Who pays the Directors?

Among the first of many questions asked by directors of a company in financial difficulty is ‘how am I going to pay my staff?’.  With challenging cash flow and depleting available funds, most directors in such situation opt to forego their own salary to pay for their staff.  A noble action indeed, but it is the right one?

When the company eventually goes into liquidation, the government through the Redundancy Payments Service and under the Employment Rights Act scheme protects employees for unpaid wages.  Employees owed unpaid wages, holiday pay, notice pay and redundancy can claim against this scheme and chances are the employees will be paid their entitlement albeit with a few limitations.

For directors, they have the same opportunity to claim.  However, there are more hurdles to overcome before payments are made to them.  In most circumstances, director/owners of liquidated companies tend to have their claim rejected.

As always, help from experience professionals such as ourselves may be the difference between losing out on such a claim and receiving a cheque from the government.