Once a liquidator is appointed, all employees will be made redundant. Generally employees will be dismissed immediately. However, the liquidator may keep on some employees for a limited period if he or she feels that this will help preserve the value of any of the company’s assets before they are sold.
Because the company is insolvent
, there may not be enough funds to pay redundancy packages to the employees. Employees are entitled to preferential redundancy pay (after the liquidator’s fees) of up to £800.
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What if employees are owed more?
Anything over and above £800 owed to employees is treated as unsecured company debt and is paid in the same way as all other outstanding creditors.
Given that there is generally not enough money to pay creditors, it is unlikely that employees in this position will recover more than a small proportion of what they are owed.
Redundancy notices and payments will not be made as per the employee’s terms and conditions of employment. As such employees could have the right to launch a claim for unfair dismissal against the company. However, this is not usual as the company is insolvent and any such awards will remain unpaid.
