Can a company director be furloughed under the Coronavirus Job Retention Scheme?

Furlough leave was a concept that was foreign to the majority of the British population just a few weeks ago. However, since the announcement of the Coronavirus Job Retention Scheme on 20^th March 2020, it is now a term synonymous with the COVID-19 pandemic.

The government has continued to publish some much-needed guidance on the issue, clarifying which classes of persons are eligible to receive a grant whilst on furlough leave. In particular, the guidance now confirms that office holders, including company directors, can claim the grant as long as they are paid through PAYE. The grant will be based on 80% of the director’s annual salary; any dividends or other payment made outside of PAYE will not be used when calculating wages.

Importantly, one of the key requirements to qualify for the furlough leave scheme is that the individual does not undertake any work for their employer. Whilst this is reasonably straightforward when furloughing an employee, how does this concept apply to directors who may be responsible for making day-to-day decisions regarding the business?

A director should be aware that the Companies Act 2006 imposes certain general duties on every director of a UK company, all of which will still apply during furlough leave. However, the government’s guidance now confirms that:

“where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they 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.”.

Essentially, this means that as long as any work a director carries out does not generate commercial revenue or provides services to or on behalf of the company, they will still be classed as being on furlough leave and thus eligible for the grant.

Any decision to furlough a director should be made and adopted through a (virtual) meeting of

the board of directors in the normal way, with quorum, decision making, conflicts of interest etc. being documented in a set of thorough board minutes.

For more information on furloughing in general please read one of my previous posts, click here or watch one of my two videos which have been uploaded onto the Franklins Facebook page:

• 20th March 2020
• 1st April 2020

If you would like any advice regarding furlough leave please contact Ben Stanton on 01908 660966 / 01604 828282 or by emailing ben.stanton@franklins-sols.co.uk or if you would like any advice on drafting board minutes or directors duties in general please contact our Business Services team on 01908 660966/ 01604 828282 or email businessservices@franklins-sols.co.uk.