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Can a director claim redundancy if they sell their company out of administration?

In an administration the director can make a claim for redundancy so long as they are made redundant as part of the process. The company can then be sold after the administrator has made the director redundant. Let’s look at the process more closely.

company director

What is company administration?

Company administration is a formal insolvency procedure for struggling businesses which is an alternative to liquidation. When an insolvent company is handed over to a licensed insolvency practitioner to be placed into administration, the main aim is to rescue the company or realise a better outcome for its creditors than would be achieved if the company was wound up. The aim of administration is to protect the company, and crucially its creditors, as much as possible. Once an insolvency practitioner has been appointed, a legal ring fence is placed around the company. This is known as a moratorium, and it stops any legal action, including compulsory liquidation, against the company from taking place.

The process can be initiated by the courts, a floating charge holder, or yourself in your capacity of company director. The insolvency practitioner will assess the financial position of the company and determine the best way forward to protect and enhance as much as possible the interests of the creditors. An exit strategy out of administration will then be planned. Depending on the future viability of it as a profitable business this could involve it being sold, either to an existing or unconnected buyer, or liquidation.

What is director redundancy?

As a director you may be worried about what will happen to you following your company entering administration. The loss of your business also typically means the loss of your main source of income. While this is undoubtedly a stressful time, there may be some slight consolation in the form of director redundancy.

Most people are aware that employees are entitled to redundancy pay following the collapse of the company they worked for, however, a lot of people don’t realise that directors are often also employees of their company and are therefore equally as entitled to claim redundancy. Your eligibility to redundancy will depend on how long you have been working for the company, your age, yearly salary, and hours worked.

My company has been sold out of administration – how do I make a claim for redundancy?

If your company has been sold out of administration and you believe you may be entitled to claim director redundancy, your first step is to contact Redundancy Claims UK and speak to one of our specialist advisers. We can quickly determine whether you have a legitimate claim and give you an indication of the amount you may be entitled to. We will then lead you through the entire process from start to finish. To find out more, or to start your claim, call us today on 0800 063 9261.

Many directors don't consider themselves to meet the criteria and don't claim when they have a legitimate right to.

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