Can I claim redundancy in compulsory liquidation?

Although many directors of limited companies are entitled to redundancy should their company enter liquidation, there are certain criteria you must meet in order to be eligible. As well as being an employee of the company, you must also have been in this position for a minimum of two years and worked at least 16 hours per week. The way in which your company enters liquidation is also a crucially important factor in determining your eligibility.

What is the difference between compulsory liquidation and voluntary liquidation?

Compulsory and voluntary are the two forms of insolvent liquidation. Both result in the closure of an insolvent company and both must be administered by an insolvency practitioner. The process is largely the same; the crucial difference between the two is how the liquidation process is initiated.  

• Voluntary liquidation – This is when the director, or directors, of a company choose to put their company into liquidation. This is often as a direct result of the company having mounting debts and feeling the pressure from creditors. In this case the director would choose their own insolvency practitioner who will handle the closure of the company from start to finish. This means the director is in control of timings and can therefore ensure the company ceases trading at the most convenient time for all concerned.
• Compulsory liquidation – A company is placed into compulsory liquidation when a creditor, such as HMRC or an unpaid customer or supplier, takes steps to wind the company up. The issuing of a winding up petition is the end result of a lengthy process of attempted debt recovery on the part of the creditor, so while this type of action should not come as a shock, the timing of it may well do. In a compulsory liquidation, the petitioning creditor is the one in control of the process and will dictate when the company is wound up.

When it comes to claiming redundancy, it is important to know that whichever of these two routes the company enters liquidation through you may still be eligible to claim.

What happens in a solvent liquidation?

In order to qualify for director redundancy, the company must be insolvent and it also must go through a formal insolvency procedure. This means that should a company close in a solvent state (such as through a Members’ Voluntary Liquidation (MVL)) or is struck off the register by way of dissolution, director redundancy will not be a possibility.

I think I may be eligible – what next?

If you are considering liquidating your company voluntarily, speak to us and learn how we can help you with making a claim for director redundancy. We can also help put you on the right path when it comes to starting the liquidation process.  

If your company is being wound up or has already gone through compulsory liquidation, however, time is very much of the essence if you want to claim. Although we can still help you, there is a strict time limit for claiming. This is typically no more than six months from the date following the company being liquidated, however, the sooner the process is started the better.

To find out more about claiming director redundancy call our specialist advisers today. With unrivalled experience in the ins and outs of director redundancy, we can help you with any questions or queries you may have, as well as being perfectly placed to begin the claims process on your behalf.