Businesses are making changes to how they trade to ensure they still remains viable and service customers during the outbreak.
Others will be looking at the empty high streets, restaurants and bars and considering if their business can survive until things return to normal.
For those with limited companies, individual directors have responsibilities that they need to meet.
These change when there is a risk the business will become insolvent or is likely to do so.
To reduce these risks, directors can take simple steps to protect themselves from future actions should the company become insolvent.
Most directors will cover these as part of their normal business management.
Where lots will fail will be that they don’t document their thinking and reasons for doing something.
This can protect them should a liquidator be appointed who pursues them for trading while insolvent or taking dividends when the company is making losses etc
The easy steps to take
- have a business plan and regularly monitor how close the business is to that plan
- the directors and management should meet regularly and review the financial position of the company
- if it looks like the company may become insolvent, document why it is continuing to trade
- review all purchase orders and document why they are being placed given the financial position of the company
- document all meeting and key decisions and meetings
- if you are paying some creditors and not others, document why, as you should avoid preferring individual creditors
- consider how the directors are being paid and the scale of that pay, in what could be a failing company
- establish if the directors, who in most cases will be the shareholders, able to pay and take dividends
The key step top take is to seek professional advice from a licensed insolvency practitioner such as Harrisons Business Rescue
With the added pressure of the coronavirus outbreak, this is a time when documenting decisions will be more important.