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Has coronavirus caused distress to your business?

It seems that business disruption due to coronavirus is pretty inevitable. What should you as a company director be doing if the disruption means your business starts to suffer?

What changes for me as a director?

As a director, you know that you owe duties to the company. When the business starts heading towards insolvency, there is a change of emphasis and instead of doing what is best for the shareholders, you have to change and consider what the consequences of your actions will be for the company’s creditors.

What does that mean in reality, though? How do you know what is best for the company’s creditors? It is a notoriously difficult path to tread. On one hand, continuing to run the business may mean it survives and everyone may ultimately be paid in full. On the other, keeping going might make things worse for the creditors as the company runs up more debt.

Some tricky decisions

  • While in this phase, a big decision can be the difference between survival and collapse. For example, should you be entering into the new lease for your new premises? It might bring better productivity or improved income stream. Equally, it may mean you are weighing the business down with more debt when it can’t take much more on.
  • Even placing a new order, if you have doubts about whether you could pay for it, could mean you have breached your duties as a director
  • You need to think carefully before making any payments. Paying everyone on time and in full may be a source of pride for you, but where things get tight, the wrong approach may get you into difficulties with your directors’ duties.

This is not a definitive list, but it gives you a flavour of some of the things you may have to think about and the way your mindset needs to change when the company is in a distressed state.

We can help you

By any measure, this is a stressful and difficult phase in the life of any company. It can appear that you can’t do right for doing wrong. We can help you make those difficult decisions, whether to place that order or pay that creditor. We can dial in to your board meetings to be on hand for advice in real time.

If your business has been adversely affected by the onset of coronavirus, please call us and we will be happy to help you through.


This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2022.


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