Case Study 1 – Engineering Company

Mr Dean operated a successful mechanical engineering company near Glasgow for over thirty years. Unfortunately, the business had been experiencing a downturn for some time. He had lost his largest client, who accounted for over seventy per cent of his business, this led to cash flow issues.

Mr Dean had just turned 67 years old and decided to close the business. He wanted to clear all his company debts however, the company cash had run out. He made a decision to use his personal money, to repay his creditors. Once it had gone, he still had £20,000 to repay HMRC.

Mr Dean was advised to liquidate the company, but he didn’t have the funds to pay for the liquidation, the next best option was to apply to strike off the company. The revenue rejected his application. By coincidence, the Insolvency Practice he had been speaking to, suggested he should speak to Redundancy Claim to see if he had a valid redundancy claim.

Mr Dean was a director and one hundred per cent shareholder of the company, therefore he incorrectly presumed he was not allowed to claim redundancy. Redundancy Claim's first job was to assure Mr Dean it is his legal entitlement to claim redundancy and other statutory entitlements under the Employment Rights Act 1996.

Redundancy Claims qualified Mr Dean’s application, based on the time he had worked for the company, his age and weekly pay or employment contract. Although he hadn’t been paying himself salary for some time, he was able to use his employment contract as evidence that the company intended to pay him £48,000 per year, this helped to validate his claim, it is a legal requirement for all employees to be in possession of an employment contract.

It became apparent he would be due over £24,000, including, redundancy, notice pay, unpaid wages and unpaid holidays. In this case he was due the maximum claim due to his age and the fact that the company had been operating for over 20 years.

We were able to give him the confidence he would receive the money. Mr Dean agreed to use the services of Redundancy Claim and he then took advice from an insolvency practitioner who agreed to take on the work on a contingent basis i.e. once Mr Dean had been paid his redundancy money, he would pay the liquidator.

Redundancy Claim were able to keep Mr Dean updated on the progress of the claim on a weekly basis, indeed even notifying him when he was due to receive his funds.

The process had taken eight weeks from agreeing the liquidation to being paid by the redundancy payment office. Mr Dean paid for the liquidation and now has a large amount of money to do as he pleases.

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If your company is struggling financially and you’re worried about your own future, it’s reassuring to know that as a director you may be able to claim redundancy pay should the company be forced into liquidation. Although not always a straightforward...
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