Don’t Panic - Don’t Panic - Don’t Panic

The question for business owners is, “Do you have a plan for the business and are you working that plan?”

There is much hullabaloo about business close-down due to Covid-19 and the ability or inability of businesses to pay their debts as they become due. Now as company owners face the challenge of trading out of these difficulties there looms out of the darkness the threat of the Director of Corporate Enforcement (ODCE), should the business go into liquidation.

While the ODCE would generally not consider directors to have acted dishonestly or irresponsibly in circumstances where the company has become insolvent as a consequence of events largely, and genuinely, outside the directors’ control, they will have to examine the merits of each case.

It will be the precise action or inaction of the directors in their response to the financial difficulties of the company that will inform the assessment as to whether directors should face a restriction application.

To be fair to the ODCE, they have issued a statement setting out their functions, and while doing their best not to frighten the horses, they still must discharge their statutory duties to ensure that businesses do not continue to trade while insolvent.

They also draw attention to the Revenue Commissioners’ stated position that a declaration made as part of an application for the Covid-19 Temporary Wage Subsidy Scheme is not a declaration of insolvency.

 So where does that leave the hard-pressed SME company owners and how do they ensure that they do not fall foul of the law as they battle for survival? 

 Business owners will have to show: -

1. The processes and procedures for monitoring the organisation’s financial position are adequate. This means having a plan and comparing it with actual results to show objectively verifiable evidence.
2. The directors acted honestly and responsibly based on assessments and assumptions.
3. The directors got professional advice as to solvency.

 So, the question for business owners is, “Do you have a plan for the business and are you working that plan?”

If the answer is YES, carry on and good luck.

If the answer is NO, you may regret it.

Mark Fielding, [email protected]