Directors and Redundancy

The Options for Redundancy For Directors of a Company

When a company goes out of business, it is well understood that former employees will receive a redundancy payment. However, fewer people are aware that company directors may also be entitled to claim a redundancy payment following the liquidation of a company. Provided the business has been trading for over two years, directors may be able to claim for directors’ redundancy payments from the National Insurance fund when the company closes, along with other statutory entitlements. These include notice pay, holiday pay and unpaid wages.

The average claim for directors’ redundancy pay in the UK is around £12,000, so it is crucial that you speak to an expert about your eligibility if you think you may be entitled to claim. This can help you to recover financially from the closure of your company and move on.

However, if your business is yet to close, you should speak to an expert for advice on whether or not this is the only way to respond to your financial difficulties. The team at Company Insolvency Advice has significant experience in a variety of company rescue and recovery solutions that are applicable to different circumstances, and could avoid the need to close your company. If you act quickly when you notice that your business is at risk of failing to pay its debts, there may be several different approaches you could take to resolve the problem.

Even if you feel that things are too late – if you have received statutory demands for payment or notices of legal action from creditors – there are solutions that may help. To discuss the viability of rescuing your business and the solutions that may help, or for support and guidance in claiming redundancy for directors, contact us today. Call us on 0800 999 0666 or use our online enquiry form to request a call back.

Who Can Claim Directors Redundancy Pay?

To make a claim for a redundancy payment, the director of a company that has closed down must also be considered as an employee. This means that you must have a practical role in the day-to-day operation of the business, and those serving in a purely advisory or non-executive capacity are ineligible to claim. The director’s role as an employee must be recognised by a contract; this may be an oral or implied contract, but it is always best to have a written contract of employment to ensure the highest chance of making a successful claim.

There are several other criteria that the director and the company must meet to enable the director to claim redundancy pay. These include:

• The company must have been trading for at least two years.
• The director must have been employed by the company for at least two years.
• The director must have worked more than 16 hours per week.
  
  

It can be difficult to know whether or not you are eligible to claim, especially given the ambiguity of the distinction between a director and an employee in some cases. It is also vital to get your application right in the first instance to avoid delays and reduce any risk of your claim being denied. As such, it is useful to work with an expert when making your application.

The team at Company Insolvency Advice has helped hundreds of company directors claim redundancy (and other statutory entitlements, such as holiday pay and unpaid wages) when their businesses have entered Liquidation. We have also supported companies with financial difficulties to continue and recover, thanks to our vast experience with company rescue solutions. Contact us today for support in claiming redundancy pay or for advice on resolving corporate debt challenges.