Covid-19 impact on businesses – a family lawyer’s perspective

Prior to the Covid-19 pandemic, I purchased a book called The Daily Stoic. The book sets out daily meditations on perseverance and one entry resonated.  It coincided, swiftly after the work from home edict, with the day the schools closed:“We’d be crazy to want to face difficulty in life.  But we’d be equally crazy to pretend that it isn’t going to happen.  Which is why when it knocks on our door…let’s make sure we’re prepared to answer.  Not the way we are when a surprise visitor comes late at night, but the way we are when we’re waiting for an important guest: dressed, in the right head space, ready to go.”

Not every business operates in a sphere capable of enabling the bulk of employees to work from home; not every business will have the IT capabilities or resource.  Some business owners struggled to navigate the pressures, through absolutely no fault of their own.  Working capital and liquidity remain under such scrutiny with supply chain disruption, workforce availability reduced, businesses now struggling to recruit.

Most family lawyers were very busy during lockdown – as a consequence of the particular pressures faced by families, relationships faced huge stressors.

Business owners were concerned about the impact C19 economic downturn on their own financial divorce settlements – recent or anticipated, as outcomes that at the time of settlement seemed fair became weighed against the business owner; or as maintenance payments looked unaffordable moving forwards.

Only in a very narrowly drawn set of circumstances can orders imposed or by consent be rewritten – to do this you have to satisfy what we know as “The Barder test”.   In short this principle essentially enables agreements to be set aside if there are new events, within a relatively short time of the order, which invalidate the basis or fundamental assumption upon which the order was made.  Case law to date would suggest that price fluctuations in the housing market, shares or business values, including those experienced following the 2008 economic crisis, will not be viewed as unforeseen or unforeseeable – however dramatic.  Phrases such “risk laden business assets” ring true for many family lawyers because of this jurisprudence but the result is indeed a perceived injustice for many at times such as those we now find ourselves in. 

If you are a business owner already paying a figure in maintenance to a former spouse that simply is not going to be affordable in the short to medium term due to a material change in circumstances then the likelihood is that you can vary downwards the sums that you pay – although all court applications now face delay simply due to backlogs still working their way through the court system. 

There will be many family businesses where plans and energy were positively focused on future growth, strategy, succession, or sale – had to shift to business continuity and crisis management – and now have to focus on getting “fit for the future” whatever it holds. And for some, in the midst of all of that, there will have to be a focus too on the impact of how what there is, is shared fairly.

First published for the Institute of Family Business (IFB) blog in April 2020 and updated in November 2021

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