Stonachs shares Job Retention Scheme furlough guidance for directors

The UK Government issued updated guidance on the Coronavirus Job Retention Scheme on Saturday and this has clarified the position on the ability of executive directors (that is, directors who are paid a salary) to be placed on furlough. Importantly, this includes salaried individuals who are directors of their own personal service companies.

Under the updated guidance, executive directors can be placed on furlough provided that:

  • this is decided by the Board and formally adopted as a decision of the company;
  • noted in the company records; and
  • communicated in writing to the director(s) concerned.

In practice, this means that the decision should be formally recorded in writing in board minutes and written notice of the decision should be given to the director who is being furloughed.

An employee is not entitled to carry out any work while on furlough but the guidance acknowledges that furloughed directors will continue to owe statutory duties to the company while they are on furlough.

They are therefore allowed to carry out particular duties in order to fulfil those statutory duties provided they do no more than would reasonably be judged necessary for that purpose. For example, this would allow a director to attend a board meeting of the company.

The guidance makes it clear that this is limited to fulfilling statutory duties and a furloughed director should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

It is important to note that the Coronavirus Job Retention Scheme only applies in relation to salary paid by company to an executive director and not any dividend payments which may be made to an executive director who is also a shareholder of a personal service company.

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