With the COVID-19 pandemic continuing to have significant adverse effects on businesses and economies worldwide, the UK government is reviewing and revising its measures aimed at mitigating the financial impact of the crisis on UK businesses.
A useful website collating updated information on government measures to support businesses can be found here. In addition, the Department for Business, Energy & Industrial Strategy has created a Coronavirus business support blog which includes case studies, input from UK business and government, as well as links to additional information and resources.
This remains a rapidly-evolving situation and new measures are still being announced regularly as the government attempts to address the ongoing issues facing British society. We are monitoring government sources and will update our advice as promptly as possible in response to new information and advice. To receive a copy of this factsheet when it is updated, please sign up here.
FINANCIAL ASSISTANCE AND RELIEFS AVAILABLE TO UK BUSINESS
The key measures announced by the government so far to support UK businesses are summarised below. Unless stated otherwise, they are applicable in both England and Wales and include:
- Bounce Back Loans for small businesses under a scheme announced on Monday 27th April;
- the Coronavirus Job Retention Scheme which ends on 30th October and the new Job Support Scheme announced on 24th September and which will run from 1st November 2020 for 6 months;
- a Statutory Sick Pay relief package for SMEs;
- a 12-month business rates holiday for all retail, hospitality and leisure businesses in England; in Wales this will now apply only to relevant businesses with a ratable value of £500,000 or less;
- small business grant funding of £10,000 for all businesses in receipt of Small Business Rates Relief or Rural Rate Relief;
- grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £12,001 (Wales) or £15,000 (England) and £51,000;
- the Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs and the more recent Coronavirus Large Business Interruption Loan Scheme offering similar facilities to larger businesses;
- a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans;
- flexibility for the settlement of outstanding tax liabilities through the HMRC Time To Pay Scheme and VAT deferral;
- support for self-employed individuals who, if eligible, may claim a taxable grant worth 80% of trading profits up to a maximum of £2,500 per month for 3 months (capped at £7,500). An extension to the scheme in August 2020 made available a second grant worth 70% of the average monthly trading profits for 3 months up to a cap of £6,570 and a further extension was announced on 24th September, which will provide two grants to be paid in two lump sum instalments, each covering a three month period, extending the period covered by the scheme up to the end of April 2021;
- a £1.25bn fund designed to protect firms driving innovation in the UK, including a £500m Future Fund for high-growth companies and £750m for R&D companies;
- in Wales only, the establishment of an Economic Resilience Fund, Phases 1 and 2 of which provided grants of £10,000 for micro-businesses employing up to 9 people (including self-employed employing staff), and up to £100,000 for small to medium-sized firms with between 10 and 249 employees, plus support for larger Welsh companies of critical social and economic importance to Wales. Phase 3, announced on 29th September 2020, will make a further £140m available to Welsh businesses, with £20m of that total being ring-fenced to support tourism and hospitality businesses and a further £80m being targeted at businesses impacted by local lockdown restrictions. The £100m COVID-19 Wales Business Loan Scheme announced by the Welsh government and the Development Bank of Wales is now fully subscribed;
- a £750m package of support for frontline charities in the UK.
Bounce Back Loan Scheme
A new scheme offering fast track loans of between £2,000 and £50,000 to small businesses within 24 hours of approval was announced by Rishi Sunak in April, following government consultations with business representatives and amid ongoing concern about businesses struggling to access funding. The scheme is intended to provide rapid loans to the smallest businesses affected by the coronavirus which are desperate for vital cash injections. Businesses established before March 1 2020 can apply for loans representing up to 25% of turnover, which will be 100% government backed, interest and fee-free for the first 12 months, with no repayments due for the first 12 months. After 12 months the interest rate will be 2.5% a year. The scheme is accessible by completing a short, standardised online application, with funds being made available in most cases within 24 hours of approval.
Coronavirus Job Retention Scheme
All UK employers which had created and started a PAYE scheme on or before 19th March 2020 have been eligible to access support to continue paying part of the salary of those employees who would otherwise have been laid off during the pandemic crisis. Until the end of July 2020, HMRC committed to reimburse 80% of the wage bill for ‘furloughed’ employees (employees who are not working, providing services or generating revenue) capped at £2,500 per month, plus the associated Employer NI contributions and the minimum automatic enrolment employer pension contributions on that wage.
The scheme, which applied to full time and part time employees, those on agency contracts and on flexible or zero hours contracts and foreign nationals on all categories of visa, closed to new entrants on 30th June 2020 and will close entirely at the end of October 2020. Government contributions under the Scheme have been tapering over the Summer and in October will reduce from the September level of 70% of the hours not worked by employees (up to a reduced cap of £2,187.50) to 60% during October (with a cap of £1,875).
Detailed information regarding the CJRS and what it means for employers can be found here. For a detailed analysis on how the changes that were introduced from 1 July affect employers, see our flexible furlough article here. Both articles are kept up-to-date but with a dynamic situation, please speak to our employment lawyers.
New Job Support Scheme
On 24th September 2020, Chancellor Rishi Sunak announced a new scheme designed to continue to support employment after the end of the CJRS. The new Job Support Scheme will run from 1 November 2020 for 6 months and is aimed at protecting viable jobs in businesses facing lower demand due to COVID-19. Businesses using the scheme will continue to pay their employees for hours worked, but the cost of any hours not worked will be shared by government and the employer. The government will pay a third of hours not worked, subject to a cap, with the employer also paying a third. Using the scheme will not affect the ability of eligible employers to claim the Job Retention Bonus. Further information on the scheme can be found here, while additional details are expected to be announced by government soon.
Coronavirus Statutory Sick Pay Rebate Scheme
The Coronavirus Statutory Sick Pay Rebate Scheme (SSPRS) will repay statutory sick pay to employers who have paid sick pay to their employees who are absent from work due to COVID-19. The SSPRS is open to UK based SMEs – for this purpose defined as employers with fewer than 250 employees.
Eligibility will be assessed on the number of employees as at 28th February 2020. Connected companies and charities are able to use the scheme if their total combined number of PAYE employees is fewer than 250 on or before 28th February.
- eligible companies will be able to reclaim up to two weeks’ SSP paid to each eligible employee who has been off work due to COVID-19;
- employers should maintain records of staff absences and of payments of SSP but employees will not be required to provide a GP’s note;
- eligibility for the scheme commenced on 13th March 2020 (the day new Regulations extending the payment to SSP to those staying at home due to COVID-19 came into force).
Further details are available here.
Business Rates Relief
In England, the Government has extended the business rates retail discount scheme to all ratepayers in the retail, hospitality and leisure sectors.
Initially, the Government announced in the Budget that a 12 month exemption for occupied retail properties with a rateable value below £51,000 would be granted. However, the impact of the “social distancing measures” announced by the UK Government on 16 March, on pubs, restaurants, hotels and theatres, has prompted the extension of the relief to all properties in the retail, hospitality and leisure sectors irrespective of their rateable value. The relief represents a 100% exemption from rates for the year 2020/21.
In Wales, although the government initially announced that it would mirror the English scheme, it subsequently announced that this will now only apply to businesses with a rateable value of £500,000 or less.
Properties that benefit from the scheme are:
- shops, restaurants, bars, pubs, cafes, cinemas, live music venues and theatres. “Shops” includes any properties used for the sale of goods to the visiting public (i.e. not online establishments);
- properties used for leisure activities, including theatres, museums, sports clubs and gyms;
- hotels, guest & boarding premises and self-catering accommodation.
The properties eligible for the relief must be in occupation, therefore vacant properties will not be able to benefit. Those properties which have closed due to the outbreak of COVID-19 will be treated as occupied and so will be eligible for the relief.
Properties that are used for the following purposes will not be eligible for the relief:
- financial services (e.g. banks, building societies, cash points, bureaux de change, payday lenders, betting shops, pawn brokers)
- other services (e.g. estate agents, letting agents, employment agencies)
- medical services (e.g. vets, dentists, doctors, osteopaths, chiropractors)
- professional services (e.g. solicitors, accountants, insurance agents/ financial advisers, tutors)
- post office sorting offices
- casinos and gambling clubs
Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible. Businesses should contact their local authority with questions relating to eligibility and the application process.
Small Business Grant Funding
Additional funding will be made available through local authorities to support small businesses that already pay little or no Business Rates due to the Small Business Rate Relief (SBBR) or Rural Rate Relief. Businesses in England with a rateable value of £15,000 or less (£12,000 or less in Wales) will receive a grant of £10,000 to help mitigate the impact of Coronavirus to help meet their continuing business costs. To be eligible for the grant, businesses must meet the following criteria:
- the business must have a business premises;
- the business premises must be in England or Wales;
- the business must be eligible for either SBBR or Rural Rate Relief.
Start-up businesses are not eligible for the funding. In England, eligible recipients will be entitled to receive one grant per hereditament. In Wales, the multiple property restriction which applies to SBBR also applies to these grants, so that the same ratepayer may only receive the grant for a maximum of two properties in each local authority area.
The scheme will be implemented through local authorities, with funding being received by the government in early April. Some local authorities will automatically contact businesses based on their business rates records and others have established an application process. Businesses should check the procedure applicable in their relevant local authority. For English businesses, the UK government website has a postcode search facility to enable businesses to access the website of their local authority. In Wales, the Business Wales website has links to each of the relevant local authority websites.
More generous rules apply to businesses in England and Wales in the retail, hospitality and leisure sectors. The Retail and Hospitality Grant Scheme will provide relevant businesses with cash grants of up to £25,000 per property: properties with a rateable value of up to £15,000 in England (£12,000 in Wales) may be eligible for a grants of £10,000, while those with a rateable value of over £15,000 in England (£12,000 in Wales) but less than £51,000 may be eligible for a grant of up to £25,000.
In addition to the above schemes, the Local Authority Discretionary Grants Fund has been established to support small and micro businesses based in England which are not eligible for other grant schemes. This fund is allocated at the discretion of local councils, but the government has asked them to prioritise small businesses in shared workspaces, market traders, bed and breakfasts paying council tax not business rates and charity properties getting charity business rates relief which are not eligible for small business rates relief or rural rate relief. Details are available from local councils’ websites.
Coronavirus Business Interruption Loan Scheme and Coronavirus Larger Business Interruption Loan Scheme
The government has announced the introduction of a temporary Coronavirus Business Interruption Loan Scheme (CBILS) to support small and medium-sized businesses and also, responding to initial concerns that a large selection of UK firms (those businesses with turnover of more than £45m but which, for a variety of reasons, are not investment grade) were without support, through the subsequently announced Coronavirus Large Business Interruption Loan Scheme (CLBILS).
The CBILS will temporarily replace the Enterprise Finance Guarantee for SME overdrafts.
Following feedback on the initial set up from UK businesses, the government has significantly expanded the scope of CBILS, with effect from 6th April 2020, to facilitate access to emergency funding by a greater number of UK businesses:
- the scheme has now been made accessible to businesses which would not previously have been eligible because they met the requirements for a standard commercial facility; insufficient security is no longer a condition;
- banks are no longer permitted to require personal guarantees for loans of up to £250,000. Although loans of over £250,000 may require a personal guarantee, this cannot include the Principal Private Residence and recovery is capped at 20% of the outstanding CBILS balance after the proceeds of business assets have been applied.
Under CBILS the government will provide lenders with a guarantee of 80% on each loan (subject to a cap on claims applying to each lender) to give lenders further confidence in continuing to provide finance to SMEs during the COVID-19 pandemic. The government will not charge businesses or banks for this guarantee and the Scheme will support facilities from £1,000 up to £5 million in value. Finance terms are from three months up to six years for term loans and asset finance and up to three years for revolving facilities and invoice finance. The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and fees. The borrower will remain fully liable for the debt.
The CBILS covers a variety of types of finance, including:
- term facilities
- invoice finance facilities
- asset finance facilities
To be eligible for the CBILS, the small business must meet the following criteria:
- be UK based, with turnover of no more than £45 million per annum;
- operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support, including banks and insurance providers) and generate more than 50% of its turnover from trading activity;
- have a sound borrowing proposal. Demonstration of this is likely to require provision of the following:
- Up to date Statutory Accounts;
- Current Management Accounts;
- Up to date P&L and Balance Sheets and updated forecasts.
- be able to confirm that they have not received other public support of de minimis state aid beyond €200,000 equivalent over the previous three years and that the facility will be used to support primarily trading in the UK.
The revised scheme on the above terms is now operational. Full details can be found here. Any small business which was unsuccessful in securing funding under the original scheme parameters may now consider re-applying by contacting their lender (40+ accredited lenders).
The Coronavirus Large Business Interruption Loan Scheme has been expanded since its initial announcement to cover all viable UK businesses with turnover of over £45m, through the availability of government-backed loans of up to £25m for firms with turnover up to £250m and loans of up to £50m for those with higher turnover. Applicants must have a borrowing proposal which the lender would consider viable if not for the COVID-19 pandemic and which the lender believes will enable the business to trade out of any short to medium-term difficulty. Applicants will be required to self-certify that they have been adversely affected by the coronavirus. CLBILS applications opened on Monday 20th April 2020. Further details can be found on the British Business Bank website.
Support for large firms – COVID-19 Corporate Financing Facility
To further support larger firms during the current crisis, the Bank of England has announced a new lending facility to provide a quick and cost-effective way for businesses to raise short term working capital through the purchase of short term debt. This facility is intended to support companies which are fundamentally strong, are investment grade, but have been affected by a short-term funding squeeze, so allowing them to continue funding their short-term liabilities. It is also designed to support the corporate finance market generally and ease the supply of credit to all firms. The scheme is now open for applications, with further details as to how it will operate and how to access funding available from the Bank of England.
Support for businesses paying tax
Time to Pay – Support for businesses and self-employed individuals in financial distress who may have difficulties paying outstanding tax liabilities as a result of issues caused by the coronavirus outbreak can be sought through HMRC’s Time To Pay Service. Arrangements are agreed on a case-by-case basis, taking into account individual circumstances and liabilities and may include arranging for outstanding tax to be paid by instalments, suspending debt collection proceedings and cancelling penalties and interest where there are administrative difficulties in contacting or paying HMRC immediately. Those owing less than £30,000 may be able to set up a Time to Pay Arrangement online. Other businesses and self-employed persons can seek advice via the self-assessment payment helpline on 0300 200 3822 (8am to 4pm Monday-Friday).
Deferral of VAT – VAT payments are deferred for a period of 3 months with effect from 20 March 2020 to 30 June 2020. This is an automatic relief for taxpayers albeit a temporary one. Businesses were initially expected to be required to repay the outstanding VAT by the end of the 20/21 tax year. However, on 24th September 2020 the government announced that, instead of paying the outstanding VAT in full by the end of March 2021, businesses can opt-in to a scheme allowing them to make smaller payments up to the end of March 2022 interest-free. Further information on this facility will be made available over the coming months.
Income Tax – Another automatic, but temporary relief favours the self-employed. Payments due for Income Tax Self-Assessment are deferred from 31 July 2020 to 31 January 2021.
Support for the self-employed
The Self-Employment Income Support Scheme (SEISS) supports self-employed individuals (including members of partnerships) who have lost income due to COVID-19. A first taxable grant, equal to 80% of trading profits, up to a maxim of £2,500 per month for a 3-month period was available to be claimed up to 13th July 2020. Applications for a second taxable grant, equal to 70% of the average monthly trading profits of the individual for three months up to a maximum of £6,570 can be made on or before 19th October 2020. Eligibility criteria for the scheme remains the same and can be found here.
In addition, a further extension to this scheme was announced on 24th September and will provide two grants to be paid in two lump sum instalments each covering a three month period, extending the period covered by the scheme up to the end of April 2021. HMRC will provide a taxable grant covering 20 per cent of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £1,875 in total. This is intended to provide broadly the same level of support for the self-employed as is being provided for employees through the new Job Support Scheme outlined above. The second grant will cover a three-month period from the start of February until the end of April. HMRC will review the level of the second grant and set this in due course. The grants are subject to Income Tax and National Insurance Contributions. Further details on how to claim these grants is expected shortly.
Support for innovative businesses
An additional support package worth £1.25bn, targeted at innovative UK business operating in sectors including tech and life sciences, has also been created. This will include the Future Fund, launched in May and open for applications until the end of September 2020, which will be delivered in partnership with the British Business Bank. The Future Fund is aimed at supporting innovative UK companies facing financial difficulties as a result of the COVID-19 outbreak, by making £250m of funds available by way of convertible loans of up to £5m, subject to at least equal match funding from private investors. Eligible businesses will need to have raised at least £250,000 in equity investment from third-party investors in the last 5 years and will need to secure equivalent funds to match the government loan from private investors or institutions. Headline terms applicable to Future Fund loans have now been published.
In addition to the Future Fund, a further £750m will be made available in the form of grants and loans to UK SMEs focusing on research and development. Innovate UK, the national innovation agency, will accelerate up to £200m of grant and loan payments for its existing 2,500 customers. An extra £550m will also be made available to increase support for existing customers and £175,000 offered to around 1,200 firms not currently in receipt of Innovate UK funding. Click here for further details.
Support for businesses in Wales
Wales only – Economic Resilience Fund
Phases 1 and 2 of the £500m Economic Resilience Fund announced by the Welsh government to provide grants to micro-businesses and SMEs which have experienced a significant reduction in turnover since the crisis began and to support larger Welsh companies of critical social or economic importance to Wales have now closed. However, on 29th September 2020 the Welsh government announced Phase 3, which will make a further £140m available to Welsh businesses, with £20m of that total being ring-fenced to support tourism and hospitality businesses and a further £80m being targeted at businesses impacted by local lockdown restrictions. The rest of the funding will be used flexibly to provide additional support, for example to increase lending to Welsh businesses through Development Bank of Wales initiatives and to help companies deal with the impact of the UK leaving the European Union.
A Cultural Recovery Grant Fund has also been created in Wales, allowing organisations and freelancers working in the arts and creative industries whose work has direct creative or cultural outcomes to apply for grants. Applications for organisations are open until 2nd October and for freelancers will open on 5th October 2020.
The £100m COVID-19 Wales Business Loan Scheme launched at the end of March by the Welsh Government and DBW is now fully subscribed.
Further advice for Welsh businesses is available via the Business Wales website. This includes a series of digital courses and webinars aimed at Welsh SMEs, covering topics including alternative business models and diversification, cashflow and finance, and managing teams and workloads remotely. Available courses can be searched using the Business Wales online Events Finder.
The Charity Commission has issued guidance for charities seriously impacted by COVID-19.
On 8th April 2020 the government announced a £750m package of support for frontline charities in the UK. £360m of this total will be allocated by government departments to charities providing vital services and helping vulnerable people during the current crisis and a further £370m will go to small and medium-sized charities carrying out vital work at the heart of communities, including delivering food and essential medicines and providing financial advice, some of which will be distributed by way of a grant to the National Lottery Community Fund. This new funding will be available in addition to the existing business support measures for which charities may be eligible including deferral of VAT bills, business rates relief and furloughing of staff through the Coronavirus Job Retention Scheme. Where charitable services are devolved, the UK government has applied the Barnett formula in the usual way and expects the devolved administrations to receive £60m through the charities pot and further significant Barnett allocations through the direct grant pot.
In Wales, Third Sector Support Wales has established the Funding Wales platform to provide a funding search portal to assist charities, community groups and social enterprises in finding grants and local finance opportunities. Details are available of various sources of funding available during the coronavirus crisis on their coronavirus funding page.
Government Ordered Closures
Since the government required specified businesses and venues to close from 21 March onwards, insurers have confirmed this is sufficient for companies which have appropriate insurance cover to make a claim. However, it also noted that most businesses are unlikely to be covered since standard business interruption policies are dependent on damage to property and will not cover pandemics. Businesses which do have cover for both pandemics and government ordered closure are likely to be able to claim, although this would depend on the specific policy terms in each case. Affected businesses are advised to check any relevant insurance policies and contact their providers.
The recent verdict in the test case brought by the FCA against a sample of insurers found in favour of business interruption insurance policyholders and may mean payouts are more likely under certain policies. It is not yet clear whether the insurers will appeal the ruling; the FCA and the insurers are currently in negotiations with a view to agreeing a final resolution and payouts on eligible claims without going through an appeal process as soon as possible.
Protection from eviction
Commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction, meaning no business will be forced out of their premises if they miss a rent payment in the next three months.
OTHER FORMS OF SUPPORT AVAILABLE TO BUSINESSES
In addition to the financial measures introduced by government, various sources of support and advice are available.
Be the Business, an independent, not-for profit entity aimed at helping UK firms improve performance, has a dedicated Coronavirus webpage with an excellent Best of the web summaries feature, which aims to curate the most useful information from across the web, by category, and includes useful practical advice on matters such as such as controlling fixed costs and managing cashflow. Each page has a 2 minute read ‘5 things you can do right now’ option and a 20 minute read ‘resource roundup’ option.
Be the Business has also introduced a new 12 week Rapid Response Mentoring programme to support owner/managers of businesses. SMEs with 6 or more full-time employees and an annual turnover of at least £1m are eligible for the programme, which pairs businesses with suitable mentors from some of Britain’s leading firms and provides weekly support calls or online meetings of 1-2 hours, as well as virtual groups and webinars providing relevant support. Businesses can register as a mentor or a mentee here.
LinkedIn has created a Coronavirus webpage collating news and perspectives on COVID-19 from trusted sources as well as links to other useful resources including free online courses covering topics such as Leading at a Distance, Managing Virtual Teams and Microsoft Teams Tips and Tricks, amongst several others which businesses may find useful.
The Federation of Small Businesses also has a useful webpage with access to free webinars and helpful summary sheets of support available for small businesses based in each of the countries which make up the UK.
Enterprise Nation is an online community of small businesses and business advisors providing startups and growing small businesses with access to trusted business support. To find out more click here.
SUPPORT FOR DIRECTORS
The Institute of Directors has set up a Coronavirus Support Hub with links to various resources and information which may be useful to company directors during this pandemic. Amongst other things, the IoD is pressing the government for clarification on what activities can be carried out by directors who are furloughed and on the issue of whether furloughed pay can be extended to include dividends, since directors of small companies often take a significant portion of their income in this form.
DISCLOSURE AND REPORTING OBLIGATIONS
In addition to the assistance which may be available to businesses, companies need to be aware of additional obligations and responsibilities which may apply during the current crisis.
Annual reports and accounts
Any company producing annual reports and accounts at this time will need to be particularly mindful of requirements to disclose the principal risks facing their business in their annual and interim financial reports. These obligations can be found in:
- the Companies Act 2006, which requires all UK companies (except small companies) to produce a strategic report for each financial year including, among other things, a fair review of the company’s business and a description of the principal risks and uncertainties faced by the company;
- for premium listed companies:
- the UK Corporate Governance Code (Code) requires the directors to carry out a robust assessment of the company’s emerging and principal risks and to confirm that it has done this in its annual report, along with a description of those risks, the procedures that are in place to identify emerging risks and an explanation of how these are being managed or mitigated;
- the DTRs require the annual and half yearly financial report to include a description of the principal risk and uncertainties facing the issuer.
In addition to reporting obligations, the Code requires boards of premium listed companies to establish procedures to manage risk and oversee the internal control framework.
Extra time for filing accounts
Companies House has shared guidance for companies that need additional time to file accounts as a result of the coronavirus outbreak.
Companies should apply for an extension in advance of the due date for filing to avoid an automatic penalty. Companies House advises that the online form takes up to 15 minutes to complete and will require the company number, email address and information about the reasons for requesting an extension, with an option to attach supporting documentation. Click this link to go direct to the relevant page on the Companies House website.
Gender pay gap reporting
The government has announced that the enforcement of all gender pay gap reporting for companies with over 250 employees is suspended for the year 2019-20, although employers may continue to report relevant information if they wish.
The Chartered Governance Institute has published guidance on the holding of AGMs during the current crisis, including advice on attendance, venue and quorum.
It has also issued advice on the holding of virtual board meetings during the coronavirus outbreak.
Specific guidance for listed companies
Going concern statement
Another specific requirement for premium listed companies which will be particularly relevant is the impact the current crisis will have on the ‘going concern’ statement they are required to include in their yearly and half-yearly financial statements by both the Code and the Listing Rules. This statement must:
- state whether the board considers it appropriate to adopt the going concern basis of accounting in preparing the financial statements.
- assess the prospects of the company and identify any material uncertainties in relation to the company’s ability to continue to do so over a period of at least 12 months from the date of approval of the financial statements.
Longer term viability statement
Under the Code, premium listed companies must also include in their annual report a statement:
- explaining how the board has assessed the prospects of the company, over what period and why it considers that period to be appropriate (in each case taking into account the company’s current financial position and risks);
- as to whether the board has a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the relevant period, drawing attention to any qualifications or assumptions as necessary.
For listed companies, the FCA has also indicated, in Primary Market Bulletin 27, that it expects issuers to put in place contingency plans to mitigate the logistical issues that the pandemic may cause for reporting in future reporting periods eg by considering whether any non-essential parts of their report can be deprioritised. Any issuer who thinks it may not be able to meet its continuing obligations should seek appropriate advice and discuss this with their auditors and the FCA.
General disclosure obligation for listed and AIM companies
For directors of listed and AIM companies, the general disclosure obligation to inform the public as soon as possible of any information which, if made public, would be likely to have a significant effect on the price of the company’s securities will take on particular significance during this pandemic. Its impact on the company’s financial position, current and anticipated future performance and the likely course of its business going forward will all need to be carefully monitored and announcements made as appropriate. The FCA’s Primary Market Bulletin issued on 17th March made it clear that despite the current challenges, the FCA expects companies to continue to comply with these disclosure obligations in a timely manner.
Publication of financial statements
The FRC has published guidance for companies preparing financial statements during the coronavirus crisis, highlighting key areas of focus for boards, including the difficulties of making forward-looking statements.
In addition the FRC, FCA and PRC have announced a series of actions to ensure the continued flow of information to investors and to support the continued functioning of the UK’s capital markets. Among the measures announced on 26th March are:
- an FCA statement allowing listed companies an extra two months to publish audited annual financial reports;
- FRC guidance for companies preparing financial statements in the context of current uncertainties;
- guidance from the FRC for audit firms in overcoming challenges in obtaining audit evidence.
This article has first published on 8 April and last updated on 1 October.
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