COVID-19: Company directors & shareholders


COVID-19: Company directors & shareholders

COVID-19: Company Directors & Shareholders

Many small companies are run by just one or two directors and have no other employees. What government financial support is available to director/shareholders during the coronavirus crisis?

If the director’s company is adversely affected by COVID-19, the director has the following options, depending on the circumstances:

Potential insolvency -

See - COVID-19: Insolvency & Directors -

Furloughing -

Furloughing for normally employee type duties:

HMRC guidance says that where a company board decides to furlough a director, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director being furloughed.

Can you furlough a sole director?

Potential issues -

HMRC guidance for employers states that:-

A director must act in the best interests of their company. In the case of a single director-employee, you may furlough yourself but you must be unfurloughed if you start working to generate revenue.

Salary or dividends?

- If a company can no longer afford to pay dividends, it may be insolvent, directors should take appropriate advice.

- If the company decides to change the terms of the contract in order to pay a salary instead of a dividend, this must be agreed contractually between the company and its director. As suggested above, we would normally expect to see a service contact which details the statutory duties of a director and an employment contract which covers duties as an employee.

Low salary example -

2019/20 -

The sole director of an events company pays themself a basic salary of £8,632 per year and the balance of their remuneration is made up by a dividend, calculated in March, based on annual profits to 31 March and paid on 5 April.

The company is forced to shut down during March 2020 following COVID-19 restrictions.

The director can only be furloughed from the day that the company confirms they are being furloughed. This should be confirmed in writing. 

2020/21 -

With no events booked for the forseeable future, the company has no income.

Additional support for small companies -

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