Articles

When a company is liquidated, its directors may be able to claim a number of statutory entitlements, including redundancy pay. These payments can help considerably when directors have their own personal financial problems to deal with due to their company’s liquidation.

If your company is going to be liquidated, members of staff may be eligible for statutory redundancy pay. Claims can be paid from the company’s assets if sufficient funds are realised, otherwise the payments are made from the National Insurance Fund (NIF) following submission of form RP1.

Although it’s not essential for directors to work under a contract of employment, doing so can offer advantages in certain circumstances. There are tax and other financial implications when you’re an employee as well as a director, so what might be the main advantage of establishing a written contract of employment?

The fact that limited company directors can claim redundancy when their company is liquidated is not widely known in the UK. If successful, however, this payment can cover the professional fees needed to undergo insolvent voluntary liquidation, rather than having to wait for a creditor to enforce liquidation.

If your company has reached the stage where it must be liquidated but there is no money available to repay creditors, or fund the necessary professional fees, you may feel that there’s no way out.

If your business is facing financial decline and you’re not sure how to proceed, you may be considering closure in order to minimise losses. This is generally achieved using a liquidation process called Creditors’ Voluntary Liquidation (CVL), which writes off any unpaid debts at the end of the process, and is administered by a licensed insolvency practitioner (IP).