The CJRS was extended recently to run until the end of October and the structure was changed so that employers using the CJRS will be required to contribute financially with effect from 1 August. Further details of this new structure, which might be described as Phase 2 of the CJRS, can be found in the article produced by my employment colleague, Innes Clark: Flexible Furlough
It is hoped that most of the businesses taking advantage of CJRS will be able to meet their payment obligations once they move to Phase 2 of the CJRS, but for a number of businesses this will prove to be a challenge and they will be required to reduce their workforce by making redundancies. There are strict rules as to how long redundancy consultations must run, which depend on the number of employees who are likely to be made redundant. Companies must be careful that they comply strictly with their redundancy consultation obligations and careful consideration will need to be given to the timing of any redundancy process having regard to the tapered contribution which will be required from employers to the CJRS from 1 August. You can find our further thoughts on the timings in our article - Redundancies - timings will be critical to minimise cost.
If a Company is technically insolvent and it does not take all reasonable steps to mitigate losses to creditors (known as "wrongful trading") then the directors of that company may be liable to make a contribution to the assets of that company should it subsequently go into a formal insolvency process. A creditor of the company may argue that failure to follow redundancy consultation procedures in a timely manner could incur further costs to the company and, in consequence, increase losses to creditors, for which the directors may be personally liable.
Although the laws in respect of wrongful trading are currently suspended up to a date yet to be determined (at least 30 June but more likely 10 July) it is unclear whether this suspension will be extended, and therefore prudent directors should presume it will not be. If you are a director of a company and you are currently using the CJRS and considering making redundancies with a view to staving off formal insolvency then we recommend that you start thinking about what the consultation process will look like now. In a worst case scenario, failure to get the dates right could lead to personal liability which could otherwise be avoided.