During the unprecedented COVID-19 global crisis, many businesses struggled to survive. In this blog post, Brent Norling of Norling Law and Damian Grant from Waterstone Insolvency share their expertise on essential strategies and measures businesses should adopt to protect their businesses in times of crisis.
While the COVID-19 crisis thankfully has passed, the practical advice remains relevant for business owners grappling with the complexities of insolvency, tax obligations, and operational costs.
The paramount importance of consulting with insolvency practitioners or legal advisors cannot be overstated. In times of financial distress, obtaining guidance from professionals like Norling and Grant can provide clarity, prevent costly mistakes, and open pathways to viable solutions that might not be immediately apparent to the distressed business owner.
The Inland Revenue Department (IRD) has shown potential leniency towards businesses struggling to meet their tax obligations during the crisis. Negotiating with the IRD to manage or defer tax payments can provide critical breathing space for businesses. It’s a reminder that in times of widespread financial difficulty, even tax authorities recognize the need for flexibility and compassion.
Reducing headcount and other operational costs is a painful, but sometimes necessary, measure to ensure business continuity. The ethical and legal implications of laying off employees, especially when government subsidies are involved, require careful consideration and adherence to the law. A strategic approach to cost reduction, focusing on long-term sustainability rather than short-term gains, is crucial.
Deciding to liquidate or restructure a business is a significant crossroads for any business owner. The distinction between the business as an operational entity and its legal entity is a critical consideration. Strategies such as hibernating the business to avoid liquidation or restructuring to address financial liabilities while preserving the core business can offer lifelines in dire circumstances.
The crisis has cast a spotlight on commercial leases and the financial strain of maintaining rental obligations when businesses are forced to close. The “doctrine of frustration” provides a legal principle that might allow contracts to be cancelled under extraordinary circumstances, offering a possible out for businesses that find themselves locked into untenable leases.
The dialogue between landlords and tenants during this time is more important than ever. Open communication and the willingness to negotiate terms can lead to mutually beneficial arrangements that help both parties weather the economic downturn. Furthermore, potential mortgage relief from banks for landlords can have downstream benefits for tenants, creating a ripple effect of financial sustainability.
Business owners are encouraged to proactively communicate with creditors and seek legal advice before making decisions with potential legal ramifications. This proactive stance not only helps in managing existing financial obligations but also in strategising for the future beyond the crisis.
Resources such as free legal consultations and guides on business hibernation strategies provided by experts like Norling and Grant are invaluable during these challenging times. They underscore the importance of accessing reliable information and professional advice.
The insights shared by Brent Norling and Damian Grant offer a roadmap for businesses navigating the complexities of a global crisis. The emphasis on professional advice, careful planning, and open communication forms the cornerstone of any strategy aimed at ensuring business continuity and eventual recovery. As businesses face the daunting task of adapting to a new economic landscape, the guidance of seasoned professionals can illuminate the path to resilience and renewal.
Navigating through crisis demands wisdom, resilience, and the willingness to seek help when needed. By adopting these essential strategies and leveraging available resources, businesses can not only survive but also set the stage for thriving in a post-crisis world.
Brent is the Director of Norling Law. He has a wealth of experience in the District Court, High Court, Court of Appeal and Supreme Court. Brent is passionate about negotiating favourable outcomes for his clients and able to implement this in his daily negotiations.
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