Job Retention Scheme for Company Directors, recent update in the Government guidance
10 APR 2020
There has been a lot of uncertainty as to whether the Job Retention Scheme is applicable to company directors or not. The guidance has now been updated and expressly confirms that the directors may be furloughed as long as they are paid via PAYE.
The position will be the same as for other employees who are eligible under the scheme. The usual criteria will apply:
- 80% of director’s usual wage costs will be covered (capped at £2,500 per month) as well as NICs and pension contributions on the subsidised wage
- Directors should have been on PAYE on or before 28 February 2020
- Initial furlough reimbursed is for 3 months but can be extended
- Furlough must be for a minimum initial period of 3 weeks.
The grant paid to the directors will be calculated based on their regular, contractual pay, such as wages, compulsory commission and past overtime. The calculation will not include discretionary commission payments or bonuses, non-cash payments or benefits in kind. Basically, it will not cover any payments made to the directors outside of the PAYE system.
Furloughed directors cannot to do any work that they would carry out in the normal circumstances to generate commercial revenue or provide services to or on behalf of the company. However, they can take part in volunteer work or training.
However, furloughed directors will still be appointed directors and so will need to comply with their duties under the company law. The company will need to consider these duties when making the decision whether to furlough their directors. For example, section 172 of the Companies Act 2006 provides that a director must promote the success of the company for the benefit of its shareholders as a whole considering the likely consequences for various stakeholders and the impact on the environment, the reputation of the company and the company’s success in the long term.
Other relevant duties include the duty to exercise independent judgement – directors should ensure that they are not simply implementing the commands of others such as major shareholders or investors – and the duty to avoid conflicts of interest. A director who is potentially to be furloughed may not be able to participate in the decision making process.
The directors should be permitted to still comply with their duties but no more than is reasonably necessary. It is arguable that in order to do so, it is reasonably necessary for the directors to be involved in the running of the business almost on a daily basis. It is yet to be seen how this will be achieved in practice.
Each director will need to come to their own decision as to whether or not furlough is the right choice for them in the circumstances.
The decision to furlough must be made by the company acting through its board of directors. Therefore, a board meeting will need to be called, alternatively the board can make a written decision – in accordance with the company’s articles of association.
The director who is being furloughed will be “interested” in the furlough arrangement for the purposes of the company law. Depending upon what the company’s articles of association says, the director may or may not be able to count in the quorum or vote on the decision. Each of the directors will need to consider their duties when coming to the decision.
Once the decision is made, it will need to be noted in the company’s records and communicated in writing to the directors concerned.
For more advice please contact us on firstname.lastname@example.org
Yulia BarnesManaging Partner
Yulia Barnes is our Managing Partner. She is an experienced solicitor and advises on a wide range of contentious and non-contentious matters for both private and corporate clients.Yulia started her legal career at a large international Magic Circle firm. She then became a partner at a regional law firm and headed a Dispute Resolution Department. She then moved in-house before starting her own Boutique practice, Barnes Law, with the aim of providing exclusive services to high net-worth individuals and privately-owned businesses. More details can be found on her LinkedIn profile.
Expertise Yulia and her team are widely recognised for their professional and practical approach to matters. She is committed to ensuring that her clients’ objectives are achieved in the most cost-effective way possible.
Approach Yulia has a wealth of experience working with businesses of all sizes: from large multinational corporations to start-ups. She has particular expertise in a hospitality industry, investment funds, private and corporate clients, and focuses on startups and technology-driven companies. Yulia brings the same level of attention to detail, professionalism and a personal touch to every case and client, and truly immerses herself in her clients’ businesses. She prides herself on her problem-solving, commercially astute approach and her track record of partnering with clients to help them achieve their strategic objectives.
Will joined Barnes Law as an Associate Solicitor in Spring 2023, shortly after qualifying in September 2022.
Will works mostly on real estate and corporate/commercial matters. Will enjoys providing advice on transactional matters.
Away from the office, Will can be found reading or playing golf. While he played rugby until university, and rowed throughout his degree, he now tends to watch both from the sidelines. During the winter he can also be found skiing.
Will plans to continue developing his legal skills and experience at Barnes Law, under the expertise and guidance provided by Yulia.
Mark is an experienced solicitor whose practice areas include intellectual property (IP), IT, data protection and general commercial law.
Mark advises businesses of all sizes – from sole traders to corporations. Among his clients are: clothing and lifestyle brands, restaurants and food suppliers, IT companies, banks, hedge funds and venture capital firms, education providers, medical and pharmaceutical brands.
Outside of his practice, Mark also advises members of the Institute of Directors as part of its Directors’ Advisory Service.
- Prosecuting a UK trademark application on behalf of an education provider and representing them in related UK IPO opposition and revocation proceedings;
- Advising a publisher and a delivery business on data protection matters, B2B and B2C Ts & Cs of sale, website and app Ts & Cs, all aspects of global brand protection;
- Advising footwear brands, alternative asset managers and hedge funds on their global brand protection, including overcoming various refusals, representing them in opposition proceedings and settlement negotiations;
- Representing a central bank in opposition proceedings before the UK IPO;
- Advising a lifestyle brand concerning trademark clearance and protection, negotiations for a website/app development and maintenance agreement.
Ioulia TatawatFamily Law Adviser
Ioulia has a solid background in family law and offers guidance, clarity, and support to clients during one of their most challenging times in their life.
She advises on all three pillars of separation: divorce, children matters and financial settlements. Ioulia is a member of Resolution and is keen to try to settle matters at early stages.
Ioulia is dedicated to assisting clients and navigating them through their legal matters with clarity and support.
Alex joined Barnes Law in September 2023 after finishing his master’s degree in law. Prior to joining Barnes Law, Alex worked in property litigation at Ashfords. Alex assists Yulia on a variety of both contentious and non-contentious matters.
Outside of the office, Alex enjoys reading and hiking. Prior to working in law, Alex was a competitive tennis player.
Alex continues to develop his skills in legal practice under Yulia’s guidance, he plans to sit the Solicitor’s Qualifying Exams (SQE) in 2024.
Mehves joined Barnes Law in August 2023, right after graduating from Queen Mary, University of London (LLB Senior Status). As part of her qualification journey, Mehves is currently pursuing her Legal Practice Course (‘LPC’) at the University of Law. She also holds a degree in European Union Law from Maastricht University, Netherlands.
Mehves works closely with Yulia on a variety of contentions matters and also writes Barnes Law’s legal blogs, manages social media accounts and is responsible for marketing.
Outside of work and studies, she enjoys running, tennis and yoga.
Mehves is looking forward to developing her legal skills at Barnes Law.
Julia PodgornovaInvestor Relationship Manager
Julia guides clients in making important business decisions based on comprehensive risk assessment and strategy. She supports investors in devising strategies designed to maximise each business’s potential from pre-seed to IPO.
Julia’s particular area of expertise are IT start-ups at different stages. Julia supports business through their fund-raising journey. As an Investor Relations Manager, Julia communicates with investors to facilitate a smooth round and legal part of each transaction.
In her free time Julia enjoys sailing, ballroom dancing, art exhibitions and travel.