Page 14 - BOSS Today Issue 48

BOSS Today #48 THOUGHT LEADERSHIP

KEEPING

YOUR COMPANY

RUNNING

do’s and don’ts for directors

s the UK Government has reacted to liquidator could apply to the court for an liabilities in the short-term may enable
Athe unfolding COVID-19 pandemic, order that directors contribute to the pot them to trade out of difficulties once the
substantial measures have been put of money available to pay out to creditors current crisis is over.
in place that are intended to mitigate if the directors had carried on incurring This appears to be an encouraging sign
the effect on businesses and the wider liabilities when they “knew, or ought to that the Government wants business to
economy. have concluded there was no reasonable continue, but it should not be seen as an
These rapid developments, including prospect of the company avoiding an invitation for directors to disregard the
legislation, regulations and guidance, insolvent liquidation”. usual considerations when deciding to
have for the most part been welcomed The original proposal was that directors incur liability or take on more debt.
by the business community, but company would not be held liable under this Directors need to remain cautious in
directors now have a legal minefield to provision in relation to actions taken from their actions because the requirement
navigate as they continue to run their the 1 March 2020 to 31 May 2020. On 14 to follow common law duties and other
companies in these very difficult times. May 2020, the UK Government extended provisions of the Companies Act will
Many directors will be considering the temporary suspension of wrongful continue to apply.
whether their companies are strong trading liability until 30 June 2020.The So, how should directors make difficult
enough to survive the economic Government does not want directors to decisions about the company?
downturn, and whether they should carry be so concerned about personal liability
on business at all. that they act pre-emptively in closing Do:
The Government has taken steps businesses down in these unusual n Continue to hold regular directors’
to suspend certain sections of the circumstances, where an increase in meetings. This can be done remotely
Insolvency Act 1986. The changes are using video or telephone conferencing.
set out in the Corporate Insolvency and Directors need to remain Directors should discuss the financial
Governance Act 2020, which came into viability of the company and consider
force on the 26th June 2020. It is intended cautious in their actions, up-to-date and detailed management
to offer temporary and longer term because the requirement to accounts. Document the decisions
protection to businesses and represents a follow common law duties made by the board, and the reasons
shift to a more debtor friendly insolvency behind them.
regime. This means that directors will and other provisions of n Review the position of the company’s
avoid personal liability for Wrongful the Companies Act will creditors and expedite the collection of
Trading. The previous law said that debts.
if a company went into insolvency, a continue to apply. n Keep in touch with your bank and your

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