The BVCA response to the COVID-19 outbreak: Statement of Best Practice.
The BVCA sent out surveys to members to gain feedback on the impact Coronavirus is having on their firms and portfolio companies. We are using the information from the surveys and further conversations with members to provide written evidence to HM Treasury and Government departments on how the support mechanisms in place are working for firms and their portfolio companies and how they could be improved. We are also providing feedback on what the BVCA believes will further help to support businesses through this period.
The BVCA is hosting webinars for our members about how the UK private equity and venture capital industry is responding to the outbreak, and how the BVCA is supporting its members and their portfolio companies during this time.
View our webinars on the impact of COVID-19
We have compiled official government guidance, as well as updates from other trade associations, to provide information for portfolio companies in the following areas:
The BVCA will continue to monitor the situation and provide members with relevant information.
In response to the global outbreak of COVID-19, the Chancellor has introduced a number of initiatives to help businesses access financial support to cover business interruption due to Coronavirus. The measures to date are as follows:
The Government advised that people should stay alert and remain at home as much as possible. However, people may leave their houses for exercise, or otherwise, more than once a day, whilst maintaining social distancing and non-essential retail shops have been allowed to open from 15 June. The Prime Minister announced in a ministerial statement, on 23 June 2020, plans to allow a greater number of businesses to reopen for 4 July 2020, including restaurants, pubs, hair salons and overnight accommodation providers. The Prime Minister also announced a relaxation of the current 2m social distancing. Some businesses, however, are to remain closed for the foreseeable future, including indoor gyms and leisure centres.
The Government has made the use of face masks on public transport mandatory from 15 June. The Government also encouraged those who cannot work from home to go to work and guidance has been published for employers to ensure safe working.
The Government published guidance and FAQs on social distancing as well as the UK’s plan to rebuild the economy:
The Government’s “roadmap” committed to gradually rebuilding the economy and reopening society with caution, and that any flexibility in lifting the measures will be advised by the data and scientific evidence, including the new COVID-19 centre and alert system. This 5 tier alert system will only be reduced to level 3 if people continue to limit contact with others to ensure the reproduction rate ( R ) continues to decline. Within these plans, the Government announced the immediate changes to the measures above but also outlined plans for younger pupils and those with exams to return to school before the Summer holiday. In the third stage of relaxation, some sporting events could begin behind closed doors and some businesses and hospitality spaces can start to reopen.
The Government warned that stricter measures would be reintroduced, if the data suggested it was necessary.
The Government has also published guidance for employers, employee and the self-employed in various work environments to understand how they can mitigate safety risks when working during the pandemic. The guidance suggests measures for social distancing, travelling to and from work and working capacity. The guides cover the following working environments, and more than one guide may need to be used to consider the action to be taken for an individual business:
The BVCA gave feedback to the Department for Business, Energy and Industrial Strategy. The portal for feedback remains open and we will continue to feedback anonymised experiences from our members’ portfolio companies on using the above guides.
The Government has also published guidance specific to sectors that might see greater adverse impacts and may need to have greater precautions, such as healthcare, education and transport sectors. See the links below for sector specific guidance.
Invest Europe has published information for its members on the policy measures being taken across markets in Europe.
On 28 March, the Government announced that it was suspending the wrongful trading law within insolvency rules to protect directors of companies who pay staff and suppliers despite insolvency risks. The changes are temporary for businesses undergoing a restructuring process, in this time they will not be put into administration and will continue be able to access raw materials.
The Department for Business, Energy and Industrial Strategy has now published the Corporate Insolvency and Governance Bill. This includes the above temporary suspension of the wrongful trading laws and a moratorium on the filing of winding up petitions by creditors would help businesses buy crucial time to mitigate the impact of the liquidity crises they are facing. BEIS have also published factsheets to provide an overview and some clarity on the detail of the Bill.
We believe the suspension of the wrongful trading legislation and moratorium are positive and if there is scope to issue guidance for directors and amend legislation in respect of directors’ duties, that would provide crucial further support. We sent representations to BEIS and the Insolvency Service who acknowledged our feedback and we are continuing our dialogue with them as the Bill progresses.
HMRC have updated the company residence and permanent establishment rules in response the Coronavirus outbreak. HMRC stated that it believes the existing guidance and legalisation provides enough flexibility for businesses to deal with changes in activity due to the outbreak and that board meetings held within the UK during this time does not qualify a company for residence. The update also noted that the existence of a UK permanent establishment does not mean that significant elements of the profits of the non-resident company would be taxable in the UK.
The International Private Equity and Venture Capital Valuation Guidelines (IPEV) has published further guidance for firms regarding valuations in light of the Coronavirus.
The BVCA has been speaking to audit firms about the impact on audit opinions:
The Financial Reporting Council published guidance on audit issues arising from the Coronavirus pandemic. Audits should continue to comply fully with required standards. In current circumstances, additional time may be required to complete audits and it is important that this is taken, even at the risk of delaying company reporting. The FRC is considering additional guidance that may be necessary to support delivering audits in the next few months.
On 21 April, the FRC published further guidance on Modified Audit Opinions during the crisis.
The ICAWE has published insight and further information on Coronavirus and its potential impact on audits and auditors.
According to the CBI, supply chain disruption has been significant, particularly manufacturing and logistics firms across different sectors. It had been mainly in China but production within Europe is now being directly hit. Some firms are utilising existing stockpiles and some firms have been able to source replacement components from elsewhere, but have had to consider cashflow, timing and margins of projects.
The Small Business Commissioners Office will continue to support businesses with invoice, payment and supply chain issues.
As a result of the Coronavirus, there is an increased risk of fraudulent activity. The charity anti-fraud Take Five has published advice to help increase awareness and inform businesses of the steps they can take to protect themselves during the outbreak.
The FCO updated its advice against non-essential travel to exempt destinations that no longer pose a large risk for British travellers. These exemptions were introduced on 4 July and the advice will remain under review to account for changing situations globally. All non-essential travel to non-exempted countries remains to be advised against. The list of exempted countries can be found here.
On 17 March, the Chancellor announced that all measures put in place by the Government will qualify businesses to claim on their insurance. The Association of British Insurers has published a Q&A on Coronavirus, providing guidance on concerns around business insurance. The document also covers: travel insurance; trade credit insurance; pensions and investments; and income protection.
The FCA has published detailed information setting out its expectations for firms during the Coronavirus outbreak and how it intends to operate as the situation develops. It has stated that it expects firms to be taking reasonable steps to ensure they are prepared to meet the challenges presented by Coronavirus for business continuity. The FCA is also expecting firms to support customers and small businesses during this period, ensure that they remain transparent. The FCA have also published guidance of specific aspects of regulation such as SM&CR responsibilities, regulatory changes and insurance products. Firms are encouraged to ensure they are managing their financial resilience and liquidity, and to report to the FCA if firms believe they will face difficulties. In terms of how the FCA will operate, it has announced that it has extended the closing date for responses to all open consultation papers until 1 October 2020 and is rescheduling most other planned work.
Last updated: 06 July 2020
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