No one wants their business to fail– but if circumstances have led to such an eventuality being unavoidable, it’s important to understand exactly what to expect from the procedure for you and your employees.
Unless a company or a close corporation has no reasonable prospect of trading out of such circumstances, there can be a legal duty to liquidate the business.
Liquidation is a legal process by which a company's existence is brought to an end." There are two ways in which a company can be liquidated: 1. The company adopts a special resolution to liquidate, which may provide for the winding-up of the company by the company, or by its creditors. This is when an application has been made to the court by a third party.
After the filing of the resolution, the company will stop conducting business. A liquidator will be appointed to collect the company's assets and use it to pay back creditors.
The liquidator will distribute any spare funds to the shareholders and the company will be formally dissolved.
If your employer is in liquidation, there is no continuing business and you will be out of a job.
Where your employer is in administration, however, an administrator will be appointed to see if the business can be kept alive pending a transfer in whole or part to a new buyer.However, they have a number of rights one of which is they can file for wrongful dismissal.Transfer of Undertakings Protection of Employment or TUPE regulations stipulate if certain criteria can be established a wrongful dismissal claim can be made.Employees affected by a company entering liquidation, however, can still legally claim for any of the following if they are owed it: Compensation for the above claims can be applied for by employees completing and returning a form called an RP1 form to the Redundancy Payment Service (RPS).It will be the responsibility of the appointed liquidator to inform employees of their rights and send the appropriate forms giving advice on what allowances they can claim.There are limits on making any legal claim against your employer in an insolvency situation.