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What will happen to my employees if my company goes bust?

It depends on:

  • how early you react to deal with the problem;
  • whether any part of the business is able to continue as a going concern; and
  • what workforce is required for that business (remembering that a purchaser may have some positions already covered).

The result can vary:

  • no material change if insolvency can be averted quickly;
  • some redundancies as part of an operational turnaround, again whilst avoiding formal insolvency; or
  • if an insolvency procedure is necessary:
    • some or all of the workforce may be made redundant (leading to enhanced pre-insolvency claims);
    • pre-insolvency claims may receive anything between the modest state-guaranteed limits and full payment; and
    • wages and salaries for employment during insolvency should be paid in full.

This is a highly complex area of insolvency law and practice. Further background reading is available here from The Insolvency Service.

There is no substitute for consulting a specialist, whose advice will be tailored to your specific circumstances. Most licensed insolvency practitioners, including those at Mercer & Hole, will consider the position with you at an initial meeting without charge.

 

 

Date: 16th September, 2008
Author: Chris Laughton

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