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Director’s Personal Risks

Posted by Michael Bromley
19 May

There is a growing sense in the community that the recession brought about by COVID-19 will not be “V” shaped, or even “U” shaped, but will in fact be “L” shaped.  There are many reasons to be concerned by this, not the least of which is that a long and slow recovery is not what the current government stimulus packages and debt management arrangements anticipated.   At some point, the support arrangements will come to an end and as the economy begins to re-start, we will see the full economic impact of COVID-19.  

Now more than ever, directors of companies need to be proactive and fully engaged in assessing all financial and non-financial risks their company may face due to the flow-on effects from interruption to business caused by COVID-19 and how these will translate to personal exposure. As businesses fail, creditors with their own COVID-19 business problems may seek to exercise their rights under any indemnities and guarantees they have received.  

Directors should carefully assess the short and long term effects of any reduced revenue and the impact of this on the company’s ability to comply with its obligations under any contracts currently in place and also the impact on any financing arrangements entered into by the company.  Directors are also responsible for ensuring that the company complies with all relevant laws and regulations and must keep up-to-date with the many changes currently taking place to ensure full compliance by the company with the relevant laws and regulations.  

Any contractual obligations of the company to customers, suppliers etc should be reviewed carefully to identify any potential problems or to assess any possibilities for mitigation in the current environment.  It would also be wise for companies to review the insurance policies they have in place to ensure whether they have adequate cover for the risks that may arise going forward as a result of the COVID-19 pandemic.   

Now would also be a prudent time to review (or indeed possibly develop!) the company’s business continuity plan and ensure that adequate risk management plans are in place to deal with any further changes that may result from the COVID-19 situation. 

At Arenburg Legal we have more than 20 years’ experience in managing legal risk.  Contact us for a free consultation regarding your possible legal exposure and options going forward.