We are in very unusual times, but one certainty is that disruption will be caused to all businesses, large or small, by COVID-19, writes Adam Dowdney, partner, IBB Law.
Directors of businesses are subject to numerous duties to the company and its shareholders, both statutory and under common law. All directors need to be aware of these during the day-to-day operation of the business.
However, if directors become aware that their business is starting to suffer, they need to consider whether they may be heading towards an insolvency situation, when the interests of the company’s creditors must be considered as a priority. Whenever a director feels the company is in any form of distress, businesses can be restructured or traded out of difficult situations with the right professional support but leave it too long and insolvency may be the only route. In addition, directors can become personally liable if they trade in certain situations when the company is insolvent, so good, early advice is critical.
There are several important factors to consider when a director is concerned about the viability of their business. These could help the business get out of difficulty; however, they could also have adverse consequences on the business. It is also a good time to talk to your bank – some form of refinancing, particularly in the current environment, may be available.
Review your contracts very carefully if the contract is or may be affected by the Coronavirus pandemic. If there is a force majeure clause you may be able to get out, or minimise the impact, of your contractual obligations.
Clearly, any period where a company is distressed is challenging and difficult for all directors involved, but we can help businesses in the process of making those tough decisions and work with them to ensure they have the right professional support around them. Do not hesitate to contact us if you have any concerns regarding your business and any other impact Coronavirus may have caused to your company.