Are company Directors entitled to receive statutory entitlements from the government if their company is in liquidation?

When a company enters a formal insolvency process and employees are made redundant, if the company does not have sufficient money to pay employees their entitlements, the government steps in and makes payments up to statutory limits. This is done by the Redundancy Payments service, part of The Insolvency Service. See more info here.

We often get asked are directors eligible for these entitlements. To be eligible the Director must have been an employee.

The Insolvency Service will consider other matters. For example, where it is established that the Director was an employee, the Insolvency Service will offset any overdrawn director loan account.

Since December 2023, The Insolvency Service has introduced a formal procedure and will require certain pieces of information to be made available to them in assessing a Director’s claim. Including:

1. Last set of full (not abbreviated) accounts
2. A copy of the contract of employment, letter of appointment or written memorandum noting the terms and conditions of contract of employment
3. Company bank statements for the 12 months prior to insolvency
4. Wages slips for the last 12 weeks of employment
5. P60s for the 3 years prior to insolvency
6. A completed questionnaire. Questions include:
   • When the contract of employment started?
   • What was the position with holiday entitlement, sick pay and pensions?
   • Did the director receive dividends?
   • Did the director have an overdrawn loan account?
   • Did the director ever take a reduction in salary?
   • Did the director have a shareholding and were funds ever invested?

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