Company Directors: Job Retention Scheme

The following information is based on the information published as of 26 March. It is intended as an indication of how the scheme will work, as no detailed guidance issued yet.

A considerable amount of incorporated small businesses are run by 1 or 2 directors, with no employees. Our notes below are based on our interpretations only, as no further guidance on the company's directors position can be found at present.

The Position of the company directors and officers

As a company director you will be trying to do everything you can to protect and preserve the business at present. Articles of Association and company law clearly state that the company's directors are having ongoing fiduciary duties to promote success of the company for the benefit of the company’s shareholders as a whole.

At present it is even more crucial to remember to be vigilant and mindful of your legal duties, to act in the interest of the company, so as not to expose yourself to the risk of personal liability if your actions go beyond what the law allows.

Interests of the employees, business relationships, customer and supplier relationships have to be carefully reviewed, and company's financial position evaluated regularly. Should the company be at risk of insolvency, the emphasis shifts from acting in the best interests of the shareholders to protecting the company’s creditors, and it is the director’s responsibility to adhere to the rules.

Therefore, for those reasons the company cannot operate without its directors and director(s) cannot be furloughed in respect of their duties as an officer of the company

As a company director you are also under an employment contract, and as such treated as an employee under the PAYE system, whether paid or unpaid. 

This lead us to believe (and this need to be clarified by HMRC further) that you can only be furloughed by the company in your capacity as an employee, not in a capacity of a director. If a furlough of the employment duties is considered this need to be evidenced by two contracts: a service contract and an employment contract (both with a clause on furlough).

Further Notes

· COVID-19 Self-employed Income Support Scheme is not available for company directors/ officers by virtue of holding the office of a director.

· It may be possible for a company to furlough a director under the COVID-19 Job Retention Scheme providing director only fulfils the company statutory duties.

· The government has temporarily suspended the wrongful trading in insolvency rules in order to allow companies to have a breathing space during the virus crisis.


What about the dividends – there is no scheme in place from the government to provide financial support to directors/ shareholders where the amount of their dividend is included.

Change of contract - 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.

Important Note

If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a SCAM.