Furlough Scheme – Directors’ Statutory Duties

The latest guidance released on the Job Retention Scheme states that salaried company directors are eligible to be furloughed. Whilst furloughed, the directors can carry out particular duties to fulfil the statutory obligations they owe to their company. However, they must not carry out work they would carry out in normal circumstances to generate commercial revenue or to provide services for or on behalf of their company.

Ss171-177 of the Companies Act 2006 sets out the common law and equitable duties of directors. The duties regulate the directors’ behaviour and seek to hold the directors to account for the way in which they run the company. The directors must comply with these duties at all times to avoid liability.

The general duties are as follows:-

1. To act in accordance with the company’s Articles of Association;
2. To promote the success of the company;
3. To exercise independent judgment;
4. To exercise reasonable care, skill and diligence in their role as a director;
5. To avoid conflicts of interests;
6. Not to accept benefits from third parties; and
7. To declare an interest in a proposed transaction or arrangement.

Duties carried out by directors in accordance with their statutory duties may include: participating in board meetings, preparing and keeping records of board minutes and financial responsibilities i.e. ensuring the company’s accounts are prepared and filed at Companies House etc.

It is vital that directors remain compliant with their statutory duties at all times to prevent a claim being brought against them for breach of duty.

For more information regarding wrongful trading please read our “Insolvency rules relaxed as the impact of COVID-19 worsens” blog.

If you would like any advice relating to directors’ duties or any other company related matters, please contact our Business Services Partner, Neil Cook on 01202 525333 or email neil.cook@ellisjones.co.uk.