As the UK enters a further period of lockdown there may be the beginning of some positive messages on the horizon. The benefits of the government’s measures, such as Coronavirus Business Interruption Loans and funding for furloughed staff, are starting to filter through to businesses. Now is the time to think about the future and how your business can move forward. As part of that exercise it is important that you bear in mind your ongoing duties as a director of your company.
Proper financial planning when making material decisions about your business is critical. Cashflow forecasts and profit & loss projections are essential to allow directors to identify and assess areas of concern, including the business’ ongoing viability during and after the coronavirus disruption, however difficult forecasting may be.
When considering any forecasts, it will be essential to document the rationale for your decisions and note any assumptions you make. This will help you in the future if questions are asked about why further credit was incurred while the business was struggling.
Even if you have previously done so, take a look at the assistance currently available. Both the terms on which assistance is being made available and your own financial position will be changing. Our website has dedicated pages with detailed up to date information about the loans, grants and assistance available. Consider whether any of the support on offer could alleviate some of the issues you have highlighted in your review of your business. It is worth noting that a number of the measures, such as the payments to furloughed staff, are only available for a restricted time period, so it is important to get on with this as soon as you can.
However just because a form of support may be available it doesn’t always mean you should be taking it. Directors will need to be satisfied that there is a commercial way forward and that taking on extra debt (even if on favourable terms), for example, is in line with their duties. Can the future business afford to repay the debt taken on? And what are the consequences of failing to repay?
Whether you decide to make use of the assistance being made available by the government or not, it is important to remember that directors remain subject to their fiduciary duties. At a time when the company’s solvency may well be in question and as a result your duty of care is to the company’s creditors, it will be important to ensure the steps you are taking are in the creditors’ interests.
If you think we may be able to help you access the financial measures available or advise you about your company continuing to trade, please do not hesitate to contact our Corporate Restructuring team have a wealth of experience in helping rescue distressed businesses, as set out in our business rescue case studies.