Sadly, the Coronavirus (COVID-19) outbreak has already and continues to cause a significant impact globally.
These unfortunate circumstances are both concerning and frustrating for everyone, including company directors.
The government has already promised various new schemes to support businesses. Examples include:
- Coronavirus Job Retention Scheme
- Business rates holiday
- Cash grants for retail, hospitality and leisure businesses
- Coronavirus Business Interruption Loan Scheme
- COVID-19 Corporate Financing Facility
If you are a director or business owner, who needs support through one or more of these schemes, you can find more information on the eligibility criteria and how to apply on the government website.
It is likely that further additional measures and schemes will be implemented by the government moving forward, so keep yourself updated with all the latest developments.
Whilst this is an unprecedented time, it is important to remain diligent as a company director and ensure that your directors’ duties are complied with. As a company director, you should be aware of the following:
- You are under a duty to act in the best interests of the company and its shareholders and, in a way considered to be in good faith, promote the success of the company for the benefit of its shareholders as a whole. However, once you form the view that the company is insolvent (e.g. when assets are exceeded by its liabilities or the company is unable to pay its debts as and when they fall due), your duty is to act primarily in the interests of the company’s creditors.
- If you allow the company to continue to incur liabilities at a time when you know, or ought to know, that there is no reasonable prospect of the company avoiding an insolvent liquidation or insolvent administration, you may face personal liability for losses suffered by the company’s creditors.
- Essentially, if there is no reasonable prospect of avoiding an insolvent liquidation or insolvent administration, your obligation is to minimise the potential losses to creditors from the company’s financial position by managing the company’s situation.
Whilst COVID-19 affects and continues to affect companies’ financial situation, company directors should continually review the financial state of the company. Whilst this is a difficult time for everyone, it is important to minimise both business and personal risks.
If you are a company director and concerned about any of the above then please contact a member of our Insolvency and Restructuring team.
You can also benefit from the specialist advice that we can provide, by speaking to experienced licenced Insolvency Practitioner solicitors, Nicky Calthrop-Owen and Annabel Whittaker on 0115 9 100 200.
Posted on March 20, 2020