As a direct result of the restrictions imposed by the Government on us all in response to the COVID-19 pandemic, many companies have suddenly and unexpectedly found themselves in a position where they are unable to pay their suppliers and are therefore insolvent on a cash flow basis.

RAAs are a statutory restructuring mechanism which operate by apportioning the departing employer’s share of liability between it and remaining employers. As an RAA can be entered before the insolvency process is initiated, RAAs can permit corporate restructuring in response to financial hardship without triggering the departing employer’s insolvency.

1. Talk to your contracting partners about any difficulties that have arisen or that you anticipate might arise. Everyone knows that unanticipated issues are going to get in the way of normal business. So address them head on. Pretending that they don't exist isn't going to be of any help to you or your business partners.
2. If you are struggling financially take advantage of the government support. Our website provides guidance on how to access that support. Speak to your bank. The risk to banks is significantly mitigated by the government guarantee.

Directors' Duties and Related Matters, in the Context of COVID-19

25 March 2020

Scope And Purpose of This Note

This note summarises the duties that directors of companies incorporated in England and Wales are subject to.

This note explains those duties, and matters that directors should consider in relation to those duties, in the context of the developing coronavirus disease 2019 (COVID-19), commonly known as the "coronavirus" or simply, COVID-19, pandemic.

Today’s list of winding up petitions has been adjourned for a minimum of three months with petitions being re-listed for June, July and August. ICC Judge Mullen recited in his order that having considered the Protocol for Remote Hearings dated 20^th March 2020 and the LCJ’s Review of Court Arrangements due to COVID-19 dated 23^rd March 2020, he has concluded that the list “cannot presently be conducted remotely” and that “satisfactory arrangements to ensure safety cannot be put in place”.

Companies are now faced with unprecedented challenges presented by the coronavirus pandemic. In this context, company directors will be trying to do everything they can to protect and preserve the business. However, they do still need to remember their legal duties, so as not to expose themselves to the risk of personal liability if their actions go beyond what the law allows.

Practical steps which directors should be taking now, as explained in more detail below include:

The UK economy cannot ignore the financial shockwaves it feels as a direct impact of the coronavirus pandemic 2019-20. The UK Government has rolled out daily and unprecedented economic measures aimed at supporting and financing struggling business given the effect of this unprecedented economic climate. We recognise that in some cases, this simply will not be enough.

One of the key issues facing all public companies during the COVID-19 crisis is how and when to update necessary market disclosures relating to the risk impact of the pandemic on their business.

History has taught us that prolonged periods of market volatility increase the risks of litigation against both companies and their governing boards, and that the way in which they act now can have long-lasting effects.

Some companies may face severe solvency issues, which will lead to questions around the disclosure of the company’s financial position.

Sky News reports today that the Insolvency Service is considering reforms to insolvency laws which may include a moratorium on winding up petitions against companies and the suspension of rules on wrongful trading.

Businesses will be considering dramatic changes over the next few days and weeks. The Government last week closed certain business such as pubs, theatres, restaurants and cinemas. Last night, the Government went further and ordered that all non-essential retail businesses and hotels should close and that people should not leave their homes to work unless it absolutely cannot be done from home.