CORONAVIRUS EMPLOYMENT LAW BRIEFING [5]: BETWEEN THE DEVIL AND THE DEEP BLUE SEA: THE QUANDARY FOR DIRECTORS

Following the Government’s most recent guidance on the Coronavirus Job Retention Scheme (CJRS) clarifying what was already assumed that Company Directors would be included in the CJRS and could in theory at least be furloughed, Directors – particularly those of smaller companies and Personal Service Companies (PSCs) – are placed in an invidious position with regard to the discharge of their ongoing duties.  The quandary for directions is examined by James Boyd 

James Boyd

 

What had been made tolerably clear from the earlier guidance, that employees who were placed on furlough would be prohibited from carrying on any work for their employer potentially impacts more fundamentally upon Company Directors. That was recognised by Ben Kerry of the Treasury in a discussion with the CBI. He observed that Directors would have some ongoing statutory duties, and the Guidance reflects this, stating that they should do no more than would reasonably be judged necessary for the purposes of fulfilling the statutory obligations they owe to their company. Clearly this anticipates duties such as filing accounts and so on. That begs the obvious question as to how furlough fits with one of the most fundamental duties falling upon Directors in the Companies Act: namely the duty to promote the success of the company? Given the mixed messages within the Guidance, but in light of the personal liabilities they can face, Directors seem to be caught between the devil and the deep blue sea.

The updated CRJS Guidance published on 4th April 2020 can be found at:

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

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