The impact of COVID-19 on the Agriculture Sector

The encouragement of periods of isolation and bans on large gatherings will see many businesses struggle to keep afloat over the coming months through no fault of their own, and directors facing some very difficult decisions.

Some organisations will have no choice but to continue operations, albeit on a scaled down or changed basis. For example, veterinary practices, equine livery businesses and animal shelters will need to continue to operate. Many agricultural businesses will be key businesses at this difficult time with food production and waste operations among others being essential. Agritech solutions may become more prominent as the world reacts to the impacts of increased remote working, isolation and social distancing.

Some businesses will be able to adapt to the changing market. An example of this is food and drink wholesalers. Accustomed to business to business sales, they are adapting their businesses to service consumer orders and deliveries, finding that increased pressure on supermarket deliveries presents an opportunity. However, rapid increases or changes to demand and working practices can  be tricky to manage.

Many agricultural businesses will be bracing themselves for the possibility of disrupted supply chains, employees or contractors unable to work and projects frustrated. Even if a business is more insulated from the impact of employees, suppliers and consumers staying at home, the ripple effect of closures and disruption to trade encountered by other businesses can bring a host of new problems  and expenses. For example, M&A activity, property transactions, trade events, new infrastructure and other projects may have to be delayed or postponed indefinitely, affecting businesses throughout supply chains. Legal advice may be required to consider the contractual liabilities and remedies that follow. Parties may also find there is additional expense in the inevitable litigation to resolve disputes that arise.

Directors and business owners have challenging weeks and months ahead of them. Directors' duties are many and varied,  leaving directors  under increased pressure to weigh up the complex and often competing interests of employees, creditors, shareholders and others in a rapidly changing landscape.

In the context of the government allowing the payment of statutory sick pay from the first day of isolation, Boris Johnson said "nobody should be penalised for doing the right thing." That comment seems indicative of public policy at the present time - there is a focus on community spirited behaviour and supporting businesses’ survival during the crisis. In the circumstances, although no specific legislation has yet been announced, company directors can likely expect some leniency with regard to potential breaches of their duties during this extraordinary time. We can expect that decisions taken in good faith will be acknowledged as such.

It should, however, be borne in mind that while the emergency measures will be a lifeline to those in need, some will seek to exploit them. We have already seen calls to make business relief conditional on keeping staff employed, and one only needs to look at the widespread disdain shown to those hoarding toilet roll to conclude that individuals who take unfair advantage of these measures are unlikely to be looked upon kindly by authorities (and Courts) in future.

Directors will continue to tread a delicate tightrope in uncertain times, and will need to be mindful of their responsibilities.

For further information contact the Restructuring & Insolvency team. 

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