Anyone who sets up a new business or becomes a director of an established operation is likely to have their eyes fixed firmly on doing whatever they can to develop that enterprise and make it as competitive as possible.
Unfortunately though there are thousands of businesses every year which run out of cash flow and cannot avoid the position of insolvency.
In these scenarios there is always a great deal for company directors to consider and no shortage of responsibilities for them to act upon. So much so that the issue of redundancy pay for directors can easily go overlooked entirely.
Rights of directors
There is a widespread lack of awareness of the fact that directors of limited companies have a right to claim redundancy pay if they are involved in closing down their business. It’s certainly an unenviable position to be in but there is scope to find a silver lining.
In our experience as insolvency experts, we’ve found that the average amount awarded to directors of limited companies making claims for redundancy pay in the UK is £12,000. This is the average figure so clearly it can be more or less but there is a high success rate among directors who are aware of their rights and make a claim on that basis.
There’s no escaping the fact that being at the helm of a business whose financial position has become unsustainable can be highly stressful and challenging in all manner of ways. As a result, the idea of claiming redundancy pay for yourself as a director of a limited company can seem like just one more source of complexity and anxiety.
But the process of claiming redundancy pay as a director in these situations is actually less stressful or involved than many people realise or anticipate. Being able to secure a redundancy payment might not be a priority for a director while an insolvency process is being undertaken in earnest but it can prove well worth having in mind.
After all, directors whose companies go out of business typically lose their jobs and their main sources of income along with the staff of the company who can no longer be employed.
So, while securing a few thousand pounds of redundancy pay might not be high on the agenda of directors whose companies are being liquidated, it can make a significant difference to their financial wellbeing once the dust has settled on an insolvency or liquidation process.
Making a claim
Making a claim for redundancy pay as a director of a limited company that is being or has been wound up is actually quite straightforward. It’s generally important to get advice from insolvency experts beforehand so that you’re aware of the rights you have as a director, which can include rights to holiday pay and unpaid wages as well as redundancy pay.
The laws that govern matters relating to all aspects of insolvency processes are well-established and the rules applicable to the issue of directors’ redundancy pay are crystal clear.
So the only issue is whether a director decides to pursue the matter and make the claims that they’re entitled to make. You can claim at any time after or during an insolvency process, it doesn’t have to be a stressful undertaking and it might prove to be a rare source of positivity during an otherwise very difficult time.