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How Can Company Directors Prepare for a No-Deal Brexit?

on Thursday, 17 January 2019.

As Brexit uncertainty continues, businesses are being urged by the government to enact or devise contingency plans for a no-deal Brexit. What duties do you owe your company as a Director?

What Can You Learn from Corporate Law?

In times of change or uncertainty we all need reference points - a star to guide us by. As you will be planning for the possibility of the UK leaving the EU without any negotiated withdrawal agreement or transition period, one star for directors of companies to follow is their duties as directors under company law.

The Companies Act 2006 codified for the first time what had previously been a collection of common law principles, developed by the courts over previous centuries, augmented by some specific statutory provisions.

Sections 171 to 177 of the Companies Act set out the general duties of directors, including some that are particularly relevant to Brexit contingency planning:

  • Promoting the success of the company (section 172)
    Directors should have regard to the likely long term consequences of any decision, the impact on employees and the need to foster business relationships with suppliers, customers and others.

  • Duty to exercise reasonable care, skill and diligence (section 174)
    The test of reasonable care, skill and diligence is both objective (ie, what would be expected as general knowledge for someone holding a position of responsibility as a Director) and subjective (relative to the director's own particular general knowledge). Accordingly a Director with particular expertise in overseas markets, trade regulation, or supply chain management, for instance, might be expected to exercise a higher degree of skill and care in Brexit contingency planning.

How Can You Apply This to Your Business?

Context is of course crucial. Businesses with substantial trade with Europe, or indeed other parts of the world, and with overseas operations will have had to consider Brexit carefully. Those with the resources to do so may well have put in place detailed contingency planning. For others whose business is principally in the UK, their concern will be more about the macro-economic effect of a no-deal Brexit on their business generally, or the effect of prolonged uncertainty on business confidence and investment decisions.

Mark Twain once said "I have spent most of my life worrying about things that have never happened". That is a comment about the comfort of hindsight - for now businesses have to consider their response to the current political situation, and directors will need to think about their duties in that regard.


To discuss how we can help your business prepare for Brexit, please contact our Corporate Law team, or complete the form below.

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