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How does a CVA affect a redundancy claim?

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In the event that a CVA should fail and go into liquidation, the treatment of arrears of pay and holiday pay elements of a director redundancy claim is different.

The RPS position is that it has the power to pay only the debts that are due and unpaid on the “appropriate date”, defined as:

In relation to arrears of pay and to holiday pay, the date on which the employer became insolvent.

Thus, the employee / director must show that the debt was unpaid at the “appropriate date”, which for the purposes of claiming arrears of pay and holiday pay means the date on which the employer became insolvent (see ERA 1996 section 185(a)). Where the employer first enters into a creditors' voluntary arrangement (CVA) and is later wound up, the appropriate date is the date of the CVA because all liabilities vest in a CVA trust at the time of the CVA.

Redundancy and notice pay are unaffected.

If you have a CVA that is failing and want to know more about what directors and employees can claim for from the RPS please call 01625 881 134 or email at [email protected]

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