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COVID-19: Company Directors and Shareholders

COVID-19: Company Directors and Shareholders

Many of the queries we at Fyfe Moir & Associates have had to handle in recent days relate to Company Directors and there is clearly much confusion in this area.

Many small companies are run by just one or two directors and have no other employees.

I have written this article to try to dispel many myths and falsehoods which are circulating and trust that it will help those directors understand the help available to them.


Definition of a Company Director

  • A director (or company officer) is an employee for PAYE purposes;
  • A director cannot claim the COVID-19 Grant for the Self Employed;
  • It is possible for a company to furlough a director under the COVID-19 Job Retention Scheme;



A director who was on the payroll and engaged in carrying out the duties of his or her employment contract (either written or verbal) on 28th February 2020 may be furloughed.


Can you furlough a sole director? 

Simple answer is Yes.

As usual though, not everything is simple and there are other considerations to take into account.

  • In deciding to furlough a director in respect of their duties as a company officer, it is assumed that the director will not be furloughed in respect their statutory A company cannot operate without its director and all directors have a fiduciary duty to their company;
  • A company will need to ensure that someone handles the ongoing administration of the entity – the duties normally carried out by a director;
  • Where as a result of the COVID-19 crisis a company goes into temporary hibernation, a director’s normal day to day employment duties may be furloughed but the director may continue to carry out statutory duties. So normal employee duties for which remuneration is paid may be furloughed but statutory duties would not be furloughed.
  • HMRC’s guidance states: “If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed”.
  • It is, however, for the employer to agree the terms of any modification to an employment contract and for the directors to act in the best interests of the company, which may include furloughing any staff member – including the director.

Ideally, we at FMA would recommend varying the terms of any existing contracts so that the duties as an employee may be furloughed while the statutory director duties carry on.

Two separate contracts should be sufficient to clarify any HMRC challenge – one being a service contract and one being an employment contract.

The employment contract may be the subject of furlough allowing the service contract to enable the director to continue the statutory duties.

This perhaps may seem OTT, but as the legislation is all new and open to interpretation, this in our view is a “belt and braces” exercise which should help fend off any subsequent challenge by HMRC.



There seems to be much confusion on this topic but the simple answer is that dividends do not qualify for the grant under the COVID-19 Job Retention Scheme.


What does qualify?

  • Employers must have been paying a salary through payroll and employees/directors would need to have been on the payroll on 28th February 2020;
  • Payments to employees when furloughed will be calculated based on normal monthly payrolled earnings for the 2019/20 tax year;
  • Furloughed employees are not allowed to work for the employer during the furlough period (but you may undertake training as a furlough employee)
  • As stated above, dividends do not count as salary for the purpose of the grant;
  • Under the scheme, businesses may apply for a grant of up to the lower of 80% of employees’ regular salaries or £2,500 per month for three months from 1st March 2020. The scheme may be extended for a longer period if the Government announce further restrictions in movements.


Potential Insolvency

The Government has announced that it will temporarily suspend the wrongful trading rules, backdated to 1st March 2020.

Guidance should be sought from FMA if you consider that this may be an issue for your company.

Hopefully this clarifies many of the queries surrounding Company Directors but we at FMA are on hand to answer queries which should be emailed to graham@fyfemoirassociates.com or alan@fyfemoirassociates.com


Graham Fyfe

4th April 2020