Coronavirus (COVID-19): Directors’ duties

Coronavirus (COVID-19): Directors’ duties


On 28 March 2020 the government announced that it would introduce legislation to temporarily relax a number of laws to assist struggling companies.

Temporary suspension of wrongful trading

One in particular is the temporary suspension of wrongful trading under insolvency laws retrospectively from 1 March 2020 for three months.

The government states that it intends to introduce the legislation at the earliest opportunity. The suspension of the wrongful trading provisions should assist directors in the short term when making difficult decisions but, nevertheless, directors should still be mindful of their duties to the company and, if they are in financial difficulties, their creditors too.

Considerations for Directors

Directors should be taking practical steps to mitigate the risk of personal liability, even during the period of suspension in respect of wrongful trading. There are some practical considerations below:

  • Have regular conference calls (if absolutely necessary and in line with government guidance meetings) with other directors to review cash flow, staffing levels etc.
  • Obtain and maintain robust and up to date financial information. All statutory records should be kept up to date and there should be regular financial and operational reporting.
  • Keep minutes of all meetings showing how and who has been consulted.
  • Treat all company creditors equally but if there are any concerns with this area then professional advice should be sought immediately.
  • Engage with the company’s lenders and key suppliers, keeping them informed of the company’s financial position and circumstances as appropriate.
  • Ensure that you can explain the rationale for the company’s continued trading with reference to the position of the company’s creditors.
  • Seek professional advice as early as possible where you are unsure.

For advice on the matters discussed above, please get in touch with your usual contact at Warners for a free initial telephone consultation.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

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