Can Directors Claim redundancy?
Find out when and how directors can claim Redundancy.
There is nothing to prevent a director being both a director and an employee of a company. If the director is also an employee then the director is allowed to make a redundancy claim to the Redundancy Payments Office (a government agency) should the Company be placed into a formal insolvency process such as Liquidation. Directors can also claim for notice pay, arrears of wages and holiday pay.
Am I eligible to claim Redundancy?
You need to show that you worked under a contract of employment for at least 2 years and the contract can either be in written form, oral or implied.
The director must also be paid through the company’s payroll.
Finally, you must not owe any money to the Company when the business goes into liquidation as ordinarily this amount will be deducted from any potential redundancy payment owed to the director.
If the business has been running for a considerable time such as five years or more, the amount the director can claim can be substantial.
Having proved that you are an employee of the company, the payment you receive depends upon your length of service, age, and rate of pay. The rate of gross weekly wages at the time of redundancy, (currently capped at £544 per week) and your length of time in service (capped at 20 years) are used as the basis for calculating how much redundancy pay you’ll receive.
If you have been paying yourself a low wage, say £800 per month, then you should be able to rely on the National Minimum Wage Regulations which will increase your rate of pay that will be used by the Redundancy Payments Office when calculating your claim.
How does a direction pay for a liquidation?
Often directors want to do the right thing by putting the company into liquidation, which ensures that the insolvent company is dealt with quickly, properly and professionally, but also protects their staff and allows them also to claim the sums owed to them. But if the directors have put all their personal funds into the Company, and there are no assets in the Company, how do they pay for a liquidation?
If the director can legitimately make a claim from the Redundancy Payments Office, and if that claim is worth several thousand pounds, which is common, then this claim can often be used to pay the liquidation costs.
This can be an effective way to place a company into liquidation at effectively no cost to the directors.
If you would like a FREE CONSULTATION with an Umbrella.UK licensed insolvency practitioner to discuss your company’s situation, or your potential employee claim, please call 0800 611 8888
Following a personal recommendation, we appointed Umbrella.UK Insolvency to handle the voluntary liquidation of our business (MVL). Tom and his team were excellent, keeping us well informed throughout and working effectively with the company's accountants to ensure all documentation was produced and filed on time. I have since recommended Umbrella.UK to friends looking for similar services and I have no hesitation in recommending them more widely.
I engaged Umbrella .UK Insolvency to oversee a Members Voluntary Liquidation for the small consultancy business I've been running. The team talked me through the MVL process, steps and requirements. The paperwork involved was well explained and straightforward, with the initial disbursement of funds handled very quickly and professionally under tight deadlines.
I extend my appreciation of your professional efficiency in handling my company business and herewith say thank you.
Before I came to Umbrella.UK Insolvency I was in a bad place mentally due to debt because I believed I would be in my current situation for a long time to come. Umbrella Insolvency walked me through my options and helped me pick the best one. I am genuinely amazed at what they managed to do for me and can now afford to live comfortably, and without the constant worry of debt looming over me.
Thank you so much for your help with my IVA. As an ex-company Director my life took a downward spiral when creditors from my liquidated company called upon my personal guarantees. I had been treading water for months, ran up credit card debts and borrowed from family. When a creditor instigated bankruptcy proceedings against me I thought I was going to lose my house. I contacted Umbrella.UK Insolvency who stopped all the phone calls and threatening letters. Umbrella Insolvency explained things in a way I could understand. They negotiated with creditors and my IVA went through, now I can sleep at night again and I kept my home. Thomas Fox was extremely knowledgeable and I truly thank him and his team.
First of all, I would like to say a BIG Thank You for all of your assistance over the past year. I would not be in the positive state of recovery without Umbrella Insolvency. Your care and assistance at the application stage last summer, along with the advice throughout the year, has been great. I would not hesitate to tell anyone in my negative situation where to turn to.
I'd just like to thank both you and Tom for your help with the closure of my company. You have been highly efficient and very professional throughout. Thank you.
Umbrella Insolvency guided me as sole Director of my small limited company, and the shareholders, through every step of a Members Voluntary Liquidation in a very efficient manner. The steps required were clearly laid out and proactively managed by their licensed practitioner. From first meeting through to an interim distribution of funds to shareholders took only a few days in our case. Thereafter, Umbrella will be managing all of the downstream actions required to complete the process with HMRC and Companies House, through to the final discharge of the company.
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