COVID-19: What's keeping you up at night?

Our international private wealth team responds to some key questions that our clients from across a number of sectors and jurisdictions have been thinking about over the past couple of weeks.


Nick Warr


Read More

Ronald Graham


Read More

Christophe Flaicher


Read More

Martin Kraus


Read More

Marc van Gelder


Read More

Michaela Petritz-Klar


Read More

Jerry Parks


Read More

Nick Warr


Read More

Ronald Graham


Read More

Christophe Flaicher


Read More

Martin Kraus


Read More

Marc van Gelder


Read More

Michaela Petritz-Klar


Read More

Jerry Parks


Read More


COVID-19: What's keeping you up at night?


To say this is an uncertain time for our clients and their businesses would be an understatement. The outbreak of COVID-19 has significantly impacted the global markets – as well as clients – on a new and very personal level. More than ever, clients are looking to us as their trusted advisers – to not only provide valuable legal advice to the family, but help guide through these uncertain times. Globalisation has, in certain respects, been put on pause. Not only are we witnessing significant and sudden decreases in asset values, individuals’ daily lives have been deeply affected as well. People of the world cannot currently move, trade and travel freely, and we have been restricted from access to our assets, companies, and even family members.

Now it is important to stay calm and stay in touch. This document outlines the key questions that our clients from across a number of sectors and jurisdictions have been thinking about over the past few weeks. We welcome you to reach out to your usual Taylor Wessing contact if you have your own questions, concerns, or just need a sounding board.

Tax, trusts and estate planning

I have an existing Will, however, should I carry out a 'health check' to ensure that the provisions of my Will remain appropriate?

It is always important to keep the provisions of your Will under review. Your Will should reflect your wishes for your beneficiaries and ensure that these wishes are realised in the most tax-efficient manner. It may be that since you prepared your Will your personal circumstances, including the value and composition of your estate, have evolved. For instance, you may have included appointments of executors, trustees and/or guardians in your existing Will whom you feel would no longer be suitable. Equally, your beneficiaries may be at very different stages and ages, which mean that different considerations are now relevant. You and/or your beneficiaries may be living in different jurisdictions, in which case considerations should be given to these changes from both a legal and tax perspective.

In these unusual and unsettling times, you may also wish to update your letter of wishes to provide your executors and trustees with additional guidance. This document accompanies but is distinct from your Will and helpfully, given the current environment we find ourselves in, there are far fewer formalities required to create or update such letters.

I do not have a Will - how quickly can I put in place new Will arrangements to cover my worldwide assets?  What do I need to think about?

With the right guidance, a Will dealing with the devolution of your UK estate can be prepared quickly. If appropriate, you may want to consider putting an interim Will in place, while your legal advisor reviews your succession planning arrangements in greater detail. Depending on the nature of assets you hold and their locations, it may be that an English Will can be created dealing with your worldwide assets. However, if this is not appropriate, either from a legal or a practical perspective, it is important to ensure appropriate Wills are prepared in relevant jurisdictions and that these dovetail with one another. For a Will to be valid, certain execution formalities need to be satisfied. Whilst some countries have introduced temporary legislation to help facilitate the execution of Wills during the present circumstances, no changes are currently proposed for English Wills, which requires the presence of two witnesses. With social distancing in place, certain practical steps will need to be considered – for example, this may involve calling on neighbours to act as witnesses, for instance over garden fences or through windows.

What would happen to me and my assets if I were to lose capacity?

In such circumstances, family members cannot automatically step in to make important decisions and manage affairs on your behalf and would need to apply to court in order to do so. However, in the UK, it is possible to put in place Lasting Powers of Attorney (LPAs), which allow individuals to appoint others, known as attorneys, to make decisions on their behalf. There are two types of LPA, one for property and financial affairs and one for health and welfare. Some jurisdictions will recognise UK LPAs but others will have equivalent arrangements to deal with a loss of capacity. Where clients spend significant time and have material assets overseas, coordinating the cross-border issues that arise is critical.

An LPA needs to be registered with the Office of the Public Guardian (OPG) before it can be used. Whilst the OPG has stated that it is currently continuing to process LPA applications within 40 working days, there may be future delays. Certain steps could be taken in the interim, such as a written statement of wishes or advance statements on future affairs.

Is now the time to consider taking steps to transition wealth to family members or structures?

In light of the unprecedented government intervention already announced by so many countries (and more cannot be ruled out depending on how long it takes for economies to recover from the impact of COVID-19) these countries will need to look at how they will raise tax revenue to attempt to balance their books. It is likely that the fiscal regimes in many countries may well be very different in a couple of years, with the introduction of higher tax rates and removal of tax reliefs and exemptions. Therefore, if you are minded to make gifts to family members or transfer wealth to the next generation and beyond, then it may be sensible to start discussions in these with your estate planning advisers sooner rather than later to formulate a considered strategy to implement in the months ahead. The fall in value of financial markets may also assist, with potentially reduced taxable gains being realised when making gifts.

Now may be an appropriate time for you to take stock and review your assets and family circumstances with a view to optimising yours and your family’s position, under the current tax regimes.

I'm a director or shareholder of a family business or other corporate entity - are there any protections I could be putting in place in terms of business continuity and succession?

It is important for families to review the governing documents applicable to their businesses (eg company articles and shareholder agreements) to check what protections or provisions are in place to cater for succession, devolution of assets and loss of capacity. It is usually possible to provide for bespoke arrangements to control succession and ensure continuity in unexpected circumstances. We would recommend that these arrangements are reviewed as part of an overall estate planning exercise, as the issues are often interrelated. For example, an individual shareholder will need to consider the devolution of their share(s) on death and how any powers or privileges held by them are to pass eg board representation. The family may wish to control succession by including, for example, bespoke pre-emption rights in a company’s articles of association to help ensure shares cannot pass outside the family lines.

If a sole or key director were to become incapacitated or fall ill, it will be necessary to consider how decisions will be made in these circumstances. The protections available may range from ensuring the company board is sufficiently diverse to ensuring appropriate measures are in place in the articles of association, shareholders’ agreements or through appropriate business lasting powers of attorney to guard against the risk of incapacity. The solutions are flexible and there may be bespoke arrangements that would suit individual circumstances.

I am the protector of a trust - what would happen if I were to lose capacity or pass away? Is there anything I can do now to provide for a smooth succession?

Although every trust structure is different, many will feature a protector whose powers will be important to the overall functioning of the trust. Protector powers vary from providing consent to certain trustee decisions to having positive powers such as the ability to hire and fire trustees. If the protector were to be unable to act (eg through incapacity or death) then the efficient running of the trust may be significantly hampered. There are a number of ways to provide smooth succession and the available options will depend on the terms of each individual trust deed. For example, some provide for a successor protector to be appointed, in the event of the incapacity or death of the current protector. Similarly, if the protector is appointed by another person (eg an appointor) then succession arrangements can often be put in place. Now may be a good time for clients to review the terms of their trusts to understand what is possible and if successors can be appointed now to ensure such appointments are completed, so that the trust is able to function as intended with a protector in office at all times.

I am the settlor/principal in relation to various family structures - what would the tax implications be if I were to pass away?  Are there any practical protocols that we should put in place now?

Many of our clients have multi-dimensional family structures stretching across multiple jurisdictions. Whenever we look at an individual’s or family’s estate planning affairs and put in place a suitable estate plan or structure, one of the key factors we take into account is the tax and residency status of the settlor or principal and key family members/beneficiaries. This can often be a key driver behind a structure being created one way rather than another and it is not unusual to find that, once the settlor/principal has passed away, changes may be required for the structure to remain effective and/or tax efficient depending on the circumstances of the beneficiaries or others involved in the structure at the relevant time.

Unfortunately, with the uncertain and challenging situation we find ourselves in at present, the ‘what if’ questions will be front of mind for many of our clients. It is always sensible to have thought through these scenarios in advance but now, more than ever, it is important to have a plan in place.

We would recommend that, to the extent that one does not already exist or clients’ circumstances have changed, a protocol is drawn up as to what advice and steps would need to be taken in the event that the settlor/ principal passes away. This may require considering the tax implications for beneficiaries (both living in the UK or abroad) or in respect of the assets held by the structure, as well as reviewing and putting in place succession provisions for any control or decision making powers held by the settlor/ principal. Every family structure will be different, but a clear action plan and awareness of potential issues will be beneficial for all.

How can I ensure the smooth and continuous operation of my family office in these turbulent times?  Are there adequate decision-making procedures in place? Is it possible to provide for some overarching family governance guidance?

In these unprecedented times, there are any number of factors which can throw a spanner in the works and prevent the smooth operation of a family office. The issues discussed above in respect of the family principal, and their decision making and control powers, can equally apply in the context of a family office. In addition, significant domestic or international regulatory changes may be required in the event that the family principal passes away.

As well as the tax, regulatory and legal considerations that need to be assessed in the context of the possible loss of the family principal, it is important to acknowledge the significant role that the family principal often plays in providing the vision and guiding principles which underpin the operation of the family office and its investment philosophy. It may be that the next generation are not yet old enough or involved enough to step into the principal’s shoes in this regard. It will therefore be important to ensure that a suitable framework (whether in the form a guiding mission statement, letter of wishes and / or a family constitution) is put in place so as to provide as much clarity and support as possible with regards to the future operation of the family office as well as giving consideration to the creation of a significantly strong and diverse circle of trusted advisers with complementary skills and expertise to support the family as may be required.

The concerns do not only extend to the role of the family principal. There will be other key individuals, roles and business lines within the family office which need to be considered and in respect of which action plans should be put in place to ensure safe and efficient continuity of the family office in the event of unforeseen changes.

I'm going to be spending more time than intended in the UK or another jurisdiction - what does this mean for my tax status? What do I need to think about and are there any steps I should be taking?

For those who are internationally mobile and have carefully planned their movements across jurisdictions, the recent disruption may have thrown uncertainty on those plans. As a result, individuals may find themselves in a particular country for longer than anticipated and, so will need to carefully consider the potential implications in respect of their residency and domicile position. In many jurisdictions, the key factor relevant to determine whether an individual is tax resident is the? number of days that they spend there each year. This is true in the UK where a detailed statutory test (SRT) exists for determining residency. Individuals are required to carry out a day-counting exercise based on their particular set of facts and circumstances. As a result, individuals are at risk of unintentionally becoming UK tax resident if they find themselves unable to leave the country.

It is important to bear in mind any recent guidance, amendments or postponements to the usual rules which apply to tax residency. For example, HMRC has recently updated its guidance for clients who may find themselves stuck in the UK as a result of the recent disruption under ‘exceptional circumstances’ and how this impacts on the day-counting exercise under the SRT. This has been followed by an announcement by the UK Chancellor of a limited exception for “highly skilled” individuals who have come from abroad to help with the COVID-19 pandemic, which will mean that the period between 1 March and 1 June 2020 (with possible extension) will not count towards the SRT. As this area evolves, we would recommend that individuals maintain detailed records of their residence and take advice in the relevant countries where they have a connection, and especially in those countries they are physically present, to check how their residency status may be impacted by the current situation. It would be well worth seeking a legal opinion to gain a clear idea of where you stand and whether you should take any steps in response.

Individuals who act as directors or employees of overseas companies will also need to be mindful of whether their activities could result in potential inadvertent exposure to tax. In the UK, HMRC has recently published guidance stating their view that the existing rules provide sufficient flexibility so as to avoid corporate tax residence (under the central management and control test) or the creation of a permanent establishment in the UK as a result of activities over a short period of time, without any degree of permanence. Nevertheless, it would remain prudent to minimise the level of activity in the UK where possible and where it is required, maintaining a detailed and accurate record in the event of any future queries being raised by HMRC.

Contentious trusts

The trust has suffered significant financial losses - does this have any impact on my fiduciary duties as a trustee? 

The key challenge will be whether the financial losses are so significant as to put the trust in a position of insolvency. Whilst a trust is not a legal entity and therefore cannot become insolvent in the usual sense, a structure may still technically be insolvent on the balance sheet test (i.e. when the value of its liabilities as they fall due exceeds the value of its assets), particularly if there are significant loans in place between entities within a structure and/or between the entities and beneficiaries.

It is now settled law in Jersey (see Representation of the Z Trusts [2015] JRC 196C) and indeed we would expect other common law jurisdictions to follow this precedent, that in circumstances where a trust is considered "insolvent" on the basis of the aforementioned test, the trustee owes its fiduciary duties to the creditors of the trust rather than to the beneficiaries and it is therefore incumbent upon the trustee to take whatever steps are necessary to ensure that the assets of the trust are not being allowed to deteriorate in value and/or be dissipated. On a practical level this means that where a trust appears to be balance sheet insolvent, the trustee will need to take steps to secure all assets in the trust and preserve their value for the benefit of the creditors. The trustee may also need to take steps to apply to its local court for directions as regards the administration of the trust going forward. If a trustee does not act in the best interests of creditors when a structure is technically "insolvent" a trustee may open itself up to claims by creditors that it has breached its fiduciary duties.

The trustee delegated the investment management of the trust's assets - is the trustee protected from any claim if there has been a financial loss? What are the trustee's rights?

The first issue a trustee needs to check in these circumstances is whether the trustee had the power to delegate investment management powers under the trust deed. If it did not and it has delegated these powers the trustee may be liable for a breach of trust and/or a fraud on the power. It should in these circumstances review its exoneration clause to assess the level of protection this may provide and seek immediate legal advice. Conversely if the trustee had the power to delegate investment management powers to a third party there will be no basis for such a claim by a beneficiary. If a trustee has properly delegated its investment management powers, it will be prudent for the trustee to review the terms of that investment management agreement, particularly in relation to the liability and indemnity provisions. The terms of the agreement will need to be analysed to assess whether the investment manager has acted within its mandate and the scope of the indemnity provisions will determine whether any recovery action could be pursued against the investment manager. It is common for investment management functions to have been delegated to the settlor or to a beneficiary of a trust and in these circumstances in particular it is important for a trustee to ensure that it had properly documented this delegation of the investment power to the relevant individual. A trustee should also ensure it has properly documented the rationale for delegating the investment management function to the relevant settlor/beneficiary as the reasonableness of such a decision may be challenged by other beneficiaries in circumstances where the trust's assets have been significantly depleted. It is generally good practice to review the delegation of any investment management role on an annual basis (regular review being required under section 22 the Trustee Act 2000 in England) because (under English law and likely in all common law jurisdictions) the trustee will be liable not only if the delegation itself was performed negligently but also in relation to the continuation of the delegation of the investment management power. There is an implied requirement for the trustee to conduct an ongoing review of the terms of any delegation of the investment management power. 

A company held in trust has lost considerable value given the current economic downturn.  As trustee we did not play any part in that company's affairs.  Can a claim be brought against us - should we have intervened or supervised in the company's affairs?

As a first port of call it would be sensible for trustees to review the trust deed to see if it contains an 'anti-Bartlett' clause. 

Without such a clause, on its face, a trustee does have a duty to intervene in the management affairs of the company which is the asset of the trust. This stems from the English decision of Bartlett v Barclays which decided that when a trust controls the shares of a company, the trustee has a duty to take action when the company's affairs are not being conducted appropriately and use its powers to obtain information so that it can decide whether to intervene. Therefore trustees are potentially liable for losses suffered to the trust at company level.

As a result of this, 'anti-Bartlett' clauses are commonly included in trust deeds to exclude the duty of a trustee to supervise or intervene in the business affairs of companies in which the trust holds shares. It is therefore very important to check that trust deeds include such a clause, and that it has been appropriately and effectively drafted.

How are the courts adapting to the current situation both in England and offshore? 

In England, the Courts are operating a stripped back approach including limiting face to face hearings and conducting more telephone hearings or Skype hearings where possible. Hearings that have already been listed are continuing to be heard.

For new listings, HM Courts and Tribunals Service are providing a daily 'priorities list' as to what hearings will be listed. From a civil law perspective it should be noted that committal proceedings, freezing injunctions and applications where there is a trial listed within the next three months are all included on the priorities list.

It should also be noted that just because a court hearing is taking place remotely it does not mean that the hearing is being heard in private. Guidance has been released confirming that the principle of open justice remains paramount to the English legal system. Therefore steps cn be taken for any remote hearing to be heard in 'open court'.  Such steps include: 

  • one person (whether judge, clerk or official) relaying the audio and video of the hearing to an open courtroom;
  •  allowing a media representative to log in to the hearing; and/or
  • live streaming of the hearing over the internet, where broadcasting hearings is authorised in legislation.

In offshore jurisdictions courts are largely taking the same approach in that only urgent applications will now be listed. For instance, in Jersey, a Practice Direction has been issued providing guidance for all interlocutory hearings before the Master of the Royal Court, the Judicial Greffier or other Greffier Substitutes. In the Bahamas all part heard trials and new trials are currently suspended however urgent applications will continue to be heard (electronically if possible).

Immigration & residency

Will absences from the UK due to coronavirus impact on my future Indefinite Leave to Remain (ILR) application?

Typically, applicants must have no more than 180 days absence from the UK in each of the years on which they are relying for the ILR application. This is a strict requirement. The Home Office residence guidance for ILR applications does contain flexibility around absence for ‘serious or compelling reasons’. This does not however expressly refer to coronavirus absence and any decision on excessive absence would be a subjective one. We recommend keeping any absence from the UK to a minimum where possible and retaining evidence of the links between the absence and coronavirus (eg flight booking information, FCO guidance).

What happens if I am unable to travel to the UK within the dates of the 30-day visa endorsed in my passport?

Successful visa applicants are issued a 30-day temporary entry clearance visa during which time they must travel to the UK. If they travel outside those dates they will either be prevented from entering or landed as a visitor which can invalidate the visa. Visa holders who are unable to travel to the UK within the dates of their 30 day entry clearance vignettes because of Covid -19 travel restrictions or illness due to the virus, should contact UKVI to request a free replacement 90 day temporary visa enabling them to travel to the UK. This temporary concession is available until the end of 2020.

What should I do if I have been unable to submit my biometrics due to Visa Application Centre (VAC) closures?

Closures of VACs have left many applicants in ‘limbo’ and unable to submit their biometric data following submission of their online application forms or retrieve their passports following consideration of their applications. Usually, for their applications to remain valid, applicants need to submit their biometric data within 45 days of submission of the online form. VFS Global (a commercial partner of UK Visas & Immigration) has confirmed that applicants will be able schedule a new appointment or reschedule an existing one once the VACs re-open if their appointments have been missed.

I have my visa and am planning to travel to the UK.  Will I face extra checks at the airport?

Under the Coronavirus Act 2020, an Immigration Officer has the power to hold anyone arriving at a UK port of arrival for further screening if they have reasonable grounds to believe that the traveller may be infected or contaminated with Coronavirus and there is a risk that they might infect or contaminate others. Travellers to the UK may also be detained if the Immigration Officer has reasonable grounds to believe they have left an infected area within the 14- day period immediately preceding the date of arrival in the UK.

Immigration Officers can detain an individual for 48 hours or until such time as any screening requirements have been complied with and assessment carried out. There is a fine of £1,000 for non-compliance.

From 8 June 2020, travellers arriving in the UK from outside the Common Travel Area (Republic of Ireland, Channel Islands or Isle of Man) must self-isolate for 14-days. Travellers arriving in the UK will need to complete an online form confirming the UK address where they will self-isolate (eg a hotel or private residence with friends or family). If the accommodation is not considered "suitable", the traveller will be required to stay in "facilities arranged by the government" at their own expense. A breach of self-isolation will be punishable by a £1,000 fixed penalty notice, or prosecution. Exemptions apply to certain industries including passenger transport workers, transit passengers, individuals arriving in the UK for pre-arranged medical treatment, health or care professionals.

My leave is due to expire, what should I do?

If an individual's visa expires between 24 January 2020 and 30 July 2020 it can be extended to 31 July 2020 if they cannot leave the UK because of travel restrictions or self-isolation related to coronavirus. The visa holder must submit an online form via the Home Office website to update their records if their visa is expiring to receive an automatic visa extension. They will not receive an extension if they do not contact the Home Office, meaning they will be classed as an ‘overstayer’ which is technically a criminal offence which may impact their right to return to the UK in the future. The online form does not need to be submitted where an individual is planning to extend their visa in the UK before 31 July 2020.

See our article on Tier 2 visas.


What should I be considering from a legal perspective?

There is general uncertainty around investment values across all sectors. If families are concerned about any of their investments, they will have to carefully consider their contractual obligations and commitments, and whether an exit strategy is necessary, or even possible, and what (if any) ongoing financial commitments they may have.

How will the investment market impact me in Europe?

It is no surprise that COVID-19 is causing uncertainty across the global markets and investors all over the world are becoming extremely cautious and are concerned about the preservation of wealth. Having said this, we are seeing new transactions, both buy-side and sell-side, coming through the door but also some existing deals being put on hold. The larger transactions seem to be impacted the most whereas more middle market deals are likely to still move forward. Obviously certain industries, such as travel and leisure, transportation and energy/oil and gas have been significantly impacted.

Reputation management

What if my company or me personally, become the focus of media attention?

Individuals and their companies may also face reputational risks during the crisis, as the media may look to publish inaccurate or damaging stories.

Allegations of going bust, financial difficulty, rule breaking, tax-payer bailouts, misconduct, mismanagement, closures, redundancies, exploitation or profiteering will increase as journalists look for Corona virus/new angles and pick up stories or opinions on social media from the public. Individuals may not realise that they are compromising their privacy rights by over sharing online during lockdown. It is important that communication is done quickly, but sensitively with enquiring journalists while still protecting your privacy and reputation. You may also find that you need to take a legal approach to warn against publishing or broadcasting false stories or private information (or corrections afterward). In challenging times like these, you may want to consider adding extra bandwidth to your stretched communication teams, these additional resources can act as an extension of your team, and communicate with customers, workers, suppliers, law enforcement, regulators, the media and/or the public.

Commercial real estate

Which real estate asset classes should I be worried about in the UK?

International Real Estate has been impacted heavily by this virus. Clients should be aware that the most affected asset classes for now are likely to be hospitality, retail, and offices. Nearly all jurisdictions will be practicing ‘social distancing’ and the UK is no exception. This is particularly hurting businesses that rely on the physical presence of people in high concentrations. Hospitality and high street retail is particularly exposed. However, at this uncertain time the UK Government is working extremely hard behind the scenes on ensuring there are business continuity strategies in place. For now there is no total shut down of the construction industry. There are emerging stories of significant redundancies in virus hit manufacturing industries e.g. Rolls Royce , McLaren, JCB. Over time this will likely have an impact on the facilities that they require.

What things should I consider as an investor in Europe as a whole?

It has been widely reported that investment transactions have slowed considerably over the past period, but investment sentiment going forward should be seen through the eye of both domestic and international investors and also on a market by market basis. Different real estate asset classes and markets will experience different levels of impact but generally Pre Covid deals are still going ahead at this stage although clearly valuations and building inspections are difficult, particularly for international investors where borders remain closed. Exit from lockdown is further ahead in several mainland European jurisdictions and we are aware of the first green shoots with markets starting to unlock (if only with a focus on local investors for now) Some clients are taking novel approaches eg stage 1 sales tenders proceeding with virtual inspections and using drones to conduct site views of large commercial projects and in connection with sales/acquisitions, but this is likely to change as lockdown eases. It is important to understand that lenders will be taking precautionary measures during this time, and a liquidity crunch could be a risk. Nevertheless, it is important to sit tight as the governments and lenders will take a pragmatic approach to this crisis in the long term.

What if I am a landlord in the UK?

Given the concessions on business rates and support of employee wages, the introduction of new rules with a moratorium for forfeiture for commercial lease arrears was perhaps inevitable as a means to protect the future of commercial businesses in this difficult period. The forfeiture moratorium remains in force until at least 30 June 2020. The Government has also recently announced further measures to prevent landlords using statutory demands and winding up petitions to force tenants to pay their rent and to restrict landlord powers to seize goods to satisfy unpaid rent. While these provisions are yet to come into force, it is expected that they will last at least until 30 June 2020. The net effect is that landlord remedies are now very limited. However, these provisions do not permanently waive rents that are due. Tenants will face a mounting debt which will have to be repaid at some point or be negotiated with landlords. Unless a landlord has a rent deposit or a compliant guarantor, a landlord's remedy for non-payment will now be to issue debt proceedings at Court. This is unlikely to yield quick results and may only be helpful if the tenant has identifiable assets to enforce upon. Landlord outgoings such as service charge costs will still be payable and this may cause some cashflow difficulties. Certain businesses may be eligible for the Government’s Coronavirus Business Interruption Loan Scheme.

See our article on from our Real Estate Disputes team.

Residential real estate

What has been the general impact on the property market in the UK?

Social distancing resulted in the closure of estate agents’ office and physical viewings of properties were suspended from March, signalling an effective halt to new transactions being agreed. Some sales of properties already on the market prior to the imposition of restrictions were still being agreed during this period, often to investment buyers without a viewing of the property taking place but overall transactions levels were clearly heavily impacted. Some sales that had already been agreed but where contracts had not yet exchanged were paused, with buyers nervous about their ability to service their mortgages in a less certain financial climate. For the most part though, transactions did not fall through as such and both buyers and sellers chose to bide their time. After the initial ‘shock’ phase, where some banks were operating with a skeleton staff and fielding applications from customers for short term mortgage payment holidays, more products have been brought to the market in recent weeks and lenders seem to be adapting to the new conditions, with many of them agreeing to rely on desktop valuations during the lockdown period. Estate agents reported receiving a high number of views for properties being advertised online. Virtual viewings are available for a number of properties and potential buyers, confined to their homes, found more time to spend on their online property searches. Estate agents were offering potential buyers and sellers virtual consultations and encouraging potential sellers to use this time to start preparing for the sale process by getting their paperwork ready and considering instructing their lawyers at an early stage. On 13th May the government announced that the housing market could reopen for business provided all those involved in the process followed specified guidelines including social distancing and further measures designed to reduce the likelihood of infection during viewings of properties.

These include, amongst others, sellers leaving all internal doors open, vacating the property during viewings and providing hand washing facilities. Estate agents office are beginning to reopen across the country and in the coming days it is expected that many of the transactions that were frozen, will move forward again, albeit tentatively. The early signs are that some buyers are seeking price reductions to reflect an anticipated fall in values over the next few months. Estate agents also report renewed interest from buyers in rural locations as the expectation of long term remote working, and a desire for more space (both within the home and outside) takes hold. In terms of looking forward, commentators anticipate continued interest from international buyers in the off plan market whilst sterling remains suppressed. In the prime markets, short term future demand will be dependent on the relaxation of current travel restrictions. The 14-day quarantine period for those arriving in the UK will certainly be a short-term barrier but many overseas buyers in the prime market have buying agents who can conduct their property searches for them. A review of the global markets suggests improved transaction levels in China from the beginning of April. In Europe, the construction industry in Spain returned to work on 13th April and work is resuming on multiple large scale new home developments there.

What happens if I am in the midst of selling property in the UK?

The property industry has adapted its practice for transactions where contracts have not yet been exchanged with the introduction of so called ‘Covid Event’ clauses into contracts. These clauses provide that if completion cannot take place due to a defined ‘Covid Event’ then completion can be delayed with a long stop completion date, without either party being in default. The events are usually widely defined and do not simply cover the possibility of either party being infected and self-isolating but also extend to, for example, delays caused by  local authority searches not being processed, the failure of document deliveries, or new mandatory measures being introduced by the government which will impact on  the transaction. These clauses have proved helpful in enabling two willing parties to exchange contracts without contravening the government advice that was in place while the market was effectively closed between the end of March and 13th May; however they do bring a degree of uncertainty for both parties as to whether completion may be disrupted, which can impact on planning. We can expect these sorts of clauses, in some form, to be seen in contracts for many months to come. It is worth noting that the government guidance only applies to ‘people moving between private residential homes’ so if a property is already vacant or a buyer will not be moving into the property on completion, they will not apply.


Are construction projects ongoing in the UK?

Currently construction sites are open in England and Wales. In Scotland, sites were closed but there is now a plan for a phased return to site works. For England and Wales, the operational construction sites are required to minimise the risk of spread of COVID-19 and protect their workforce. In short, works are to be carried out in accordance with the UK government's social distancing guidelines wherever possible.

The UK government does not specifically recommend closing sites that cannot implement social distancing. Where the social distancing guidelines cannot be followed in full in relation to a particular activity then the advice is to "consider whether that activity needs to continue for the business to operate, and, if so, take all the mitigating actions possible to reduce the risk of transmission."

Site Operating Procedures have been published which outline measures to be implemented on sites in order to comply with the UK government's guidance.

What if I have an ongoing construction project?

If a construction contract lacks an express term allocating the risk of infectious disease outbreaks, such as COVID-19, parties will need to consider other provisions in order to understand who bears the risk. A contractor working on a scheme may be entitled to an extension of time, and avoid paying delay damages, if an 'excusable delay event' occurs causing critical delay to the project. 

A contractor is not entitled to recover additional money (or loss and expense) simply because it obtains an extension of time.  A contractor must separately establish an entitlement to its 'loss and expense'. As an infectious disease outbreak does not 'fit in' many of the standard categories which offer entitlement and we are seeing that contracting parties are deploying various positioning strategies - in an effort to ensure that their employer is obliged to pay compensation.  We suggest that employers should carefully check provisions and insurance policies to understand the risks and also assess whether recovery is possible through other routes. There is also a clear risk of knock-on insolvency caused by business disruption during this time.

The contract may offer an entitlement to the employer or contractor to terminate the contract if the whole or substantially the whole of incomplete works are suspended for more than two months. Termination is a high-risk option and the commercial implications must be considered very carefully.

What else should I be aware of?

Can the contractor seek extension of time for lack of sufficient workforce?

If there is delay or loss of production whether the contractor can seek to claim an extension of time may depend on being able to establish that the insufficiency in their workforce was a result of a mandatory quarantine or limitations / restrictions following the exercise of government power or a force majeure event (i.e. the occurrence of COVID-19 itself).  In an unamended JCT standard form contract, the contractor may rely one or both of these events to seek an extension of time.

What if the contractor's access to site must be restricted due to coronavirus deep clean?

In an unamended JCT standard form "any impediment, prevention or default" by the employer is an event which entitles a contractor to an extension of time.  It is likely that any instruction by the employer restricting access or reducing working hours for a deep clean will fall into this category. This is also a matter which may permit the contractor loss and expense.

Supply chain issues: what happens if I refuse an offer of substituted materials?

It is likely that a contractor, in order to comply with its obligation to proceed regularly and diligently with the works, will need to investigate other materials and goods which can be substituted should it be experiencing difficulties with its supply chain. A common standard form contract used in the UK provides that the contractor may not substitute any materials without the consent of the employer.  If the employer consents to a substitution and that has an increased cost then this is likely to entitle the contractor to an extension of time and payment of additional money. If the employer does not consent to the substitution, this consent must not be unreasonably delayed or withheld. Any unreasonable delay or withholding of consent is likely to constitute an event being "an impediment, prevention of default" by the employer, entitling a contractor to apply for an extension of time and its loss and expense.

Banking & finance

What impact will the COVID-19 pandemic have on my loan agreements?

The occurrence of the outbreak itself is unlikely to constitute a breach by a borrower of its obligations under its debt finance arrangements but the cumulative impact of the outbreak on the value of underlying assets and a borrower's ability to service debt due to cashflow constraints may lead to a breach of loan agreement terms. The potential breaches our clients are most concerned about are financial covenant breaches, payment defaults, defaults as a result of a cessation of business, information undertakings (particularly around giving notice of potential defaults) and the occurrence of a material adverse change (MAC).

Can I rely on "force majeure" and has there been a MAC?

Industry market standard loan agreements do not include a force majeure clause or equivalent wording which is sometimes included in commercial contracts and no such clause is implied neither under English law nor German law. Consequently, unless the loan agreement includes specific force majeure wording, borrowers cannot rely on a force majeure event having occurred. 

Most loan agreements are likely to include an event of default where a MAC has occurred which has or is reasonably likely to cause a material adverse effect (MAE). The definition of MAE is usually the cause of much drafting debate and therefore can vary substantially from one loan agreement to another but such a clause will usually be triggered where the borrower’s business, property or ability to make loan repayments is impaired by changing circumstances.  Lenders have, however, historically been reluctant to call an event of default based solely on a MAE clause as the relevant provisions are usually generic in nature which makes it difficult for a lender to conclude with complete certainty that an event or circumstance has occurred which has had a MAE.  There is also a potential reputational risk in the market for lenders invoking an MAE event of default and for any potential administrator being appointed solely on the basis of a MAE clause.  The drafting of the relevant provision is vital.

What legislative action has been taken to protect borrowers?

Whilst, as at the date of publication, there has not been government action to protect borrowers in the same way as there has been for tenants, the Prudential Regulation Authority (PRA) has urged all UK banks to act reasonably and stressed that a distinction should be drawn between "normal" covenant breaches and those which are purely as a result of the prevailing economic challenges.  In particular, the PRA has made specific reference to temporary changes in EBITDA, the suspension of business, MAE clauses and delays in providing financial statements, compliance certificates or third-party valuations as being examples of defaults which lenders should not rush to act on. Experience suggests that early engagement with lenders in relation to potential covenant breaches is key and likely to be positively received.

In addition to the Bank of England lowering the base rate of interest to 0.1%, the UK Government has made a number of loan schemes available for UK businesses experiencing disruption to their cash flow as a result of lost or deferred revenues. 

These include:

  • the COVID Corporate Financing Facility (CCFF) (designed for large, credit worthy corporates looking to raise a significant amount of short term liquidity);
  • the Coronavirus Business Interruption Loan Scheme (CBILS) (designed for UK-based SMEs with group turnover of not more than £45M per annum looking to raise up to £5M);
  • the Coronavirus Large Business Interruption Loan Scheme (CBILS+) (designed for UK businesses with annual turnover above £45M);
  • the Bounce Back Loan Scheme (designed for small businesses to provide rapid access to loans between £2,000 and £50,000); and
  • the most recent scheme, the Future Fund, where our team played a leading role in advising the UK Government, is designed for unlisted UK companies that have raised at least £250,000 equity investment from investors in the last five years and are looking to raise between £125,000 and £5M.
What legislative action has been taken in Germany?

There has been a huge focus on risk of insolvency in the corporate world within the German market. Due to new legislation, loans granted from 1 March 2020 until 30 September 2020 are subject to privileges with regard to insolvency challenge rights and liability under insolvency law. If new loans are granted during this suspension period, the payment of interest and repayment of principal up to 30 September 2023 and the provision of related collateral during the suspension period are not deemed to be disadvantaging to the creditors and are not subject to insolvency challenge. Further special conditions apply to loans granted by the Kreditanstalt für Wiederaufbau (KfW) or under other government aid programmes in connection with the COVID-19 pandemic.

The German government has decided on a package of measures to secure stability and liquidity of companies in need. The state-owned bank KfW is responsible for most programmes. There are a number of loans under this special regime, such as loans for Entrepreneurs, a Start-up specific loan and a programme focused on "Direct Participation for Syndicated Financing". Since 15 April 2020 KfW also offers the KfW-Quick Loan (KfW-Schnellkredit).

Financial dispute resolution

I anticipate a dispute in the near future, what should I do?

In unsettled markets the number of disputes often increases. Whether you are looking to make a recovery or defend against potential legal proceedings, early preparation and understanding your strategic options can be invaluable in ensuring your position is best protected. This includes managing communications, looking at early dispute resolution strategies, and early case assessment to identify quickly the options available to you and manage the process effectively whilst ensuring all appropriate safeguards are in place.

What will be the biggest threat to me if my assets start declining in value?

Margin calls have had an immediate impact and banks have started taking enforcement action. However, security enforcement will be an ongoing issue given market uncertainty and the risk of loan and credit defaults. These issues will continue into the future if asset values fall and lenders conduct asset revaluations which result in calls for further collateral or Events of Default. Early engagement with potential default scenarios can help identify the right mitigation strategies, including the potential to challenge any enforcement action in the current environment.

About Taylor Wessing's private wealth team

Our international private wealth team—made up of 50 partners across 16 jurisdictions—has an unparalleled depth and breadth of experience working with ultra high net worth families & individuals. We work closely with our clients to help them grow, protect, and when the time is right, transfer their wealth. With the continued rise of economic globalisation, our clients' affairs are equally as complex—working closely with our clients and their advisors, we tailor our advice to help them safely navigate that complexity.

We are proud of the diversity of our client base which includes ultra high net worth individuals and families, family offices, global property investors, entrepreneurs, venture capitalists and owners and principals of private equity houses, hedge funds and other financial services companies. More than 80% of our client base has connections to more than one jurisdiction and as a result a substantial proportion of our advice is cross-border in nature. We also work closely with, and advise fiduciaries who administer trusts and other asset holding structures for high net worth individuals and their families.

We have market-leading strength across all of the legal services our clients will need as they navigate the complexity of their lives and businesses.

Call To Action Arrow Image

Latest insights in your inbox

Subscribe to newsletters on topics relevant to you.