What you need to know about liquidation and director redundancy

When considering your right to director redundancy, you need to be aware of how the liquidation process affects your right to claim.

Simply put, a director can only claim redundancy when their insolvent company has entered liquidation. The liquidation process can be started voluntarily by the director when realising the company has no chance of revival, or it can be initiated by a creditor (commonly HMRC) who has petitioned to wind up your company due to unpaid debts.

Redundancy claims are a very professional company, Caroline who is dealing with our case is friendly, compassionate and very clear in explaining everything during this difficult time. The service we have received has been amazing, Thank you.

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Regardless of the route into liquidation, whether voluntary or the result of creditor action, the insolvent liquidation process itself is key to unlocking the statutory entitlements you are entitled to, including redundancy pay. You should also note that other directors may also qualify for the same entitlements.

Our knowledgeable team can answer any questions you may have, and can advise on any potential TUPE issues which require careful planning to protect company directors and employees (where applicable). We can even provide a detailed business review if required, and assist with employee redundancy claims if necessary.

“Liquidation and director redundancy are mutually exclusive; you can’t apply for director redundancy unless your company is insolvent and either in liquidation or set to be liquidated.”

What is insolvent liquidation?

A compulsory liquidation occurs when one or more of your creditors petition the court to force your company into liquidation allowing for its assets to be sold and the proceeds used to repay outstanding debts. The end result of compulsory liquidation will be the dissolution of your business – the company will cease to exist and will be struck off the register within 3 months of the finalisation of the liquidation.

As the name suggests, a Creditors’ Voluntary Liquidation (CVL), is when a director, or directors, voluntarily choose to liquidate their insolvent company, usually following increasing pressure from creditors.