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What statutory entitlements can a director claim when their company is liquidated?

Posted on: Tuesday 7th November, 2017

What statutory entitlements can a director claim when their company is liquidated?

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.

On the company’s closure, along with employees, directors lose what is often their only source of income, so what are the eligibility criteria for claiming redundancy and other payments?

Criteria for claiming statutory payments as a director

  • Working under a contract of employment for the incorporated business for at least two years
  • Working for a minimum of 16 hours per week in a manner comparable to other employees, i.e. taking a salary under PAYE, and fulfilling a practical role that is more than just advisory
  • Being owed money by their company – this is often their original investment

To establish their status as an employee of the company, directors must complete a questionnaire from the Insolvency Service that reflects the above criteria.

How to make a claim

Claims should be made from the Redundancy Payments Service (RPS) using form RP1. If successful, payments are generally made around six weeks following receipt of the claim. So how are these claims calculated?

Redundancy pay calculations are based on a director’s age, weekly wage, and the length of time they’ve worked for the company, and are subject to certain limits. The director’s age determines the proportion of weekly wage used in the calculation – this figure is then multiplied by the number of full years’ service.

  • 18-22 years: half a week’s wage
  • 22-40 years: one week’s wage
  • 41 years and over: one and a half week’s wage

Length of service is capped at 20 years, weekly wage is currently limited to £489, and redundancy pay is capped at £14,670.

Other statutory entitlements for directors

Apart from redundancy pay, what other statutory payments might directors be entitled to?

  • Up to eight weeks’ arrears of salary
  • Up to six weeks’ unpaid holiday pay
  • Notice pay up to a maximum of 12 weeks
  • Unpaid pension contributions

Directors may also be able to claim Statutory Sick Pay (SSP), and Statutory Maternity, Paternity, or Adoption Pay, but claims for these are made from HM Revenue and Customs rather than the National Insurance Fund.

If your company is going into liquidation and you would like more information on your statutory entitlements as a director, contact our expert team at Redundancy Claim. We’ll explain your rights, entitlements, and how to make a claim.

Our flowchart can help you understand whether you might qualify for director redundancy.
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