Posted on: Friday 4th December, 2020
A company director can make themselves redundant in the sense that they can place their insolvent company into liquidation voluntarily, to minimise creditor losses. Doing so means that all jobs are redundant as the company closes down.
Being able to claim redundancy pay as a director depends on whether or not they worked for the company as an employee as well as being a director. So if you’re a limited company director in this situation, you must also prove your status as an employee.
It’s common for company directors to work under a contract of employment, and this is one factor that determines their status as an employee. If a written contract exists, it’s straightforward to prove their employee status, but oral and implied contracts can also be used as the basis for a claim.
We have extensive experience of making successful claims on behalf of directors, and can help you prove your status as an employee.
To be regarded as an employee, a director must:
Director/employees of companies in liquidation may be eligible to claim a range of entitlements in addition to statutory redundancy pay. These could include wage arrears, backdated holiday pay, and unpaid pension contributions.
When calculating your redundancy pay, you’ll need to take into account your age, length of service, and weekly wage. There are caps on these amounts, but statutory redundancy pay up to £30,000 is tax-free.
You’re essentially making yourself redundant as a director when you place your company into voluntary liquidation, as the company closes and you lose your job. Creditors’ Voluntary Liquidation (CVL) attracts professional fees, however, and you may believe that it’s unaffordable given the financial position of the company.
A successful claim for redundancy by yourself and potentially other directors opens up the possibility of being able to fund a CVL, however, and so avoid the rigorous investigations that take place when a company is forcibly liquidated by a creditor.
Alternatively, a redundancy payout could support your personal finances whilst you look for another job or role. Additionally, some directors decide to use the money from a redundancy claim to repay some or all of their company’s debts.
Placing your company into voluntary liquidation – effectively, a director making themselves redundant – clearly isn’t an ideal situation, but when there’s no hope of recovery it does offer some benefits compared with the alternative of waiting to be wound up by a creditor.
It protects you from allegations of wrongful trading and director misconduct and allows you to meet your legal obligations, as by voluntarily entering liquidation you’re minimising creditor losses.
Redundancy Claim UK helps limited company directors to make successful claims for redundancy pay and other statutory entitlements. We have more than 40 years’ experience of insolvency – please get in touch with our expert team for more specialist advice and practical support.
Does accepting a new job offer before the date of redundancy prevent a director making a claim for redundancy to the RPS
If you are looking to close your limited company, you may have attempted to strike it off by submitting a DS01 form to Companies House. This process is also sometimes referred to as dissolving or company dissolution.
A Creditors’ Voluntary Liquidation (CVL) is an official procedure whereby a company’s assets are liquidated in order to pay creditors. It’s typically initiated by directors when their company becomes insolvent and there is no hope of business recovery.
Redundancy claims are a very professional company, Caroline who is dealing with our case is friendly, compassionate and very clear in explaining everything during this difficult time. The service we have received has been amazing, Thank you.Tina Hill Director of a professional services firm