Quarter-day payments – how to make ends meet during the COVID-19 outbreak.

Even in the current climate, unless your lender, landlord or other provider has authorised a payment holiday, a lot of quarter-day payments will be due on 25 March 2020.

Following the news that Laura Ashley has appointed administrators, and with a spike in administrations and liquidations expected by insolvency practitioners, across all industries, Charlotte Newlyn of IBB’s Corporate and Commercial team discuss how to make ends meet during these uncertain times.

What is a quarter day?

Some repayment terms in commercial agreements, including facility and tenancy agreements, will dictate that the sum owed is to be paid in four equal instalments throughout the year. In this situation, it is common for the four payment dates to be tied to what are known as the “quarter days”.

The quarter days are 25 March, 24 June, 29 September and 25 December every year, meaning the first of the year is due very soon.

What if I can’t pay?

It is unsurprising that a lot of businesses will not be able to meet certain repayments, considering the disruption caused by COVID-19.

The most important step you must take is to contact your lender, landlord or simply the other party to your contract, before the relevant payment deadline or any reminders. Explain your situation and suggest a payment holiday.

The FCA states that all lenders must listen to customers in financial trouble and treat them “with forbearance and due consideration”. A common solution which lenders should consider is taking either a minimal or no payment or, at the very least, freezing accruing interest.

Of course, this doesn’t apply to landlords or other contractual parties, but you should still discuss and try to come to a commercial agreement with them. Keep a record of all conversations, including any offers you make and their response, for possible future reference.

What else can I do?

Several banks have announced plans to implement repayment holidays of up to 3 months for successful applicants. The devil is in the detail, however, and important facts such as interest continuing to accrue during the holiday should be noted.

More notable, however, is the announcement made by the Chancellor, Rishi Sunak, that £330 billion will be made available by way of loans via the Bank of England, from the week commencing 23 March 2020. Further details are yet to follow about (a) the terms on which these loans will be made, and (b) how businesses can access these funds, so it is important to stay abreast of new announcements.

What if none of the above works?

Unfortunately, it is becoming apparent that a number of businesses, as seen with Laura Ashley, will not survive this downturn. It is extremely important at times like these to ensure your cash flow remains steady, so that you can pay your debts as they fall due.

However, where this cannot be done, it may be necessary to speak to an insolvency practitioner. These professionals will be able to advise you on the best course to wind up your business.

If you decide to put your business into administration, we can assist you with the appointment of administrators and the procedures in general.

Speak to our Corporate and Commercial team today

It is a difficult time for businesses and individuals alike. If you have concerns about your business, contracts or obligations in the current climate, we can advise you. Do not hesitate to contact our Corporate and Commercial team on 01895 207264 or at corporate@ibblaw.co.uk