delayed not cancelled

Delayed not Cancelled - company responsibilities during lockdown

Company directors will be focused Said company and commercial partner, on the bottom line and corporate Rina Sond, at Longmores Solicitors: “The governance as they continue to challenge of balancing the books during the navigate their way through the pandemic current crisis is stretching even the most lockdown and the Government’s route robust companies. Alongside, directors map towards business as usual. Many are justifiably concerned about fulfilling will be worried at the risk of straying into their responsibilities, acting diligently territory where they cannot pay their bills, and in the best interests of the company. or in meeting reporting requirements, but One issue is where they stand if cash flow Government concessions should relieve has been hit and company solvency is in some of the stresses in the short term. question. The Government’s intervention Compliance with the Companies Act 2006 about cash flow, but it is no substitute for requires directors to exercise reasonable professional insolvency advice and indeed care, which includes ensuring that the this special relaxation of the rules on company does not trade while insolvent. wrongful trading will eventually expire. This will arise where a company is unable to pay its debts as they fall due, or in situations “It’s important to be clear that these where liabilities are greater than assets, concessions are not about reframing and directors are under a duty to minimise corporate responsibility; it’s more about potential losses to creditors. If no action is breathing space.” taken, a director may be wrongfully trading, which carries unlimited personal liability. Other responsibilities which can be The UK Business Secretary announced filings with Companies House: a temporary three-month suspension of may have allayed some immediate concerns deferred during the pandemic include some wrongful trading provisions early in the • A three-month extension for filing yearlockdown, so company directors could end accounts. This extension must be continue to trade and pay staff without the applied for before the filing deadline, but is threat of personal liability. Other duties automatic and immediate on request. remain unchanged, and a director will be • Where late filing has already occurred liable for any other breach, including the and is due to the pandemic, there will be duty towards the company’s creditors if a sympathetic response and there may be there is a question of insolvency. a break before penalties must be paid, or payment plans agreed. • Temporary changes to strike-off policy. Where an application has been made for voluntary strike-off this will be published in the Gazette, but further action delayed to protect those who may have objections. Where strike-off is due to failure to file, Companies House will continue to write to companies but will not publish a Gazette notice. This does not apply to those who are being dissolved through insolvency or where the filing delay is reported as being due to the pandemic. • Emergency filing service. This will enable a number of paper-only registrar’s powers forms to be uploaded for submission. This will cover a small selection of forms which do not currently have an online option to allow requests for rectification and removal of information on the register. This will be extended to include more documents and payments in future.

Gender pay gap reporting and the publication of modern slavery statements can also be deferred without penalty. But the Government has emphasised that organisations must continue to tackle the risk of modern slavery in their operations and supply chains and recognise the increased potential for labour exploitation during the pandemic. And even though gender pay gap reporting has been suspended for the year, most companies will have compiled the data during the year and the expectation is that they will wish to catch up with reporting, if they have not already done so.

But take note, these policy changes are temporary and will be reviewed as the situation develops.

For legal advice for your business contact longmores.law enquiries@longmores.law 01992 300333

RINA SOND Company and Commercial Partner at Longmores Solicitors

Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.