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Director claiming redundancy and other payments in Insolvency

It has often been considered that a company director cannot claim redundancy, and loss of other benefits of his employment when his limited company goes into Liquidation.

The Insolvency Service booklet “ Redundancy and Insolvency a guide for employees” sets out the guidance on who can claim in a liquidation, when and for what. The payments are made from the National Insurance Fund in the case of a company which is insolvent and cannot pay its statutory dues. The Redundancy Payments Office then deals with the claims and makes the payments.

The guidance says that a company director will not qualify if they only deal with company policy or go to board meetings in return for fees. However if they have a job with the company, they have to show that they were working under a contract of employment.

Many small businesses are run by their owner managers who have specific roles and work alongside the rest of the workforce.

We are aware of the recent decision in the case of Secretary of State of Business, Enterprise and Regulatory Reform v Neufeld [2009] EWCA Civ 280 CA

This was heard as you can see in the Court of Appeal. The Judges decided that a person who was a majority shareholder and director of a company could also be an employee of that company under a contract of employment, even if he had total control of the company.


In this case the claimant was a director of a company. The company became insolvent. He claimed statutory redundancy money from the company. The Court of Appeal held that the claimant, was an employee and as such he was entitled to claim for redundancy money, notice money and holiday pay owing at the date of insolvency of the company.

He had a contract of employment which existed at the time of the company insolvency. That contract was found to be genuine and that he had a contract of service, and as such he was entitled to benefit from the Business Insurance Fund the same as any other employee.

One if the Judges set out a number of principles which it is important to bear in mind as a Director.

•“There is no reason in principle why someone who is a shareholder and director of a company cannot also be an employee of the company under a contract of employment.
•There is also no reason in principle why someone whose shareholding in the company gives him control of it cannot be an employee.
•In short, a person whose economic interest in a company and its business means that he is in practice properly to be regarded as their “owner” can also be an employee of the company”
Hence, if you are a Director of a Limited Company and that company is going into liquidation, there is nothing to stop you making a claim for redundancy, unpaid wages, holiday pay, notice pay and possibly a basic award for unfair dismissal.

The sums involved can be large indeed and it could pay to take advice.

Call 0808 160 5577 if you think that you might be entitled to help.

Contact Steve Thatcher of Help With Debt (UK) Limited a total debt solutions company.
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If you have any debt problem whatsover either personal or corporate make Steve your first call all advice is free. Finally if in the UK and you need a friend to speak to call 01162171406



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