This morning, I read with sadness about the anxiety those in the hospitality industry are experiencing. This anxiety stems from the fact that they have lost most of their customers, yet, they still need to pay their staff, rent, suppliers, and tax bills. At this moment in time, it is not clear what help and financial assistance is available and whether more financial assistance will be provided in the coming days. In order to comply with duties as a director, they need to ascertain what assistance is available for the company. This is changing daily, so it is important to seek updated information.
I have read and heard a number of people say that they would have preferred the Government to force closure so that they can rely upon insurance. This begs the question; can companies rely on insurance in situations such as this? It depends upon the insurance they have in place, and few will have insurance to cover them in these circumstances. These companies are in a very difficult situation, with many already saying that they will be pushed into insolvency situations. I remind the directors of these companies to continue to have board meetings to consider their financial position, and ensure that they comply with their duties.
Directors need to consider what steps they can take in an attempt to avoid insolvency, but must also ensure that they comply with their duties as directors to ensure that they do not expose themselves to personal liability.
Government has said that money will be available, however, directors should consider what is and what is not available, and make enquiries to ascertain this. When a company is insolvent, the directors have duties to act in the best interest of the creditors. Given there is so much uncertainty about the level of help that will be available for companies at the moment, it is my advice that directors explore all that may be available to help them through these difficult times. As I always say when I am advising boards of directors: Document everything.