29th July 2020
As you took on your position or worked your way up to become a company director it was likely that you considered a plethora of challenges that you might be faced with. But being a company director during a global pandemic probably was not one of them.
While the business world is in turmoil company directors need to proceed with caution over the coming months to ensure that decisions made under pressure can be justified and that they stand up to scrutiny in the event that they are challenged later down the line.
It is important to keep abreast of latest guidelines and developments, always looking ahead to the potential impact and risk on your business. Planning for all eventualities and ensuring that steps you take are well-thought through, lawful and consistent will help protect your business and keep your stakeholders content.
Our specialist Company & Commercial team at Lamb Brooks look at five key areas you need to consider when steering a company through these unchartered waters.
As some businesses return to work and other continue to furlough or work remotely directors must ensure they are doing all that they can to reasonably protect the health and wellbeing of their staff. This means carrying out risk assessments, mitigating hazards, providing PPE and communicating guidelines as a minimum duty of care. Company directors should also be considering the mental health of their workforce during this time and provide support and communication regardless of whether your team is in the workplace, working from home or on continued furlough leave.
Remember, company directors can be prosecuted for breaches of health and safety legislation which are attributable to neglect on their part and may also be subject to disqualification proceedings where a prosecution succeeds. For this reason, it is important that you take your duties seriously and ensure the decisions you make are well informed and supported by stringent advice.
Cash flow is the life blood of any business and where it is in short supply consideration must be given into what short-term measures you can put in place to achieve good cash flow in difficult times. Make use of Covid-19 related grants, loans, insurance claims and exemptions.
In the long-term, consider how you can better collect debts and unpaid invoices from your customers or suppliers using legal assistance for any serial late-payers and tightening up your payment terms and conditions. Whilst businesses will be reluctant to make tough choices many are faced with cost-cutting exercises including redundancies and restructuring in order to survive. Make the best decision for your business given facts, figures, risk assessments and professional advice.
Dealing with commercial contracts that are no longer feasible can be difficult and will usually require advice from a lawyer to ensure that they are handled correctly. Where contracts can no longer be performed it may be possible to rely on a force majeure clause if the agreement has one. Company directors will need to proceed with caution to avoid effecting termination in circumstances where this is not justified to avoid putting the company in a breach of contact scenario.
Now is a time for all businesses to be creative, flexible, and understanding with each other. Renegotiation of contract terms may be possible, and businesses will rely on the goodwill of stakeholders who they have built long-standing relationships with.
Recent events may have sparked a need for you to review your terms of business and other contractual agreements that your business has in its suite of documentation to further protect your company from disruption in the future, given that we do not know how long the business world will be feeling the tremors of the Covid-19 storm.
If your company’s financial situation becomes so dire that you worry about long term viability, then professional advice should be sought with urgency so that you can assess your options and explore ways to find resolution. Carefully consider the personal risks that you also carry if you continue to run a company that is in danger.
It is also crucial to be alert to any businesses that you deal with who are in troubled waters. Look at your list of essential customers and suppliers and assess the risks that your own business would face should they go under. Are you heavily reliant on a struggling business or working in a high-risk sector? What is your contingency plan? Learn to spot the warning signs and manage your risk accordingly.
Your decisions as a company director are less likely to be subject to a successful challenge if you can demonstrate the process that you went through to make them. Ensure that any major decisions you have made during this pandemic are reasonable and logical given the circumstances or challenges that your business faced and always document your assessments.
It is likely to be some time before businesses can begin to trade with some degree of normality. Because of this it is important when making decisions about your business to; air on the side of caution, plan for all eventualities, take account of government guidelines, document your thoughts and processes and seek legal advice when you have concerns.
By taking this considered approach you will limit the chances of being challenged on how you handled company business during the crisis.
Company directors should also ensure that they have adequate directors’ and officers’ liability insurance in order to provide a security net in the event that things go wrong.
If you require further advice or guidance on your obligations as a director, please contact our Business Team on 01256 844888 or email firstname.lastname@example.org
Whether you need some assistance with your contacts, restructuring, disputes, debt collection or employment matters, we are here to provide peace of mind.
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The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.
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