Last updated 17 April
The coronavirus outbreak and economic shutdown has made for an immensely challenging set of circumstances for directors.
This is an IoD briefing on the key measures the Government has announced to support directors, both as individuals, and in terms of your corporate governance duties.
Coronavirus Job Retention Scheme (‘furloughing’)
The CJRS will allow companies to claim for 80% of furloughed employees’ usual monthly wage costs, up to £2.500 a month, plus associated employers’ NICs and minimum auto-enrollment pension contributions.
The Government expect an online payment portal to expect it to be made available by the end of April 2020. See our briefing on Government support for SMEs here. Further HMRC guidance is available here.
Company directors are eligible to be furloughed, if (and to the extent that) they are paid via PAYE. This also applies to salaried individuals who are directors of their own Personal Service Company.
Where one or more director is furloughed, this should be formally adopted as a decision of the company, noted in company records and communicated to the director(s) concerned.
HMRC guidance states that, while furloughed, directors can carry out particular duties to fulfil the statutory obligations they owe to their company, “provided they do no more than would reasonably be judged necessary for that purpose.” Directors “should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.”
However, the government’s direction to HMRC is more restrictive than the above HMRC guidance. The direction states that furloughed directors may only file company accounts or carry out disclosure exercises. The IoD is calling for urgent clarification on what activities directors can carry out while furloughed, following this conflicting government advice.
The CJRS claim for 80% of furloughed employees’ pay only applies to PAYE salary, and not to dividends.
This has caused many directors of small companies deep concern, given it is common to take a significant portion of income as dividends due to the potentially variable nature of a director’s salary.
The IoD is working hard to press Government for more support in this area – see our recent press release here. If you have thoughts or ideas, please email the policy team.
Emergency Insolvency Measures
The Government has announced that wrongful trading rules will be temporarily suspended. The change is intended to give Directors greater confidence to continue to trade during this pandemic, without the threat of personal liability should the company ultimately fall into insolvency.
The Business Secretary has indicated that legislation, which would retrospectively apply from the beginning of March, will be introduced at the “earliest opportunity”. Parliament remains in recess until 21 April.
Further information is available here.
ICSA with the support of the Financial Reporting Council have issued guidance on contingency planning for AGMs during the current coronavirus outbreak. The guidance suggests how listed firms incorporated under the UK Companies Act may which to approach their AGMs in light of the current prohibition of gatherings of more than two people.
The guidance is available in full here.
Companies House Filings
Companies House has announced temporary measures allowing companies to delay the filing of accounts. Firms must apply for an extension citing issues around COVID-19. Firms will be automatically and immediately granted a 3-month extension via a fast-tracked process.
Further information is available here
The Financial Conduct Authority has announced temporary relief for listed companies facing the challenges of corporate reporting during the coronavirus crisis. The temporary relief permits listed companies which need the extra time to complete their audited financial statements an additional 2 months in which publish them. The FCA has called on market participants not to draw ‘undue adverse inferences’ when companies make use of the extra time.
Further information on the temporary relief is available here.