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What are your options for claiming Director Redundancy?

Director Redundancy

It is a common misconception that company directors have no right to redundancy but just like any other employee you may be eligible to claim.

We understand that an insolvency process can be complex enough; that's why we also work closely with your Insolvency Practitioner to take the strain out of the process and ensure your claim is being managed effectively.

In some cases, directors of insolvent companies regularly under-claim their statutory entitlement to redundancy payments. Our expert and experienced team ensure that you maximise your claim by coordinating its submission to the Redundancy Payments Service (RPS) with your Insolvency Practitioner and help make sure the claim is paid out without being subjected to an expensive tribunal.

What is insolvent liquidation?

Broadly speaking there are two main insolvent liquidation procedures: Compulsory Liquidation, and Creditors’ Voluntary Liquidation (CVL).

A compulsory liquidation occurs when one or more of your creditors petition the court to force your company into liquidation so that all of its assets can be sold and the proceeds used to repay outstanding debts. The end result of compulsory liquidation will be the dissolution of your business – the company will cease to exist and will be struck off the register within 3 months of the conclusion of the liquidation.

As the name suggests, a Creditors’ Voluntary Liquidation, is when the liquidation process is started voluntarily by the directors of an insolvent company. This process is started usually due to increasing creditor pressures when the director has nowhere left to turn. The insolvent company would appoint an insolvency practitioner who would then call a meeting of the company’s creditors and facilitates the process of selling the company’s assets to repay the creditors.

Click the do you quality form to see if you qualify

Can I claim redundancy if my company isn’t in, or isn’t facing liquidation?

Put simply, no.

Just as an employee would not be able to claim redundancy while still in employment, you as a director are only able to claim redundancy when your company is in the process of going into liquidation. This is because a redundancy payment is designed to help individuals who have found themselves out of work rather than for those who are just contemplating the possibility of this happening.

It should also be noted that directors cannot claim redundancy in the instance of a solvent liquidation as this is seen as actively choosing to put yourself out of work.

When can a claim be made for director redundancy?

While it is possible to make a claim for redundancy both pre- and post-liquidation, the timescales for making your claim is strict. You must start the process either pre-liquidation or within 12 months of your company entering into liquidation. Despite this, it is advised that pre-liquidation is the best time to get the ball rolling on your claim. Many find the prospect of receiving a redundancy payment helps make the decision to liquidate the company easier. Waiting until after your company is liquidated could prevent you claiming your statutory entitlement.

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