As a company director during the COVID-19 crisis, you are likely to be dealing with unprecedented issues, and be getting to grips with new ways of doing business that, only a year ago, would have been unthinkable.
As a company director during the COVID-19 crisis, you are likely to be dealing with unprecedented issues, and be getting to grips with new ways of doing business that, only a month ago, would have been unthinkable.
Many companies, if they are lucky, are relying on people to work from home. Others are having to furlough employees in order to retain them beyond the current crisis. Directors are dealing with new ways of temporary financing, and inevitably the main issue for nearly all companies at this time is cashflow. The current crisis has placed a magnifying glass on the general issues that face companies in financial difficulties.
Throughout all the decisions that directors make at this time, they must remain mindful of their duties as directors, whether their companies are healthy or whether they are not. Whilst the last thing on a director’s mind at the moment may be their future risks, it is at this point that they need to be particularly careful of their own potential future personal liability, which can be affected by acts that they undertake now. For full details on directors duties see: Directors Duties & Personal Risks and Types of Claim Against Directors.
Measures announced by the Chancellor of the Exchequer on 28 March 2020 for changes to insolvency legislation may provide some comfort to directors. However, as of the date of writing, this new legislation has not been passed, and directors must proceed on the basis of current legislation.
A major risk to directors at the moment is that they are so overwhelmed trying to keep their business going despite the uncertainty and the restrictions brought in, that the bigger picture may be missed.
What should I be doing as a director to prevent future risk?
There are certain actions a director can take in order to try to prevent future problems both for the business and in respect of their own personal liability.
Keep on top of the company’s financial position at all times. Accountants should report regularly so that all directors are clear on the company’s financial position and can review forecasts and projections to react quickly if it emergency rescue action is needed.
Take expert professional advice now. To create a realistic business plan to see the business through the short-term and post COVID 19. Advice should also be taken to safeguard a directors’ personal position during this crisis to avoid any later problems should the company go into insolvency, including avoiding claims for personal liability or director’s disqualification.
Review and enhance debt collection and credit control. Consider the balance between forbearing with others during this crisis, and ensuring you have sufficient cashflow to continue trading.
Review current finance options. A review should be carried out to ensure that current financing is still appropriate for the company at this time. Look at the various finance options that have recently been offered by the government, which are subsidised and designed to assist short-term cashflow problems arising directly from the COVID-19 crisis.
Keep full records of all decisions – it is imperative that board members meet frequently at this time, even daily (virtually), and that all decisions must be recorded properly in the minutes. All directors must be fully aware of the business situation at this time and the company’s position is reviewed frequently and the board react quickly to change.
Keep lines of communication open – particularly with people that you owe money to such as financiers, suppliers, creditors and landlords. They are much more likely to forbear with you if you explain the situation and can give them an estimate of when they might be paid.
Take expert advice when dealing with employees – particularly if you need to furlough some but not all. Take advice in advance to avoid claims by aggrieved employees in the future. It may be that redundancies are necessary, and it is imperative that the correct procedures are followed if so.
Contact a business rescue expert such as a lawyer or an insolvency practitioner to consider the options for your company during this time if you are facing financial issues. There are many options, such as a trading administration, which provides a temporary stop on claims being made against the company during the period of the administration, or agreeing a company voluntary arrangement with your existing creditors which has the same effect for credit up to the date of the CVA. There are other rescue plans and options that can be implemented in order to increase cashflow and take the pressure off a business that is otherwise viable. Contact our team of experts today to discuss all the options for your business to give you some breathing space in order to continue through this difficult period. For more information see: Company Rescue Services
At Francis Wilks & Jones our team of company specialists can review your business with you, and provide you with options, or if necessary put you in touch with one of our recommended external experts, such as a business rescue expert.
Please call any member of our team for your free consultation now on 020 [number to insert]. Alternatively email us with your enquiry [email address] and we will call you back at a time convenient to you.