How can companies preserve business and incentivise employees during these uncertain times?
All content on this page is correct as of April 15, 2020
Bates Wells outlines some issues for consideration for companies planning for the future of their business, as well as the different forms of incentives available for your people.
A lot has been written about how to deal with human capital, especially around furloughing. Below we look at some other considerations…
- Can be
used as a viable alternate remuneration strategy to compensate key employees for
taking a temporary salary reduction or in lieu of a discretionary cash bonus.
is also the possibility of agreeing low valuations and option exercise prices with
HMRC as a result of the economic uncertainty.
- If the
business has already granted EMI share options, then now may be a good time to
re-visit the share valuation especially if any option exercise in future is
likely to give rise to income tax liabilities for the employees.
- Companies in urgent need of finance may be able
to take advantage of existing tax benefits and SEIS/EIS as a means of
attracting investors. As well as the income tax relief and the CGT exemption on
a sale there is loss relief which means if they don’t get their investment
money back on a sale, the resulting loss (less the initial relief) can be set
against income tax.
- The EIS Association is lobbying for a relaxation
of the EIS rules and also an increase in the rate of tax relief so as to further
encourage investors to put in much needed cash to companies.
- Companies should be considering whether any requirement
to write off bad debts might give rise to losses that can be recognised for
accounting and tax purposes.
Ring-fencing company property/assets
company could move certain assets into a separate group company to ring fence
it from the liabilities of their trading entities.
- This should
be possible to do on a tax neutral basis.
- It will
be necessary to consider the valuation of property/assets being transferred and
company law requirements.
Deferral of tax
with the company’s accountants how the company might be able to defer tax or
get VAT relief for bad debts.
deferral requires the cancelation or suspension of any standing orders.
- Companies may need to restructure debt which in
turn may lead to loan write offs and capitalisations.
Organising a virtual board meeting
- Check the articles of association for provisions relating to telephone / video conferencing; and details about what constitutes a quorate meeting.
- Circulate board papers via email but also consider any data protection issues.
- As attendees can join / drop off the meeting at
any point, the Chair should take steps to ensure the meeting is quorate when
decisions are taken.
Considering alternatives to meetings
- Check the articles for further details about
directors’ decision making and if decisions needs to be unanimous or by a
- Ensure written resolutions are recorded along
with a copy of any email agreements from directors.
- Can the issue be delegated to a committee of
- If the matter is urgent consider if it might be
appropriate to take an informal decision and ratify this later using a formal
Signing documents remotely
- An electronic signature can be used to execute a document as long as:
- The person signing intends to authenticate the document; and
- Any formalities relating to the execution of the document are satisfied. For example, if the signature requires a witness physically present, then even signing a document electronically requires a witness physically present.
- If a witness is required, this person has to be
present and cannot witness a signature virtually, for example, over video
- Although it is not always a legal requirement,
consider if a witness needs to be independent.
- Consider using any of the current software
platforms for esigning.
- Review the articles for any relevant explicit
powers that the board may use and for provisions around quorum to hep with
- Consider how a valid AGM can be held while the
Government’s Stay at Home Measures are in place. Can you hold a hybrid meeting
or a fully-virtual meeting?
- Encourage the use of proxy votes.
- Consider using an informal notice and delaying sending formal notice until the situation becomes clearer (unless the board has the power to postpone the AGM).
- Consider using your website to provide
shareholders with information.
- Consider live-streaming the AGM. Note that
dialling-in might not constitute formal attendance.
- Consider hosting a form of shareholder event
later in the year.
How can we help
Bates Wells’ Corporate & Commercial team has wide ranging experience across corporate, commercial contracts, finance and tax matters and can assist you with the short and medium term impacts of the current crisis.
This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.
All content on this page is correct as of April 15, 2020.