.

Are we required to stay open if there is a “keep open” obligation in our lease?

The presence of such a provision in a commercial lease could be a particular flashpoint in the current circumstances for landlord-tenant disputes. In this instance, it is advisable for tenants to follow the official guidelines laid out by the government, health authorities and WHO.

Recent years have seen fierce debate about the enforceability of “keep open” clauses, and the ongoing international health crisis is likely to return this subject to the forefront of discussion.

Nonetheless, firms should seek legal advice prior to any decision to close premises, unless the landlord and/or the relevant authorities advise otherwise.

Should we add any new provisions to a lease that is currently being negotiated?

The simple answer to this is “yes”. As a tenant, you should absolutely be looking to add provisions into any new lease that you are presently negotiating, as well as any other clauses that might now be considered topical and relevant.

Don’t hesitate to contact our team for further specialised advice and guidance

Whatever challenges the ongoing Covid-19 outbreak is likely to bring for your firm, here at London Registrars, we can provide the solutions and expertise that will help you to navigate the safest route through the disruption for you, your business and your staff.

Contact us now to learn more about our business support, legal support and company secretarial services, the latter encompassing every key service from registered office addresses to the preparation and submission of the annual Confirmation Statement and minute book maintenance.

April 2020