How business owners can protect themselves from the impact of Coronavirus

The outbreak of the coronavirus pandemic, is an unprecedented global event that is having a major impact on the economy and businesses,  the way we interact, the viability and functionality of businesses and future employment and financial prospects.

From a corporate, commercial and legal perspective we would like  to provide you with some practical tips on how to best navigate your business through these turbulent and uncertain times.

We consider the most important first steps are to:

• Communicate, ask for help and engage the right people to help you;
• Review and assess all your key business documents agreements and all important business information that are the key drivers of your business;
• Prepare and implement new/improved business plans;
• Work together and treat others fairly and justly; and
• Remain calm in a crisis.

Contractual rights

There are 2 key legal principles which could assist you in these circumstances.

Force Majeure

1. Force Majeure is the legal principal that can be utilised when there are unforeseen consequences that prevent someone from fulfilling obligations under a contract.
2. It is important to note that this principal can only be used if the contract actually contains a “force majeure” clause. Such clauses usually are about an “act of God”, such as earthquake, flooding, war etc.
3. If your contract does contain a “force majeure” clause, you still need to review the exact wording of the clause to determine whether it covers a public health crisis, like the coronavirus pandemic.
4. If you aren’t sure if your “force majeure” clause covers the coronavirus pandemic, please contact us for further assistance.

Frustration

1. If your contract does not contain a “force majeure” clause, all hope is not lost as the legal principal of frustration could be of assistance.
2. Frustration occurs when a contract, without the fault of either party, is incapable of being performed due to an unforeseen event or events.
3. If frustration can be used, the contract is automatically terminated at the point of frustration. It is important to note that this does not mean that the contract is void from the commencement, but rather that only future obligations are discharged.
4. Another important consideration to be aware of is that if the contract includes a “force majeure” clause (and such clause contemplates a public health crisis) then frustration cannot be called upon, as the contract already contemplates such an event.
5. To determine if your contract is frustrated, please contact us for further assistance.

Leasing

Tenants

We are seeing the severe economic impact that social distancing and an increase in self-isolation is having on businesses.  Profits and turnover are lower than ever, and businesses are being forced into closure or making drastic changes in the way their businesses are run and employment viability of staff.

Rental payments are increasingly harder to make when the business just isn’t there.  So what can you do?  Contact us so we can work together to review, assess and implement the right plan for you.  This may include the following:

1. A review your lease agreement. In particular, the “force majeure” clause or consider if you could show “frustration” of the contract.
2. Communicating with your landlord. Tell them that you are struggling.  Suggest a rent-free period or a rent reduction.
3. Assess and access any information and incentives provided by the Government regarding payment packages for small businesses. Please contact us for the latest information in this regard.
4. Negotiating new or interim terms with your landlord.

Landlords

Tenants aren’t the only group of people being hit hard by this global crisis.  As a landlord, if you risk losing your rental income, your mortgage repayments don’t stop and your other debts don’t disappear.

So if your tenant comes to you and asks for a rent-free period or reduction in rent, what do you do?  Contact us so we can work together to review, assess and implement the right plan for you.  This may include the following:

1. Understand where they are coming from. It’s likely that your tenants are suffering severe economic strains and are having to consider drastic measures, such as laying off employees or shutting shop completely.
2. Consider a rent-free period or rent reduction.  This could keep your tenant afloat for the duration of the pandemic, which will help in ensuring longevity of tenure. If you don’t act reasonable in the circumstances, you could suffer reputational harm, lose your current income stream and lose future rental income long after the coronavirus pandemic is over and life gets back to normal.
3. Speak to your bank/mortgage broker.  Given the circumstances, the banks may are likely to offer hardship conditions or other forms of short to medium term mortgage repayment relief. Please contact us for the latest information in this regard.

Banking & Finance

If you’re struggling to make your mortgage repayments, pay credit card debts or suffering general financial hardship as a consequence of the impact of the coronavirus pandemic, it’s important that you don’t keep your head in the sand – instead, be proactive.

Keep in mind the following when dealing with your financial struggles:

1. Most mortgages/financial contracts include hardship clauses or “force majeure” clauses.
2. The Government is constantly updating its stimulus packages for small businesses/welfare recipients.  .
3. Act swiftly to contact your bank and explain your struggles.

Insurance

Insurance policies can be difficult to navigate at the best of times, let alone when you’re facing an unprecedented and uncontrollable event.  We can assist you to navigating your insurance policies and/or dealing with your insurer, which may include the following:

1. Reviewing your insurance policy, in particular looking for terms/clauses regarding “pubic health crisis”, “Act of God”, “force majeure” and “financial hardship”.
2. Speaking with your insurer about your policy and request what you are entitled to under your policy.
3. Please contact us to reviewing your insurance policies or negotiate with your insurer on your behalf.

Implementing new business plans

Whilst not strictly legal, reviewing and implementing a new business plan is imperative to sustaining your business over the duration of this global health and economic crisis.  Business as we know it has been forced to make drastic changes, and right now we are unsure of how long we will be subject to these changes.  Whilst every business will have different considerations, here are some key tips to keep in mind when reviewing/implementing new business plans:

1. What expenses are crucial to business functionality?
2. What expenses can be reduced? (ensuring that it will not impact future business prospects).
3. Consider your suppliers – are they impacted by new import restrictions? It may be prudent to contact back-up suppliers to ensure you can still manufacture your product.
4. Are you able to defer any payments/expenses? Consider what deferral options the ATO may have, for example.
5. Create new sales initiatives. Can you move your product/service online to maintain accessibility to your business?
6. Seek support from your bank/financier.
7. Staff – if it’s possible for your staff to work from home, do so. Consider what challenges this could present, and create ways to overcome such challenges.

Employment

Sustainability of employment and the likelihood of high increases of unemployment are issues which are keeping many employers and employees up at night.  In order to maintain employment, here are some of the considerations that employers are taking into account:

1. Leave without pay;
2. Voluntary salary reductions; and
3. Reduction of working hours.

Regarding workplace relations and employment law, our team leader is Andrew Clare who is widely regarded by clients and peers as a leading practitioner in his field and acts in all areas of employment and industrial relations law.

In Summary

With the uncertainty surrounding the outbreak of the coronavirus pandemic we want to reassure our clients, friends, family, loved ones, business owners, tenants, landlords and the community at large that TGB Commercial team is here to provide you with any support and pragmatic advice you may require.

In these troubled times we are calm and ready to provide you with sensible advice for any legal or commercial crisis that you may be experiencing.

Communication is the key and we are ready – right here – right now to assist you with the things that are within your control and advise you and prepare for the things that are beyond your control.

To request an appointment, click here.