Legal update June 2020

Coronavirus: Assistance to businesses update

Coronavirus Job Retention Scheme (CJRS)

The government’s furlough scheme is changing from 1 July 2020 to incorporate flexible furlough, and the financial assistance being offered by the government is gradually being reduced until the end of the CJRS, which is set for the end of October.

If you have furloughed employees under the CJRS it is your responsibility as the employer to get the calculations right and ensure that you are claiming the correct amount for eligible employees. If you are unsure, you should seek the advice of an accountant or tax adviser.

If you have not already furloughed an employee, it may be too late to benefit from the scheme (unless there are special circumstances such as an employee returning from statutory parental leave). This is because an employee would have to be furloughed for a minimum of 3 weeks by the end of June, and so would have needed to have started furlough by 10 June 2020.

All claims for June will need to be made by the end of July and claims going forward will need to be made each month. For further details on how to apply to the scheme, including upcoming changes and how to make calculations before you claim, see this recent article on furlough rules.

Statutory Sick Pay

The Statutory Sick Pay (General) Regulations 1982 have been amended again to include a new paragraph 5b. This change reflects that self-isolation as a result of contact tracing will be deemed incapacity for SSP purposes. The change has been made to ensure that the public abide by the new rules and are not tempted to travel to work if they have been asked to self-isolate under the test and trace system.  

FCA looks to resolve uncertainty in business interruption insurance cover

Further to its announcement in early May that the FCA was going to the Courts to provide certainty where business interruption insurance and coronavirus is concerned, the FCA confirmed earlier this month that the court hearing for the test case is expected to begin in the second half of July 2020.

The update also provides more detail on the proposed court action, including sample policy wordings, the insurers that use those wordings, and which of those insurers the FCA has invited, and have agreed, to participate in the proceedings (56 in total).

The FCA is hoping to publish a list of all the relevant insurers and policies that may have impacted wordings in early July. Following the FCAs measures we may be able to assist you with your business interruption claim, helping you understand what you may be entitled to under your policy.

Employment

Maternity Action requests CJRS cut-off exemption for new parents

Following a request by Maternity Action earlier this month, the Chancellor Rishi Sunak confirmed that new mothers would not have their SMP reduced if they were on furlough leave and that furlough leave was possible, if offered by the employer to the employee, after the end of maternity leave.

This is significant in not discriminating against new parents, which may have missed the cut off date of 10 June 2020 for furlough leave even though they could benefit from the furlough scheme after June 2020.

Commercial

Fake online reviews investigated by CMA

The Competition and Markets Authority (CMA) announced at the end of last month that with the upsurge in online shopping, particularly due to the coronavirus pandemic, they will examine how websites detect, investigate and respond to fake and misleading reviews. It will look at issues including:

• Suspicious reviews, such as where a single user has reviewed an unlikely range of products or services.
• Whether businesses are manipulating the presentation of reviews about their products and services - this might include combining positive reviews for different product.
• How those paid in some way for reviews about products or services are handled.

Major websites will be reviewed to see if they are doing enough to crack down on fake reviews. If the CMA finds that any of these websites are not doing what is legally required, they will take enforcement action through the courts if needed and name and shame the businesses at this point, if appropriate to do so.

Five new business-focused working groups launched by the UK government

It has been announced this month that five business-focused groups will work on the UK’s growth potential, being made up of between 20-25 participants and chaired by the Secretary of State for BEIS.

The groups will be focused on five key themes, to try and deliver economic growth and jobs, as follows:

• The future of industry: How to accelerate business innovation and leverage private sector investment in research and development.
• Green recovery: How to achieve net zero carbon emissions and capture economic growth opportunities from this.
• Backing new businesses: How to make the UK attractive to start-ups and those businesses scaling up, from all over the world.
• Increasing opportunity: and economic performance across the UK.
• The UK open for business: How the UK can win and retain more high value investment.

Government guidance for public bodies on supplier payment

Government guidance is clear that invoices and speed of verifying, processing and payment of invoices must be more rapid than usual in order to retain jobs. It also ensures that supplies are not delayed and clear and transparent communication relating to any change in contractual arrangements are provided between parties.

Managing Public Money generally prohibits public bodies from payment in advance of need, without Treasury consent. But in the current circumstances, Treasury consent is granted for payments in advance of need where the Accounting Officer is satisfied that a value for money case is made by virtue of securing continuity of supply of critical services in the medium and long term. The consent is capped at 25% of the total value of the contract and only applies until the end of October 2020.

Whilst this may come as welcome news to suppliers of public bodies, suppliers are not automatically entitled to payment or other relief under this guidance and supplier relief payments are not intended to supplement or duplicate the other business support provided by the government.

Commercial Property

Rental payment code of practice

The government plans to draft a Code of Practice to provide clarity and reassurance surrounding rent payments for businesses on the high street. This will look at encouraging fair and transparent discussions between landlords and tenants over rental payments during the coronavirus pandemic to ensure that no one part of the chain shoulders the full burden of payment.

The code is part of a number of other measures introduced, such as the Coronavirus Act, to prevent any business being forced out of their premises if they miss a payment. This also bans statutory demands until 30 June and prevents landlords using Commercial Rent Arrears Recovery unless they are owed 90 days of unpaid rent. The measures under the proposed Code will also be temporary and the government will explore options to make it mandatory, if required.

The government will work with lenders to ensure flexible support for commercial landlords, including payment holidays and restructuring facilities. Before the June payment day, the main commercial lenders will contact their major commercial landlord borrowers to identify concerns and provide any necessary support. If landlords are receiving this support, they should pass this on to their tenants in the form of more frequent but lower rent payments or flexibility in payment dates, for example. Discover more information about changing commercial rent payments and if you would like further advice on this, contact our specialist commercial property solicitors.

Corporate

Changes to the Corporate Insolvency and Governance Bill

Further to the public briefing on 28 March 2020 when it was announced that changes to the corporate insolvency regime would be made, it has been decided that the new insolvency restructuring procedures discussed in August 2018 will be implemented together with further temporary measures to support continued trading through the coronavirus crisis. This includes suspending parts of insolvency law so directors can continue trading without the threat of personal liability for wrongful trading and to protect companies from creditor action. It will also amend Company Law to give companies latitude in respect of company filing and annual general meetings.

IOSCO publishes statement on fair disclosure of impact of pandemic

IOSCO has published a statement of fair disclosure relating to the pandemic and the uncertainty it has caused, meaning there are material implications for financial reporting and auditing. As financial statements are more challenging at the moment, high quality disclosures about the impact on amounts recognised, measured, and presented in the financial statements are even more important. Transparency, complete disclosures, and interim financial information including more robust disclosures and management’s response are critical for the proper functioning of capital markets.

Share Schemes

COVID-19 guidance on tax-advantaged share schemes

Save As You Earn (SAYE): Government guidance published this month in respect of share schemes advises that the SAYE prospectus and Employee Tax Advantaged Share Scheme User Manual will be updated. The updates will reflect that SAYE contribution holidays are to be automatically extended beyond the maximum 12-month period if contributions are missed because an employee is on furlough/unpaid leave relating to COVID-19.

Payments can be made by standing order if employees are unable to make their monthly contributions from salary due to having to take COVID-19 related unpaid leave, so long as deductions from salary recommence at the earliest opportunity. The maturity date of the option will be delayed by the number of missed months (including those missed due to COVID-19). It has been confirmed by HMRC that SAYE contributions can be deducted from CJRS payments.

Share Incentive Plan (SIP): SIP contributions can continue to be deducted from CJRS payments, but employees cannot make up missed deductions if they stop SIP contributions due to COVID-19.

Company Share Option Plans (CSOP): Furlough will not impact qualifying options if the grantee was an employee or full-time director at the time of grant.  

Enterprise Management Incentive scheme (EMI): If there has been no change affecting the value, EMI valuations agreed with HMRC (where the period of 90 days agreed in relation to the EMI valuation expires on or after the 1 March 2020) can be automatically extended by 30 days. Any new EMI valuation agreement letter issued on or after 1 March 2020 will be valid for 120 days.

However, there are still some unresolved questions which HMRC will clarify. These questions relate to whether new EMI options can be granted to employees who are furloughed, working reduced hours or on unpaid leave, and whether employees holding EMI options cease to meet the working time requirements when they are furloughed.

If you require assistance with discussing employee incentive schemes and way of keeping employees motivated during this difficult time, please contact our employment incentive experts.

Data Protection

EDPB publishes details of its 31st Plenary Session

On 9 June 2020, the European Data Protection Board (EDPB) decided to:

Establish a taskforce to coordinate potential actions and to acquire a more comprehensive overview of TikTok’s processing and practices across the EU. This is because it has already issued guidelines for data controllers processing data, subject to the GDPR. In particular, the guidelines relate to when personal data is transferred to third countries and when processing minors’ data, especially where the processing activities relate to offering of goods or services to data subjects in the Union, even if the data controller is not established in the EU.

Adopt a letter in relation to the use of Clearview AI (facial recognition technology) by law enforcement authorities. Under the Law Enforcement Directive (2016/680/EU), law enforcement authorities can process biometric data for the purpose of uniquely identifying a natural person only in accordance with the strict conditions of Articles 8 and 10. Therefore, there is doubt that any legal basis for this service exists or would be consistent with the EU data protection regime.

Adopt a response to the ENISA Advisory Group appointing a representative

Adopt a letter responding to an Open Letter from the European Centre for Digital Rights (NOYB) This stated that the EDPB has been ‘working constantly on the improvement of the cooperation between the Supervisory Authorities and the consistency procedures.' The Board recognises there is still work to do as there are differences in national administrative procedural laws and practices, and limited time and resources to resolve cross-border cases, but the Board confirmed that it is committed to finding solutions, where it is able to do so.

Intellectual Property

Using e-signatures

As social distancing has made signing documents in person difficult, e-signing has become the norm across a range of documents. But can they be used widely in legal documents?

Generally speaking, yes, e-signatures are usually valid for legal documents in England unless the law or document specifically states otherwise. But there will always be considerations to take into account to make sure your e-signature is valid. The Law Society has issued guidance on the use of e-signatures during the pandemic and sets out details on how to best operate under these circumstances.

Contracts and intellectual property assignments can be signed using an e-signature unless the documents state otherwise. Even documents which might require to be executed as a deed and witnessed, such as a power of attorney, can be signed with an e-signature, provided that the witness attests to the application of the e-signature.

Company documents are executed by company directors or authorised signatories who can sign using their e-signature, but you should check that your company’s constitutional documents do not prevent this, to ensure using an e-signature is valid.

Whilst e-signatures are widely accepted in England, you will need to seek professional advice from a legal adviser in another jurisdiction about whether e-signatures are valid if your contract or transactions is not governed by English law.

Also, where Intellectual Property requires registration with a national authority, it is worth checking ahead to see what they accept, as they may have more specific requirements. If you have any queries regarding the signatory requirements for specific documents, our specialist IP solicitors can help.

Dual filing of trade marks before Brexit transition deadline

The European Union Intellectual Property Office (EUIPO) and EURid (the domain name registry for the .eu, .ею and .ευ top-level domains) are to increase collaboration on trade marks and domain names to better support applicants and owners, particularly small and medium enterprises (SMEs) to secure their brands. 

The two parties are looking to implement a reciprocal process when a .eu domain name is registered, so that holders can see if a trade mark with a similar name is available at the EUIPO and to research whether trade marks or domain names are registered first to attempt to tackle fraudulent domain names and registrations in bad faith.

Brexit

Update on negotiations on the future of UK-EU relations

Further to our update last month, it has become even more clear that the UK and EU differ on how their future relationship should be governed.

There is a difference of opinion on the ‘structure’ of the future relationship, in terms of its treaty architecture, institutional setup and oversight, as well as on the details of how dispute resolution between the parties will work in the future.

The EU’s draft treaty covers all aspects of the future EU-UK partnership with an overarching governance structure and a general dispute mechanism (and a few exceptions). The UK has proposed ten separate treaties with their own individual governance frameworks.

In respect of dispute resolution, the EU proposes that dispute settlement should involve a two-stage process: consultation in a joint committee and binding arbitration if the dispute cannot be resolved by way of consultation. The arbitration panel would have to refer matters requiring interpretation of EU law to the Court of Justice of the EU (CJEU). The UK does not agree to the involvement of the CJEU in dispute settlement. Where consultations do not resolve a dispute, suspension of the agreements (in whole or in part) would be the parties’ last resort.

We will continue to keep you informed of any progress in the negotiations.

European Commission notices to stakeholders in different industries

Whatever the results of the EU-UK negotiations there will be a significant impact on businesses from next year.

The Commission has started the process of reviewing and updating over 100 sector-specific stakeholder preparedness notices it published during the Article 50 negotiations with the United Kingdom. Of those notices only 44 have been updated as ‘notices for readiness’ at the time of writing.

*Please note that this update does not constitute formal legal advice and should not be relied upon as such. Always ask a solicitor if you are unsure of how the law relates to your business.