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In many cases, directors of insolvent limited companies are entitled to claim redundancy once the company enters into a voluntary liquidation process. This is because many company directors are also classed as employees of the business. Certain criteria applies, however, if the company has been incorporated for at least two years and directors are on the payroll, they are likely to have a valid redundancy claim.
As a company director, you may have an understanding of redundancy pay in relation to your employees, but did you know that a large majority of limited company directors are also entitled to redundancy when their insolvent company enters into liquidation?
Company directors are eligible for redundancy pay, also known as directors redundancy, in the event of their company being forced to close due to insolvency.
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When your company is struggling financially and liquidation looks to be the only option, you may feel as though you have nowhere to turn. You may not even have the funds to liquidate. However, in this situation, you may qualify for redundancy as well as a number of other statutory entitlements which could provide a much needed windfall in troubled times.
The redundancy payout can be utilised in any way the director chooses. At an undoubtedly difficult time this payment could help ease the financial strain following the closure of their company, or it could even be used to start a new venture should the director wish.
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If you are a director of a limited company – which has been trading for over two years – and you are considering insolvent liquidation, it is possible that you may be able to claim for director redundancy.
In addition, you may also be entitled to other statutory entitlements such as notice pay, holiday pay and unpaid wages.
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To qualify for director redundancy, you must be regarded as an employee of the company as well as a director in order to be eligible. The following criteria also apply:
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Having established that you are, in fact, an employee of the company, the amount you’re entitled to depends on your length of service, age, and rate of pay. The rate of gross weekly wages at the time of redundancy and your length of time in service at the time of liquidation are used as the basis for calculating how much redundancy pay you’ll receive.
To be eligible, you must have completed a minimum of two years’ service. Employees owed money by an insolvent company become preferential creditors, and you may also be able to claim backdated salary, holiday pay, and arrears in lieu of notice.
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The quickest and easiest way to ascertain whether you qualify for director redundancy is by speaking to the insolvency practitioner dealing with the liquidation of your company.
If your company has yet to enter into liquidation, the experts at Real Business Rescue are here to help talk you through the process and determine whether you may be eligible for director redundancy. Call the team today on 0800 644 6080.
Still unsure whether liquidation is right for your company? Don't worry, the experts at Real Business Rescue are here to help. Our licensed insolvency practitioners will take the time to understand the problems your company is facing before recommending the best course of action going forward based on your own unique circumstances.
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