Can I claim director redundancy if my company is liquidated?

Often yes, provided you were a genuine employee of the company, not just an office-holder. The Redundancy Payments Service pays statutory redundancy, and sometimes notice pay, unpaid wages and holiday, out of the National Insurance Fund when the company is liquidated. A contract of employment (which can be implied), at least two years of continuous service, a regular PAYE salary and a real day-to-day role all count towards qualifying. Taking only dividends and no salary usually weakens a claim. Many owner-directors do qualify and are simply unaware of it.

Employee, not just a director

The claim turns on whether you were an employee as well as a director. Being on the board does not by itself make you an employee, but most working owner-directors also have an employment relationship. Evidence that helps includes a written or implied contract of employment, a regular salary processed through PAYE, working set hours in the business, and being treated like other staff. You also need at least two years of continuous employment with the company (gov.uk: your rights if your employer is insolvent).

What you may be able to claim

If you qualify, you can claim statutory redundancy pay based on age, length of service and weekly pay up to the statutory cap, plus potentially statutory notice pay, arrears of wages and accrued holiday pay, all subject to the statutory limits (gov.uk; Employment Rights Act 1996, s166 and s182, which pay these out of the National Insurance Fund).

How to claim

Claims are made to the Redundancy Payments Service after the company enters a formal insolvency such as a creditors' voluntary liquidation, using the case reference the Insolvency Practitioner provides. Your IP can tell you whether your circumstances are likely to meet the employee test before you claim.

Related: director redundancy, the redundancy calculator, creditors' voluntary liquidation, and company liquidation.

Director redundancy: common questions

Who pays director redundancy when a company is liquidated?

The Redundancy Payments Service pays it out of the National Insurance Fund, not the insolvent company. This is the same statutory scheme that pays employees of failed businesses. You claim after the company has entered a formal insolvency such as a creditors' voluntary liquidation. This is general information; a Licensed Insolvency Practitioner can confirm whether your circumstances qualify.

Is there a minimum number of hours I must have worked?

No. Statutory redundancy has no minimum-hours test, so a part-time working director can qualify on the same basis as a full-time one. What matters is being a genuine employee with at least two years of continuous service, not how many hours a week that service involved.

Does owning most of the shares stop me claiming?

Not by itself. A director who also owns the company can still be its employee; the question is how the relationship worked in practice. A contract, a PAYE salary and a real working role point towards employment. Taking only dividends, or holding the title with no working role, points away from it, and the Redundancy Payments Service decides on the evidence.

This is general information, not legal or financial advice. Eligibility depends on your specific employment status and is decided by the Redundancy Payments Service. Speak to a Licensed Insolvency Practitioner about your own position.

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