Directors Duties in Insolvency and their Implications

Can I Claim Directors Redundancy in Liquidation?

in Directors Duties in Insolvency and their Implications Guides

When a company goes into administration or liquidation the directors of the business are in effect made redundant.  Their powers and duties as directors cease.  So, it isn't surprising to know that directors are in fact entitled to redundancy payments if they were employed by the company.  Given the company is insolvent then it cannot afford to make the payments, so instead the bill is picked up by the Redundancy Payments Office (RPO).  This fact can help alleviate some directors concerns about liquidation.  In any liquidation the employees are able to claim for arrears of Wages, accrued Holiday Pay and Pay in Lieu of Notice, and if they have been working for the same employer for two consecutive years are also entitled to receive a statutory Redundancy Payment.  The same applies to directors.  There are a number of companies out there claiming they can get large payments for directors but there are a number of caveats. What are the eligibility criteria? You must have been employed by the company and received a wage commensurate with your work. This is not often the case as directors usually pay themselves with dividends and take a minimum wage for tax reasons.  This was actually one of the reasons why many didn't benefit from furlough payments during the pandemic as they were not actually employees.You must have proof you were employed. Again just being paid via PAYE may not be enough.  You will need to show that you had a contract and that terms were set (these can be implied and not necessarily detailed in an employment contract) example terms might be holidays taken, sick leave, paternity.maternity payments, car allowances, pension provision etc.  ie all the usual things that an employee has.An employee may not work less than minimum wage. This is important as if you are putting in long hours and not being paid much then it actually means you are not an employee!  As such any claim will not be accepted. Small monthly payments will just be seen as extracting money from the company as an office holder not an employee. How do I apply? Once the company has gone into liquidation or administration then there is an application form that the directors can fill in.  It doesn't take long and there really isn't any need to employ a third party to do the claim for you.  Some companies are making some misleading claims about average payouts etc. How much am I likely to get paid? You will receive redundancy and loss of pay if you are entitled to it.  However, in most cases that we have dealt with the directors owe the company money and this negates any payout that is likely to be owed.  In addition, the Redundancy Payments Office (RPO) is getting very strict about claims, so a director that has taken out substantial dividends is unlikely to be regarded as an employee. The amount is capped at £719 per week.

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Can I Claim Directors Redundancy in Liquidation?

What Is A Transaction At An Undervalue?

in Directors Duties in Insolvency and their Implications Worried Director What Will Happen To Me After Liquidation?

A transaction at an undervalue is when an asset is transferred for no payment or sold at below their true value.  The transaction becomes a problem if the company is insolvent, as any transfer at an undervalue is in effect depriving the creditors of money owed to them.  This is outlined in s238 of The Insolvency Act 1986. 

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What Is A Transaction At An Undervalue?

Why Directors Delay Getting Advice

in Directors Duties in Insolvency and their Implications Guides

There are many reasons why directors don’t act when they are worried about something. Here are a few possibilities: Avoidance: When you are worried about something, it can be tempting to avoid it altogether rather than confront it. Procrastination can be a way of putting off dealing with the problem or issue, in the hope that it will go away or resolve itself. Fear of failure: If you are worried about your business failing or not meeting expectations, you might put off taking advice because you are afraid of facing that failure. By not starting the task, you can avoid the possibility of failing and feeling bad about yourself. Being Overwhelmed: When directors are worried, they may feel overwhelmed by the task at hand. Procrastination can be a way of avoiding the feelings of stress or anxiety that come with tackling a difficult or complex task. Perfectionism: Some people may not take advice or delay doing so, because they have high standards for themselves and are worried about not being able to meet those standards. This can lead to a sense of paralysis, where they are unable to start the task because they are worried about not doing it perfectly. Overall, delaying action or not taking advice is a common coping mechanism for dealing with worry and stress. However, it often makes the problem worse in the long run, as the task or issue continues to loom and causes more stress and anxiety. It's important to recognize the reasons behind the business problems and work to address them in order to move forward and tackle the issue at hand. This is something we can help you do!  Call us on 0800 9700539  what have you got to lose!

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Why Directors Delay Getting Advice

Companies Run By Women Less Likely To Go Bust

in Directors Duties in Insolvency and their Implications News

New research by KSA Group shows that male-owned businesses were over 40% more likely to go into insolvency between October 2021-22 than those run by females.The study, which looked at the insolvency rate of companies with a 75%+ male or female board, showed that male-dominated companies went bust at a rate of 0.84%, versus 0.59% for majority-female companies.This means that companies were 42% more likely to become insolvent if their boards were male-dominated.The study also considered single-director companies, which had a higher overall insolvency rate than companies with two or more directors. Here too, company failure rates were higher for men than women, with insolvency rates of 1.08% and 0.77% respectively (a 30% difference). Overall insolvencies up 200% post-COVID Does the COVID pandemic have any bearing on these results, given that overall insolvencies have rocketed by 200% since 2018?It seems the gender difference was already in play, and in fact was more pronounced before the pandemic. When KSA Group ran its 2018 insolvency study, male-dominated businesses were 70% more likely to enter insolvency than female-dominated firms.The failure rate of female-owned businesses has increased threefold since the pandemic (from 0.20% to 0.59%), but this has increased less sharply for male-owned businesses (0.34% to 0.84%). Key findings in 2021/22:Insolvency rate is over 40% higher in male-run companies Four times as many companies are run by majority men than women Overall insolvency rate in both groups has increased by a factor of 200%Do men run riskier businesses? Are men less competent at running businesses than women, or could there be another explanation?Robert Moore, from KSA Group, points out that men might simply gravitate towards more risky business sectors: “It is apparent that the insolvency rate is higher in male-run businesses, but this may be due to a number of factors that have nothing to do with whether men are less effective at running businesses than women. It may well be that the types of businesses that men tend to run are more vulnerable to insolvency.”For example, construction was the most represented industry within male-dominated business insolvencies, accounting for 24% of all business failures looked at by the study. By contrast, only 7% of the female-dominated company insolvencies were in the construction sector.As depicted in the pie charts below, there are other noticeable differences in the sectors of male versus female-dominated company insolvencies, with a more even split of industries across the latter. This does suggest that a greater range of businesses are now at risk of insolvency: a legacy, perhaps of the pandemic and the subsequent economic shock?Insolvent Male Run Business By Sector, Female Run Insolvent Businesses By Sector, We did not collect data on the overall percentage of each industry across all active (non-insolvent) companies, so it is difficult to draw conclusions on whether this is a sector-specific problem.&nbs...

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Companies Run By Women Less Likely To Go Bust