Thought Leadership

Covid-19: Staying Safe as a Start-Up

Client Updates

The uncertainty around the outbreak of Covid-19 is providing businesses large and small with unprecedented commercial, financial and legal challenges. We have prepared an overview of matters companies should be mindful of to help them navigate the constantly changing Covid-19 landscape.

Budget 2020

Unofficially dubbed the “coronavirus budget”, the Chancellor unveiled a package of financial measures in the spirit of “doing whatever it takes” to shield all small and medium sized businesses from the impact of Covid-19. The Budget announced on Wednesday 11 March and most recently updated on Tuesday 17 March has made several notable adjustments, such as agreeing to make available government backed loans totaling £330bn to support businesses. Other measures of note include:

  • Britain’s smallest 700,000 businesses (across all sectors of the economy) will be eligible for cash grants of £10,000;

  • Cutting interest rates from 0.75% to 0.25%, which brings borrowing costs to their lowest point in history;

  • Small and medium-sized businesses will be able to apply for and access “business interruption” loans of up to £5m. Additionally, businesses will be able to access the first 6 months of that loan interest free, as the Government will cover the first 6 months of interest payments;

  • Business rates will be abolished for firms in the retail, leisure and hospitality sectors with a rateable value (i.e. an estimate of what it would cost to rent the property on an open market) of £51,000;

  • Small companies in the retail, leisure and hospitality industries occupying business premises with a rateable value of between £15,000 and £51,000 will be eligible for grants worth £25,000;

  • All those advised to self-isolate will be entitled to statutory sick pay, even if they have not presented any symptoms and businesses with fewer than 250 staff will be refunded for sick pay payments for two weeks; and

  • Entrepreneurs’ Relief will be retained, although the lifetime allowance will be reduced from £10m to £1m (i.e. slashed by 90%). Gains above £1m will be charged at standard capital gains tax rates of 20%.

Prior to seeking additional financing, companies should review the terms of any existing facility agreements, investment agreements and other arrangements to ensure that they have the request investor or lender consent to take on the additional financing.

Health and Safety

There is an expectation that businesses will keep employees informed about the health risks of Covid-19. By having up to date information on your employees’ contact details, you can implement an effective communication system for urgent updates. Therefore, it is important for each company to remain abreast of government advice on any developments either via an internal team or third party such as a law firm or risk management business.

If the office remains open for interim or full access, you must ensure that there is good hygiene in the workplace by encouraging employees to follow handwashing guidance by the National Health Service and increasing the cleaning of hard surfaces. Furthermore, there is an expectation that companies will carrying out a risk assessment to identify higher risks groups for Covid-19 and ask them to work remotely.

Remote Working

As Covid-19 is shifting work patterns and forcing companies to implement work from home policies for an uncertain time period, there are a variety of key points to take into consideration. Baker Botts’ employment counsel will be able to assist with the below1:

(1) Work from home policy

Implement a tailored work from home policy for Covid-19. Set specific expectations for your employees, provide advice on travel, include an overtime policy (if applicable), clarify instructions for protecting proprietary company information and guidance for reporting any illness.

(2) Technology

If your business already has an option for flexible working, then you are one step ahead of the game. If not, then now is the time to ensure that all your employees have the requisite technology to perform their job from home. Given that it is not clear when employees are expected to be back in the office, consider urgently sourcing technology for all employees and not only your key team members.

(3) Cybersecurity risks

Provide all your employees with clear guidance or an online training session on cybersecurity risks when working remotely. For example, computers are prone to a cyber-attack when not using secured VPN or Wi-Fi. Ensure that all risk areas are covered with a step-by-step guide on how such risks could be alleviated.

Supply Chain

Traditionally, businesses would be able to claim damages for breach of contract when contractual obligations are not met, or loss is suffered because suppliers cannot fulfill their duties. However, if Covid-19 is the reason for contractual failure, businesses otherwise in breach may possibly be protected if there is a force-majeure clause (i.e. unforeseeable circumstances that prevent someone from fulfilling a contract) in the relevant contract or if the doctrine of frustration applies. Not all businesses in breach can be protected as it is difficult to rely on these concepts. Thorough legal analysis of the relevant contract is required to determine the rights of each party. For example, a full review of the non-exhaustive events often found in force-majeure clauses is required in addition to spotting whether “unforeseeable” events are included.

Key contracts must be reviewed at the earliest opportunity by all parties involved with an assessment of what pre-emptive measures could be taken to avoid a contractual breach. Parties to a contract could take this as an opportunity to collaborate and consider re-negotiating or delaying obligations.

Millions of people in lockdown around the world have been turning to digital means to help them carry on with both their personal and work-related commitments. In this uncertain time, digital technology businesses are subject to unparalleled demand and, although this increase in demand is challenging, this is an opportunity for growth in reputation and revenue. In order to meet such demands smoothly and showcase excellent customer service, businesses should consider whether the customer support team is prepared to be on standby to assist with any complications, such as the increase in bugs and crashes. Consider preparing underutilized employees from less busy teams to step in and assist with customer service. If purchasing more server space would decrease complications, it is worth prioritizing that as your business is in competition with other digital technology companies that are equally trying to standout in this opportunistic phase.

Insurance

Traditionally, businesses with business interruption insurance policies are covered in the event of damage to property, rather than a pandemic. Additionally, businesses may have purchased a specific add-on for notifiable diseases, but given that Covid-19 is unprecedented, any such add-on would not be helpful. However, if you have purchased a supply chain or denial of access cover, then your business is very much likely to be covered for Covid-19. Review your insurance policy and check with your insurance provider that you are covered for Covid-19.

Emergency Succession Plan

For the survival and growth of your businesses, it is vital to put together a succession plan in the event members of the management team are infected with Covid-19. In a short amount of time, you must create a development plan for likely successors and seek necessary approvals of the succession plan.

1https://www.bakerbotts.com/services/practice-areas/litigation/labor-and-employment

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Lawyers in Baker Botts’ Corporate Department bring sound commercial judgement to clients’ most critical and urgent issues, along with a deep understanding of the varied legal, technical and policy issues that they face. Drawing on our intimate familiarity with clients’ needs and the resources of our global platform, we have amassed an enviable record.

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ABOUT BAKER BOTTS L.L.P.
Baker Botts is an international law firm of approximately 700 lawyers practicing throughout a network of 13 offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology, and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit bakerbotts.com.

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