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Making a Director Redundancy Claim

When a company finds itself in a position of extreme financial and operational difficulty, and there is no alternative but to place the company into liquidation, it is widely accepted that any employees of the insolvent company will be made redundant and will subsequently be entitled to a redundancy payment.

What is less understood, however, is that the directors of insolvent limited companies are also entitled to claim redundancy from their company once it enters liquidation. This is because, as well as being its director, many company directors are also classed as employees of the business.

Director redundancy works in the same way as redundancy for employees. There are certain criteria which must be met in order to qualify, with the amount an individual is entitled to calculated based on age and length of service with the company.

Director Redundancy Entitlement – Did you know that as a limited company director, you may be entitled to claim redundancy if your company enters into an insolvent liquidation process? We can point you towards a fully regulated third party who can provide advice on your right to claim director redundancy if this is applicable to your situation. To understand if you are entitled, give a member of our team a call on 0800 063 9262, or email [email protected].

Jonathan Munnery

If you are considering liquidation for your limited company, taking advice from a licensed insolvency practitioner can help you understand your options.

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Do I qualify for director redundancy?

In order to qualify as an employee of the company, and therefore be entitled to redundancy, a director must:

  • Have a formal contract of employment
  • Work at least 16 hours per week for the week
  • This work must assist with the day to day running of the business rather than acting simply as an advisory role

How much redundancy may I be entitled to claim?

The amount you may be entitled to claim is based on several factors including your age at the time of redundancy, your length of service, and your gross weekly pay. For the purposes of redundancy, length of service is capped at 20 years, and gross weekly pay is capped at £544 per week. For each full year served you will be entitled to the following amount:

  • age 18 to 22 - half a week's pay
  • age 22 to 40 - 1 week's pay
  • age 41 and above - 1.5 weeks' pay

Additional statutory entitlements

As well as being eligible for a redundancy pay-out, you may also be entitled to additional statutory entitlements including holiday pay, notice pay, and unpaid wages. Depending on your circumstances you could be entitled to up to six weeks of accrued holiday pay, and up to eight weeks of unpaid wages. You are also likely to be entitled to up to 12 weeks’ notice pay depending on your length of service.

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Director redundancy and liquidation

While it is likely that many company directors do qualify for redundancy once their company becomes insolvent, it is important to note that redundancy can only be claimed if the company enters a formal liquidation process such as a Creditors’ Voluntary Liquidation (CVL). If the company is struck off – or dissolved – using the DS01 form, directors will be unable to make a claim. Placing a company into a CVL does come with a price tag attached, however, this cost may be eclipsed by the potential redundancy claim. Closing your company by way of a CVL also provides peace of mind that all outstanding creditors and company matters are handled in the appropriate manner and in accordance with the Insolvency Act 1986.

How is director redundancy paid?

When a company makes redundancies, it is the company’s responsibility to cover the redundancy payments owed. However, in the case of an insolvent company, this is simply not possible. In this instance, payment is made by the Redundancy Payments Service who take payment from the National Insurance Fund. This is used to pay both employees and directors.

How to make a claim for redundancy

Directors can make a claim for redundancy themselves, or alternatively there are a number of independent firms who can assist with the application. At UK Liquidators we can recommend a fully regulated claims management firm who have helped thousands of eligible company directors successfully claim the money they are entitled to.

During a very stressful time, UK Liquidators were able to calmly explain the liquidation process to me, ensuring I knew exactly what I was getting into before going ahead. I cannot thank them enough for making a difficult time that little bit easier.
Harry Barnes
Company Director
Common Liquidation Questions
Do I qualify for director redundancy?

In order to qualify for director redundancy, you must meet a set criteria.

What can director redundancy pay be spent on?

At a time when money is likely to be tight, a redundancy payment could be a much-needed lifeline.

What is director redundancy?

Director redundancy is similar to staff redundancy in that it provides a financial lifeline to individuals who have lost their job through no fault of their own.

Where does the money for director redundancy come from?

Typically when a company makes redundancies, it is the responsibility of the company to pay for all redundancy costs.

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At UK Liquidators, our service is fully partner-led and your case will always be overseen by a fully licensed insolvency practitioner.

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Jonathan Munnery
Mark Boast
Insolvency Practitioner
Matthew Cluer
Carolynn Best
Ready to Liquidate?
Express Liquidation Service
Ready to start liquidating today? Complete the form and a member of our team will be in touch.
Please note: By completing this form you are not liquidating your company
Contact the UK Liquidators Team

If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.

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