Sports Q&A – What are your top tips to sports organisations for surviving the Coronavirus crisis?
02 April 2020
We truly hope you are all staying healthy and safe during this time. Here are our top tips for survival for sports organisations:
- Act fast! Do all you can now to limit your liabilities, secure payments from creditors, consider the availability of additional funding, and keep your sources of income flowing.
- Everyone is feeling the pinch, so deals can be done: be proactive and seek to renegotiate.
- Consider your biggest liabilities first:
- Highly paid players/athletes/staff: can you negotiate pay cuts/deferrals? Getting collective buy-in, with leaders taking the first steps for the good of the organisation, is proving effective. If you do get agreement, ensure the deal is properly documented. For football players, this is vital to ensure you can’t later be accused of breach of contract and risk losing the transfer value of the players.
- Premises costs: try to negotiate a reduction in rent or payment holiday. Many landlords are sympathetic to the current situation and may take the long term view that it’s better to help the survival of a good tenant so they retain rental income in the longer term.
- Ticket holders: although consumers will be entitled to refunds for cancelled matches, can you communicate with fans in a way that will limit applications for refunds and give them other options that help support the club/sport?
- Suppliers: check your contracts to understand the legal position, can you terminate on notice, trigger force majeure or has the agreement been frustrated (our force majeure and frustration flowcharts are particularly useful for this purpose)?
- Staff costs: understand the benefits of furloughing employees (see our comprehensive FAQs). The scheme will potentially enable you to reclaim 80% (up to £2,500pm) of the wage cost for each employee who is presently unable to work or for whom there is no work to do. The scheme applies to casual workers provided they are paid via PAYE. The grant only applies once the employee has been formally furloughed so it is important to act quickly, not least as the scheme currently only runs until 31 May. You’ll need to carefully select who to furlough as furloughed employees cannot do any work for their employer (although they can volunteer for third parties, and undertake training).
- Highly paid players/athletes/staff: can you negotiate pay cuts/deferrals? Getting collective buy-in, with leaders taking the first steps for the good of the organisation, is proving effective. If you do get agreement, ensure the deal is properly documented. For football players, this is vital to ensure you can’t later be accused of breach of contract and risk losing the transfer value of the players.
- Find finance: Banks are still open for business so explore the additional support many are offering, such as additional financing, loan repayment deferrals and temporary credit and overdraft limit increases. Consider other sources of finance to ease cash flow pressures, e.g from current shareholders, new potential investors or by borrowing against receivables. The Coronavirus Business Interruption Loan Scheme (for small and medium businesses) or the Bank of England’s Covid Corporate Financing Facility (for larger business), and the various sport-specific relief measures (as announced by the likes of the EFL, RFU, ECB and Sport England) may also be of assistance. You should also review your existing finance documents to identify (and try to avoid) any potential defaults that could arise (see further our FAQs).
- Keep income flowing wherever possible. Sponsors and broadcasters may be checking for get-out clauses or how to reduce payments. As with suppliers (see above), ensure you understand the terms of your agreements and the legal options so you can put your best foot forward in the face of claims that you’ve failed to deliver rights etc. But remember that these are long-term partners who you don’t want to alienate. They may also be facing insolvency themselves and holding them to your original bargain may push them over the edge. Consider what is a fair deal in the circumstance and see if a compromise can be reached: it is no doubt better to guarantee some long term income than have an insolvent partner.
- ADR: If matters become contentious, remember that dispute resolution doesn’t have to result in expensive litigation. Consider whether you can find an alternative method of resolving the dispute. Seeking advice to understand your position at an early stage can also help save costs down the line.
Stay informed: Do your best to keep abreast of the fast moving legal position – government announcements and new legislation are coming apace but can make a real difference. Many of the measures are intended to help businesses survive. We’re doing our best to help you in this regard. Our Covid-19 hub is updated daily and we’re all at the end of a phone/vidcon to help you find your way through this crisis.
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