Directors resignation enabling potential future redundancy£?
Discussion
Hi Folks,
I asked my accountants this question last week and they have decided that they can not provide me with an answer - perhaps the PH massive can help me out?
"X is both an employee on payroll and also more recently a Director. If they resign as a Director today, then they are still an employee. On that basis, if later on the company were to choose to close, then as an employee (of many years) then surely they would be entitled to a redundancy payment?"
I thought this would be a simple "yes", but the Accountants have suggested they are "unable to advise on this matter and that you should consult with a HR specialist"
Any thoughts?
Cheers
I asked my accountants this question last week and they have decided that they can not provide me with an answer - perhaps the PH massive can help me out?
"X is both an employee on payroll and also more recently a Director. If they resign as a Director today, then they are still an employee. On that basis, if later on the company were to choose to close, then as an employee (of many years) then surely they would be entitled to a redundancy payment?"
I thought this would be a simple "yes", but the Accountants have suggested they are "unable to advise on this matter and that you should consult with a HR specialist"
Any thoughts?
Cheers
The business is not in the process of closure though. This is just about the Director resigning their directorship, and a "what if" for later on if there is was a closure. It wouldn't be a Liquidation in any event, just a solvent company striking off.
To be fair the company closure element is a sideshow I think. The question could have been. "If X resigns their directorship and returns to being an employee only, if I make them redundant in the future, can they receive the usual employee redundancy treatment"
To be fair the company closure element is a sideshow I think. The question could have been. "If X resigns their directorship and returns to being an employee only, if I make them redundant in the future, can they receive the usual employee redundancy treatment"
Countdown said:
Bit confused....
Directors are entitled to redundancy pay if they are also Employees. i.e. they don't need to resign the Directorship to claim entitlement.
Surely that is only if the company is going into liquidation and is as "Director Redundancy", so not a lot of entitlement ?Directors are entitled to redundancy pay if they are also Employees. i.e. they don't need to resign the Directorship to claim entitlement.
M4tt-H said:
Countdown said:
Bit confused....
Directors are entitled to redundancy pay if they are also Employees. i.e. they don't need to resign the Directorship to claim entitlement.
Surely that is only if the company is going into liquidation and is as "Director Redundancy", so not a lot of entitlement ?Directors are entitled to redundancy pay if they are also Employees. i.e. they don't need to resign the Directorship to claim entitlement.
Countdown said:
M4tt-H said:
Countdown said:
Bit confused....
Directors are entitled to redundancy pay if they are also Employees. i.e. they don't need to resign the Directorship to claim entitlement.
Surely that is only if the company is going into liquidation and is as "Director Redundancy", so not a lot of entitlement ?Directors are entitled to redundancy pay if they are also Employees. i.e. they don't need to resign the Directorship to claim entitlement.
Thank you!
M4tt-H said:
Countdown said:
M4tt-H said:
Countdown said:
Bit confused....
Directors are entitled to redundancy pay if they are also Employees. i.e. they don't need to resign the Directorship to claim entitlement.
Surely that is only if the company is going into liquidation and is as "Director Redundancy", so not a lot of entitlement ?Directors are entitled to redundancy pay if they are also Employees. i.e. they don't need to resign the Directorship to claim entitlement.
Thank you!
When the director "leaves employment", are they genuinely leaving the company cutting off all ties with the company - and when I say "all ties" I mean that there really is no further connection with the company of any sort.
Many directors technically resign from their director's position so that their name no longer appears at Companies House. However, they may still have connections with the company and may even be still exercising some control of the company i.e. acting as a shadow director.
Is this by any chance a ploy by the individual to try and extract some tax free income out of his own company by claiming it is "statutory redundancy" money?
Many directors technically resign from their director's position so that their name no longer appears at Companies House. However, they may still have connections with the company and may even be still exercising some control of the company i.e. acting as a shadow director.
Is this by any chance a ploy by the individual to try and extract some tax free income out of his own company by claiming it is "statutory redundancy" money?
Eric Mc said:
When the director "leaves employment", are they genuinely leaving the company cutting off all ties with the company - and when I say "all ties" I mean that there really is no further connection with the company of any sort.
Many directors technically resign from their director's position so that their name no longer appears at Companies House. However, they may still have connections with the company and may even be still exercising some control of the company i.e. acting as a shadow director.
Is this by any chance a ploy by the individual to try and extract some tax free income out of his own company by claiming it is "statutory redundancy" money?
Is there a scenario where an employee becomes a Director but finds that they don't like the responsibility and chooses to resign their Directorship, returning to the role they performed previously? That's sort of how I read the OP's situation. Many directors technically resign from their director's position so that their name no longer appears at Companies House. However, they may still have connections with the company and may even be still exercising some control of the company i.e. acting as a shadow director.
Is this by any chance a ploy by the individual to try and extract some tax free income out of his own company by claiming it is "statutory redundancy" money?
Of course.
The issue is that if they formally resigned as a director (and had their name removed from all the formal company paperwork and legal documents) but continued to ACT as if they were a director.
Company Law would, in this case, look on the person as having always been a director.
It's one of the reasons why we now have to disclose Persons of Significant Control in a company. This includes ANYBODY who is directing matters - whether a formal Director or not.
The issue is that if they formally resigned as a director (and had their name removed from all the formal company paperwork and legal documents) but continued to ACT as if they were a director.
Company Law would, in this case, look on the person as having always been a director.
It's one of the reasons why we now have to disclose Persons of Significant Control in a company. This includes ANYBODY who is directing matters - whether a formal Director or not.
Eric Mc said:
When the director "leaves employment", are they genuinely leaving the company cutting off all ties with the company - and when I say "all ties" I mean that there really is no further connection with the company of any sort.
Many directors technically resign from their director's position so that their name no longer appears at Companies House. However, they may still have connections with the company and may even be still exercising some control of the company i.e. acting as a shadow director.
Is this by any chance a ploy by the individual to try and extract some tax free income out of his own company by claiming it is "statutory redundancy" money?
Not really, and its not me as X either. I'm just looking at potential eventualities of the next 6-12 months, and don't want to do something that causes a problem later on. The individual would no longer carry out any director duties (as a shadow or whatever), but would remain on payroll as an employee only, doing employee things. As the individual has been with the company for many years I don't want there to be some odd disqualification of entitlement because they had held a Director position in the organisation previously. I was pretty happy about all this until i got the rather odd message back from the Accountants suggesting I seek professional HR advice. (which clearly equates to a post on PH Many directors technically resign from their director's position so that their name no longer appears at Companies House. However, they may still have connections with the company and may even be still exercising some control of the company i.e. acting as a shadow director.
Is this by any chance a ploy by the individual to try and extract some tax free income out of his own company by claiming it is "statutory redundancy" money?
)StevieBee said:
Is there a scenario where an employee becomes a Director but finds that they don't like the responsibility and chooses to resign their Directorship, returning to the role they performed previously? That's sort of how I read the OP's situation.
Yep - more like this, albeit it's less of "don't like it" and more of, the company just doesn't really "need" multiple Directors any more.M4tt-H said:
Not really, and its not me as X either. I'm just looking at potential eventualities of the next 6-12 months, and don't want to do something that causes a problem later on. The individual would no longer carry out any director duties (as a shadow or whatever), but would remain on payroll as an employee only, doing employee things. As the individual has been with the company for many years I don't want there to be some odd disqualification of entitlement because they had held a Director position in the organisation previously. I was pretty happy about all this until i got the rather odd message back from the Accountants suggesting I seek professional HR advice. (which clearly equates to a post on PH )
Is the individual a shareholder? )If he is, do they own more than 50% of the shares?
M4tt-H said:
Not really, and its not me as X either. I'm just looking at potential eventualities of the next 6-12 months, and don't want to do something that causes a problem later on. The individual would no longer carry out any director duties (as a shadow or whatever), but would remain on payroll as an employee only, doing employee things. As the individual has been with the company for many years I don't want there to be some odd disqualification of entitlement because they had held a Director position in the organisation previously. I was pretty happy about all this until i got the rather odd message back from the Accountants suggesting I seek professional HR advice. (which clearly equates to a post on PH )
The directorship and the employment in this case run in parallel. You can mutually agree to end the directorship and this does not affect the employment rights as they accrue. )If I was dealing with this, I’d approach it along the following lines:
In this case, if you’re getting a resignation in their capacity as a director, then you should get them to waive all rights in respect of their having been a director and to confirm there are no claim snow or which might arise in respect of them having been a director.
Employment rights don’t touch - just let these accrue in the normal course and address at the time any employment comes to an end.
You may wish to get legal advice - the above isn’t.
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