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Liquidation & Redundancy

Discussion in 'Legal' started by Helen Watson, Mar 26, 2007.

  1. Helen Watson

    Helen Watson UKBF Regular Free Member

    Posts: 2 Likes: 0
    Hi I am working for a company that I think is about to go into liquidation. The thing I was wondering was, what is my employer legally obligated to tell me, I have been there for 10 years so obviously I'm elegible for redundancy pay but I think that I'll turn up at work one morning to be told that I no longer have a job. Where do I stand?
    Any advice would be appreciated.
  2. Richie N

    Richie N UKBF Regular Free Member

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  3. Guest

    Posts: 0 Likes: 0

    I am struggling to remember some rules, but it goes a bit like this.

    There is a very limited amount of your redundancy/notice, and I mean limited! - it is maybe 2 weeks? that becomes a super - preferential creditor, which is paid anyway at full value, and the DHSS stand in your place in the queue to claim it back from the company recievers

    In addition there is a small amount the government pay independently, for each week of your remaining redundancy, but it is capped at most a couple of hundred a week.

    The difference then between your actual redundancy and what the rules above give you, becomes a preferential creditor on the company - and it is only paid if there is money to do it. And from memory you stand in the queue after the government agencies, and after the liquidators fees from memory

    So in practical terms, you can probably forget it.

    Maybe I have a jaundiced view, having been a creditor on a couple of bust companies, but I get the distinct impression that Insolvency practitioners charge whatever is left after government agencies and banks are paid out.

    If you cant get sensible answers anywhere else I have a copy of the insolvency acts, and if pushed I might look it up for you.

    But sadly you will probably say goodbye to all but about four weeks money.
  4. Guest

    Posts: 0 Likes: 0
    Oh, and I dont think they have any obligation to tell you until after the liquidators are appointed.

    But the one ray of hope, is sometimes they will try to find a buyer for the business, and if your role is essential, the liquidator may keep you on. But they have to be really careful - because they become liable for your salary then.

    I also believe there can be a problem - I half recollect from trying to buy a business that had gone into liquidation, that transfer of undertaking can apply, which is a big disincentive for either taking over a bust business, or taking the staff with it.
  5. bwglaw

    bwglaw UKBF Regular Free Member

    Posts: 4,682 Likes: 229
    The size of the employer will determine whether they have a duty to inform and consult with employees and whether their job is at risk. I would not entirely agree with the other comments made therefore you need specific legal advice.
  6. Guest

    Posts: 0 Likes: 0
    A few references dug up:

    Check out this:


    That explains most of the issues, and gives you the contacts

    - But really, I shouldnt spend money on legal advice (yet, or unless you suspect wrongdoing) - give any reciever and the government offices chance to explain it first.

    - but watch insolvency practitioners, not all of them play by the rules - I will go further and say at least two that I tripped over didnt even seem to know the rules!

    A few other pieces

    Obligation Capped at 290 per week
    Section 166 ERA 1966. The protected redundancy pay is only up to the weekly limit announced each April.

    Q My employer has gone 'bust': how can I claim my pay owed to me?
    Where an employer becomes insolvent owing debts to employees there is a special scheme to compensate these workers. This is known as the 'Insolvency Provisions' of the Employment Rights Act 1996. Under Section 184 of the Act the Department of Employment Redundancy Payments Section will pay to such workers the following debts:
    8 weeks wages up to a weekly limit (currently £290 per week) - this includes commission and overtime
    Payment in lieu of notice up to a weekly limit (currently £290 per week) - an employee should claim Jobseekers Allowance immediately upon dismissal, as their claim for payment in lieu of notice will be reduced by the amount of Job Seekers Allowance (whether they claim the Allowance or not).
    6 weeks holiday pay up to a weekly limit (currently £290 per week) for unused holidays or for holidays taken but not paid, accrued in the previous 12 months
    Other payments including statutory payments for time off work, e.g. sick pay, maternity leave; a basic award for compensation for unfair dismissal; reasonable reimbursement of apprentices' or articled clerk's fees and any 'protective award' made by an industrial tribunal.

    Notice...no particular obligation listed to employees - till reciever appointed

    The problem I had, in buying a lcompany in receivership:

    TUPE causes problems for anyone buying a business.
    Good intentions
    When the regulations were introduced in April, the government was trying to promote its concept of a 'rescue culture'. Insolvency practitioners had been complaining for years that the cost of the TUPE regulations was a barrier to rescuing ailing companies.

    At the time I was interested in this - there was also a limited element of employee pay which jumped the creditor queue - thats back in 1996 - but the rules may have changed since then.
  7. bwglaw

    bwglaw UKBF Regular Free Member

    Posts: 4,682 Likes: 229
    Kimmrunner - your information is somewhat outdated. The weekly cap you refer is actually now £310. Government offices and the like can only give guidance but will not give specific advice. The OP should seek immediate legal advice because employment law changes very frequently
  8. Guest

    Posts: 0 Likes: 0
    It is bad news when the governments own site is out of date!

    However the first document does include the contact numbers for the key regional offices - which in the end are the ones that will help her.

    The liquidators ( if appointed ) will no doubt pass on some of this information - including the contact adrresses of the regional offices above.

    Provided and assuming they keep to the rules for employees - which in this case she is relying on the govt department, rather than a liquidators honesty - there is unlikely to be a problem.

    I would think it is rare for there to be a dividend in respect of the difference between an employees entitlement and the lesser amount paid out at the weekly capped limit:

    Note my experience on how liquidators really calculate their fees...it always seems to be whatever is left after paying out some of the preferential creditors. School of hard knocks speaking there! My other negative experiences with insolvency practitioners have been in terms of their failure to check ownership of assets, their willingness to do dirty dishonest deals behind the backs of creditors, and in one case unlawfully putting a major shareholder on the books as an employee ( he wasnt)- so that they could bribe him for him to cast the votes in favour of completing the liquidation. Disgraceful.

    But in reality, as I have discovered is it is a expensive thing to challenge them.

    My suggestion to the OP simply waits to see what happens and what she is being told! - then there maybe something on which to base some advice on, and with that : I shall politely leave the thread for good!
  9. KM-Tiger

    KM-Tiger UKBF Regular Full Member - Verified Business

    Posts: 7,655 Likes: 1,876
    That's not a jaundiced view, it's what happens as far as I can see. Unsecured creditors rarely get anything.
  10. sjbeale

    sjbeale UKBF Regular Full Member

    Posts: 1,082 Likes: 182

    Your employer has a duty to consult whether it is just you or a number of employees. You will entitled to a minimum of statutory redudancy pay + notice pay if you are to go immediately.

    If this does not happen you can claim unfair dismissal.
  11. Guest

    Posts: 0 Likes: 0
    Read the OP - She is talking about a liquidation here....
  12. bwglaw

    bwglaw UKBF Regular Free Member

    Posts: 4,682 Likes: 229
    The general duty to consult should not be confused with the duties set out in The Information and Consultation of Employees Regulations 2004 which provides a much broader duty to inform and consult. These Regulations give employees greater right to be informed of the employer's business where the employee's job is at risk
  13. Guest

    Posts: 0 Likes: 0
    But the reality can also be , the contract they hoped for doesnt come in, or a creditor whose debt they rely on just went into administration:
    the directors can meet the bank tomorrow, the bank can say no and freeze the acounts, the directors have no option and appoint, and "regulations or no regulations" the first "consultation" she may get is finding the offices locked with the notice of a meeting of liquidator and employees scheduled at which they are all told the game is over - and given a number to ring at the redundancy offices.
  14. bwglaw

    bwglaw UKBF Regular Free Member

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    The law makes provisions for such circumstances
  15. Guest

    Posts: 0 Likes: 0
    But the last thing the OP needs if she really is headed for redundancy on a couple of hundred a week - is to fritter that small sum trying to play legal "King Canute" against forces many times bigger than her.

    So IMHO her best course of action is to see what unfolds - see whether there is a probem before trying to solve it.
  16. bwglaw

    bwglaw UKBF Regular Free Member

    Posts: 4,682 Likes: 229
    I think you are speaking from your own personal experience

    If the employee was made redundant then the redundancy pay would be more than a couple of hundred given the length of service she has. The employer has a duty to inform/consult
  17. Guest

    Posts: 0 Likes: 0
    You will notice I said hundreds a week not hundreds, and I also observed that in most liquidations, it is generally unlikely the OP will see any further dividend after that.

    Good to see that one of us is.
  18. bwglaw

    bwglaw UKBF Regular Free Member

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    You said:

    I speak from professional experience ;)
  19. Guest

    Posts: 0 Likes: 0
    "Professional experience" - sorry that cuts no ice at all with me.

    Since the last 3 times that I asked solicitors to do anything for me were useless, wrong or both, and without exception late: the mystique of the legal profession no longer does it for me. I have got on far better since by acting for myself.

    And I too speak from professional experience, of being on the sh*t end of several companies going bust, and getting advice from solicitors, who seem to be very good at reading the rules of poker, but are no use at all in playing the game. - in knowing when to bet or fold

    Any way, it will be interesting to see you injunct the liquidators of a company "failed to consult" before it appointed, or then drag them through high court to try to get them to pay out more than the governments pittance, of just a couple of hundred a week.

    But whatever keeps you happy.

    I keep taking this back, from the point of view of the OP

    I still think her sensible course of action
  20. Helen Watson

    Helen Watson UKBF Regular Free Member

    Posts: 2 Likes: 0
    Thanks for the help and advice, I went into work last Monday to be met by my MD who gathered all the staff and management together and told us " thats it we're closed..." so I have now joined the great unemployed.
    Thanks again people