Guidance for Companies on Furloughing Directors
The Government has issued welcome guidance – in relation to the position of company directors who are furloughed. The Coronavirus Job Retention Scheme (CJRS) means that a company can furlough its employees (including directors) and claim back money from the government, subject to various criteria.
Previous guidance stated that employees who were furloughed must not do any work for the company. This position was unsatisfactory for directors, who have both statutory and fiduciary duties to the company and a role as office holders in addition to their role as employees. It meant that they would be in a difficult position whereby, if furloughed, they could not perform any of the tasks necessary as part of those duties to the company.
This is a welcome change for directors who do not want to be in breach of their duties whilst furloughed. Directors are in a unique position; whilst being employees, they also have duties that they owe to the company which can be enforced against them. They can now continue to perform their duties whilst furloughed, provided they only do what is absolutely essential.