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What are directors’ redundancy claims?

It’s pretty obvious that if a company goes into liquidation there will be no money available from the company to pay the employees any form of redundancy payment when they lose their jobs. However, most people are aware that in these circumstances the Government steps in via the National Insurance fund and pays the employees a statutory redundancy payment.

If you’re a director of the company in question you’ll be worried about your staff.  In a small company many of them are probably your friends, but at least you know that if you liquidate the company properly your staff will get their statutory redundancy pay.

But what about you, the company owner and director?

There are costs involved in the legal process of putting a company into liquidation and your company must be liquidated before your staff can receive their statutory redundancy pay.

It’s obvious your company doesn’t have any funds or else there’d be no need for it to go into liquidation, so how can you find the money to liquidate your company so you look after your staff as best as you can?

The Government’s redundancy payment scheme might help you but this is a specialist process and we recommend independent advice is taken.

Essentially it works in the same way as your employees’ statutory redundancy claims.  It is funded by the Government from the National Insurance fund. The amount you can claim is based on the amount of time you’ve been a director of your limited company.  You must have been in the role for at least two years to claim a redundancy payment.

For companies that have been trading for several years, your claim can amount to several thousands of pounds. The claim very often covers the costs of legally liquidating your company and might also leave you with a cash excess.

In a nutshell, if you need to liquidate your company, making a claim for directors’ redundancy could cover the cost of the liquidation, while ensuring your staff receive their statutory redundancy payments and it might even leave you with some cash in the bank.

That might sound too good to be true, but surely it’s worth investigating?

Yes, there are costs involved but if your claim more than covers the costs, your staff are looked after, you no longer have to deal with people owed money by the company and it leaves you with cash in your pocket; what’s not to like?

Qualifying Criteria For A Government Directors’ Redundancy Claim

  • You need to have been a director of a limited company for at least two years.
  • You need to be on the PAYE payroll of your company even if you haven’t taken a salary.
  • Your company must be put into liquidation by a licensed insolvency practitioner and there will be a fee for this.
  • You can make a claim yourself but it is a specialist process to make a directors’ redundancy payment claim as you need to establish employment status. A specialist company will charge you a fee to submit your claim but may give you peace of mind that the claim will be submitted correctly and that you will receive all funds that you are eligible for.

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