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In the land of coronavirus cash is still king

16 April 2020
The role of the Credit Department in managing credit risk and maximising cash collection for businesses has never been more critical to a business's survival than in the face of coronavirus.

On Monday 23 March 2020, Boris Johnson announced that all British people must stay at home, save for very limited purposes, in order to slow the spread of the coronavirus.  Immediately, all shops selling non-essential goods were required to close (following the closure of pubs, bars, theatres and restaurants the Friday beforehand); and people would only be allowed to leave their home for very limited purposes, including travelling to and from work, but 'only where this is absolutely necessary and cannot be done from home'.  

In reality, however, many venues and shops were already almost deserted (save for supermarkets and other food shops).  The impact on cash flow for businesses has been tangible:

- For commercial organisations, different sectors have been affected in different ways.  Even intra-sector, whilst Retail and Hospitality have felt a major impact on footfall before closure, organisations supplying Food are experiencing a huge surge in demand;
- For sole traders, some are able to continue e.g. carrying out repairs and maintenance in people's homes, provided they are well and have no symptoms and the household isn't isolating or holding a shielded individual;
- For individuals, a great number of people were laid off before the Government announced its Coronavirus Job Retention Scheme and furloughed since.

The impact is wide-ranging.  From practical experience, we have heard the full spectrum of issues from companies holding on to cash, to individuals being laid off or put on short-time working, reducing their household income, and some refusing to accept the service of process for fear of contracting the virus.

Nevertheless, as at the time of writing:

Clients are continuing to work, seeking our advice on myriad of issues, such as whether force majeure clauses in their contracts might "bite".  Others are seeking guidance on how they might best exercise forbearance and consideration, in the face of what are unprecedented and rapidly developing circumstances.  Many are referring matters where their customers are seeking to excuse late payment by referring to coronavirus, where their debts have accrued some time prior to this crisis!

DWF's Recoveries Department has been able to respond to developments very quickly, mobilising our flexible IT infrastructure to support more than 98% of our Department to work from home.  With continued facilities support from our offices, we are able to print and sending hard copy correspondence and documentation, where necessary, as normal.  We are working very hard in order to continue to be able to provide the same high quality service that our Clients expect.

Courts: the Claims Production Centre (CPC) in the Northampton County Court Business Centre (CCBC) remains operational, as does the County Court Money Claims Centre (CCMCC) in Salford, with those working within the Courts having "key worker status". Many Hearings have been subject to adjournment but, where Hearings are necessary, Her Majesty's Courts & Tribunals Service is working urgently on expanding the availability of technology by telephone, Skype and video facilities.

 Enforcement:

o Warrants and Writs of Control are perhaps most impacted, with many enforcement agent visits (after compliance stage) being suspended temporarily, following the Government's guidance.  Telephone and letter collections activity is continuing;

o Applications for Third Party Debt Orders and Charging Orders are uninterrupted, potentially save for the conduct of any applicable Hearings;

Whilst a new Practice Direction has been implemented to stay possession proceedings, this solely relates to possession proceedings brought under Part 55 of the Civil Procedure Rules i.e. mortgagee's possession claims and possession claims against trespassers, rather than claims to enforce charging orders by sale under Part 73.  However, with the mortgage market going into partial lockdown achieving the sale of any property may prove very difficult in any event.

o  Attachment of earnings order are also likely to be impacted by layoffs, furloughing and employer failure to comply.

Insolvency:

o Bankruptcy: the service of process may be subject to the same issues as Enforcement Agents, particularly when it comes to individuals who are self-isolating; and

o Corporate Insolvency: the High Court initially adjourned all Winding Up Hearings and it was well reported that the Government was currently considering a moratorium on the issuing of Winding Up Petitions, to assist struggling businesses in the face of the impact of coronavirus.  Since, Hearings have started to be heard remotely and the Temporary Insolvency Practice Direction has come into force.

In the midst of virtual lockdown, debt collection continues, DWF's Recoveries Department remains ready and willing to support Clients navigate through the ever-changing landscape and, importantly, the Courts continue to provide what is a vital public service, just as others in the public sector and in the private sectors are doing.

Whilst it is, by no means, "business as usual" for many: cash is still king.  Knowing your customers and keeping close to developments with them is imperative, as is chasing payment to support cashflow for businesses, as the backbone of our economy.

If you would like to get in touch with us on this topic, please get in contact with Jeffersen Gledhill.

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