The answer is yes, provided the process is managed correctly. The ability to claim directors redundancy pay depends upon the company closure method chosen and the qualifying eligibility of the director. We discuss these below.
Company closure method
The type of company closure method chosen will determine whether a director can apply for directors redundancy or not:
- Company dissolution and Members’ Voluntary Liquidation (MVL) – unable to claim as the company is solvent
- Creditors’ Voluntary Liquidation (CVL) – can claim as the company is insolvent
Who pays for a directors redundancy claim in a CVL?
As the company is insolvent there would be insufficient funds for the company to pay. Payments are made through claims made to the National Insurance Fund via the Redundancy Payment Service. As well as redundancy pay, there could also be payments for unpaid wages, holiday pay, and pay in lieu of notice.
Qualifying eligibility of the director
Although a CVL enables claims for redundancy payments to be made, the following eligibility criteria applies to directors redundancy claim entitlement:
- Two years eligibility – The director must have been employed by the company for two years, or there was a transfer of employment giving rise to continuous employment for that time
- Minimum hours – a director must work on average for a minimum of 16 hours per week for the company
- Paid through PAYE – the director must earn regularly through the PAYE system
- Employment contract – a director evidences there is a formal contract of employment
- Day to day work – a director must work in a day to day role
For further information on claiming directors redundancy and employee redundancy, read our related article – “Employee Redundancy Claims”.
Call us at Greenfield
If you need friendly helpful advice about claiming directors redundancy pay Call us 0121 201 1720 or enquire below.