COVID-19: some immunity for directors?

The government has announced sweeping support measures for businesses to weather the coronavirus pandemic. These include a 12 month business rate holiday for all firms in the retail, hospitality and leisure sector in England; funding grants of up to £25,000 for small businesses struggling to meet rents and other essential expenditure; and, potentially, help for airlines, which are acutely affected.

The encouragement of periods of isolation and bans on large gatherings will see many businesses struggle to keep afloat over the coming months through no fault of their own, and directors facing some very difficult decisions. Directors' duties are many and various, and directors will be under increased pressure to weigh up the complex and often competing interests of employees, creditors, shareholders and others in a rapidly changing landscape.
In the context of the government allowing the payment of statutory sick pay from the first day of isolation, Boris Johnson said "nobody should be penalised for doing the right thing." That comment seems indicative of public policy at the present time - there is a focus on community spirited behaviour and supporting businesses’ survival during the crisis. In the circumstances, although no specific legislation has yet been announced, company directors can likely expect some leniency with regard to potential breaches of their duties during this extraordinary time. We can expect that decisions taken in good faith will be acknowledged as such.

It should, however, be borne in mind that while the emergency measures will be a lifeline to those in need, some will seek to exploit them. We have already seen calls to make business relief conditional on keeping staff employed, and one only needs to look at the widespread disdain shown to those hoarding toilet roll to conclude that individuals who take unfair advantage of these measures are unlikely to be looked upon kindly by authorities (and Courts) in future.

Directors will continue to tread a delicate tightrope in uncertain times, and will need to be mindful of their responsibilities.

For advice on directors' duties, and more information on this article, please contact our Restructuring & Insolvency team.