Directors of limited Companies are falling through the cracks in the government’s COVID-19 support package, putting their companies and millions of jobs at risk.

Leading social enterprise, The Women’s Organisation, is urging the Government to reconsider and plug the gaps in its COVID-19 financial support package to better protect Company Directors.

The Women’s Organisation is warning that there are thousands of businesses, and therefore jobs, at risk because these owner/ Directors have no access to an appropriate packet of financial support which would facilitate business sustainability.

Helen Millne, Deputy CEO of The Women’s Organisation

It is drawing attention to the plight of Company Directors who are not self-employed and are paid through their company on minimum salary, receiving the majority of their income through annual Dividends.

Many directors have paid tax both through PAYE on their low-level earnings and through self-assessment for the Dividends they have received from the companies’ profits.

The Liverpool-based organisation says that the current Government schemes intended to support businesses to survive the pandemic and be ready to thrive once the lockdown is loosened are not providing lifeline resources to this group in the way that is needed.

The organisation acknowledges that the Small Business Grant Fund (SBGF) is available to those in smaller premises, but this figure will be relatively low. And while the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back loans are available to these businesses, loans are not the right solution for these personal income issues.

Whilst these Directors would be eligible for the Coronavirus Jobs Retention Scheme by Furloughing themselves from their roles as employee and director of their own company, The Women’s Organisation points out that both their income would be unviable and, critically, furloughing would mean they could not undertake vital tasks within the company to maintain its viability and ensure the business is able to restart trading.

One Liverpool Company Director shared their experience: “Within hours of lockdown all but two of my clients stopped their retained fees, leaving me with no alternative but to furlough my seven staff members. I tried to service the two projects and maintain the business myself but was forced to give up and furlough myself.

“Despite that I am maintaining company information, battling to get loan funding to enable me to restart at the point we are allowed. I earn a little over £700 per month before I earn profit related dividends – of which I have no profits to speak of since lockdown. All government routes to grant aid outside of the furlough scheme do not apply to me. I cannot see why it is so difficult to make a case to support company directors who create valuable employment to keep the economy moving.”

According to BEIS research (2019) there are 2 million actively trading companies (not including sole traders or partnerships) in the UK, with just over half of all Limited Companies employing staff and just under half only employing their owner/director(s).

This means that Limited Companies provide stable employment to at least 2 million people.

Helen Millne, Deputy CEO of The Women’s Organisation, said: “Limited Companies provide valuable products and services to their communities, generating significant income and employment to the UK economy. Company Directors deserve not only to be properly protected financially in this crisis, but also to have their contribution to our economy properly recognised.

“As it stands, a very large proportion of 2 million Company Directors are now left with no income, no support, and perhaps no business to return to. What is more, over 55% of these Directors employ staff meaning that the subsequent number of jobs at risk from these businesses failing is incredibly significant.

“We are hopeful that Government ministers and the treasury will be looking to develop a timely and effective support package which better reflects the contribution of this group to our economy and properly protects the income of thousands up and down the country”.

The Women’s Organisation has put forward a number of recommendations to the Government for extending the current schemes, so that they can best serve Company Directors and secure the sustainability of these businesses and ensure that they can be prepared for the recovery phase.

The first recommendation is to introduce a scheme specifically designed for Directors which replicates and acts as an alternative to the Self Employment Income Support Scheme, and that provides three months of their monthly dividend pay-out and three months of their monthly salary.

The Second option put forward by The Women’s Organisation is to introduce a Directors Retention Scheme, similar to the Coronavirus Job Retention Scheme, that allows Company Directors to continue working to promote the success of their company whilst furloughed.