Law Society Asks Bank of England if Firms Can Access Government Loan Scheme

Law firms are awaiting a response from the Bank of England after the Law Society asked if the legal profession will be able to access government loans designed to help businesses cope with coronavirus disruption.

A person at the Law Society said the U.K. body wrote to the Bank of England last week to seek clarification on whether law firms were eligible for the Covid Corporate Financing Facility (CCFF), a government package worth £330 billion to help support struggling businesses struck by financial strains caused by the outbreak.

The package includes a Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs, and a lending facility to help aid liquidity at larger institutions, according to the government’s website.

But the CCFF covers mostly incorporated companies with significant revenues, customer base and operations in the U.K. The Law Society is seeking clarification as to whether law firms could apply.

The answer is expected to be of interest for a variety of firms that are struggling to manage their finances amid a dearth of corporate and financial transactions.

One corporate partner at a U.S. law firm commented: “All law firms will definitely be looking at ways to borrow money right now. Smaller firms might go for SME loans, while bigger ones might look at loans that could offer up to £50 million.

“Transactions are on hold, so this is a difficult time for all firms. But really it’s a matter of whether firms are well-managed and already have enough cash in the bank, and whether they’re eligible for loans.”

Another corporate partner at another U.S. firm said that “it’s not just a recession, humanity is on hold”, and thinks some firms will struggle to pay their staff during the pandemic. He added that many firms would be looking at borrowing from banks and probably won’t have any issues paying off their loans once everything goes back to normal.

The Law Society’s enquiry comes as several firms are taking steps to protect their financial position amid difficulties brought on by the virus.

On Monday, Allen & Overy confirmed it is holding a cash call and reducing partner profit distributions during the outbreak.

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