Director Redundancy Claims

Many directors assume that when their company closes, they simply lose out. In some cases, that’s not true. Directors and redundancy is one of the most overlooked areas of director help, and getting it right can mean a decent financial return at what’s often a difficult time.

If your company is insolvent (or heading that way), understanding whether you’re entitled to make a director redundancy claim yourself is worth exploring in more depth.

At BCIA Recovery & Turnaround, we help directors understand whether they qualify for redundancy, and guide them through making a claim correctly. We’re ready to help you understand all options available to you – get in touch for a consultation.

Can Directors Claim Redundancy?

It sounds counterintuitive. Directors run the company, so surely they can’t be made redundant by it. In reality, directors and redundancy aren’t mutually exclusive, provided certain conditions are met.

The key distinction is this: a director can hold two separate roles at once. One is the statutory role of company director. The other is being an employee of the company, working under a contract of employment, paid a salary through PAYE, and carrying out day-to-day duties. It’s the employee status that opens the door to a redundancy claim, not the director title itself.

What You Need to Qualify

To bring a director redundancy claim, several conditions generally need to be met:

• You were genuinely an employee of the company, not just an office holder – evidenced by a contract, PAYE payslips and day-to-day duties beyond board decisions
• You had at least two years of continuous employment with the company
• The company has entered a formal insolvency process, such as liquidation, and can no longer pay you directly
• Your role has officially ended as a result of the company’s closure

Each of these gets checked carefully when a claim is assessed, which is why having the right evidence in place from the outset matters.

Entitlement to Redundancy UK

Once eligibility is established, entitlement to redundancy UK rules apply to directors in the same way they apply to any other qualifying employee. Depending on your circumstances, a successful claim can include:

• Statutory redundancy pay, calculated using your age, length of service, and weekly pay, subject to a statutory cap that’s reviewed annually
• Notice pay, if you weren’t given your full contractual or statutory notice period
• Unpaid wages, for any salary owed but not paid before the company closed
• Holiday pay, covering any accrued but untaken annual leave

These claims aren’t paid by the company itself, since it has no funds left. They’re paid through the National Insurance Fund, administered by the Redundancy Payments Service (RPS), a division of the Insolvency Service.

How a Director Redundancy Claim Works in Practice

Once a company enters an insolvency process such as a Creditors’ Voluntary Liquidation, the appointed insolvency practitioner confirms the company’s position and provides the information needed to support a claim. From there, the process typically involves:

1. Confirming your employment status and gathering supporting evidence, such as your contract and payslips
2. Submitting your claim to the Redundancy Payments Service, usually online
3. The RPS assessing whether you meet the qualifying criteria as an employee
4. Payment being made directly from the National Insurance Fund if the claim is approved

Claims generally need to be submitted within strict time limits following the company’s insolvency date, so acting promptly matters. Delaying can complicate a claim unnecessarily, even where the underlying entitlement is genuine.

Why Directors Miss Out

We see two common reasons directors don’t pursue a claim they may actually be entitled to. 

First, many simply don’t know it’s possible – the assumption that “I’m the director, so I can’t claim” is widespread, even though it’s often incorrect. Second, the evidence needed to prove employee status isn’t always in good order, particularly in smaller companies where formal contracts and payroll records haven’t been kept as carefully as they should be.

Neither of these has to mean a claim fails. But both are far easier to address before liquidation happens than afterward, which is exactly why this is worth raising early, alongside any wider conversation about closing the company.

Getting This Right Alongside Everything Else

A director redundancy claim rarely exists in isolation. It usually sits alongside a much bigger set of decisions: whether the company should enter liquidation, what happens to any personal guarantees, and how outstanding debts are handled. 

Looking at redundancy entitlement as part of that wider picture, rather than as an afterthought once the company has already closed, tends to produce a much better outcome.

It’s also worth remembering that a genuine redundancy claim is entirely separate from any conduct concerns a liquidator might review. Claiming what you’re properly entitled to as an employee doesn’t reflect poorly on you as a director, provided the underlying employment relationship was real.

How BCIA Recovery & Turnaround Can Help

Our senior advisors, working from our Matlock and Manchester offices, bring 50 years of combined experience to guiding directors through every part of a company closure, including whether they’re entitled to redundancy themselves. We’ll help you gather the right evidence, understand your entitlement and make sure a claim is submitted correctly and on time.

If your company is facing insolvency and you’re unsure whether you can claim redundancy as a director, don’t leave it to chance. Get in touch with BCIA Recovery & Turnaround for free, confidential director support and find out exactly what you may be owed.