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Understand Creditors’ Voluntary Liquidation and Director Redundancy

A Creditors’ Voluntary Liquidation (CVL) is a legal process for limited companies that are facing severe financial difficulties and cannot be saved. This leads to the permanent closure of the business and its removal from the Companies House registry. 

During a liquidation, all employees are let go and may claim redundancy pay. Surprisingly, directors of the company may also be entitled to claim redundancy pay and other statutory benefits. 

The connection between CVL and director redundancy lies in the eligibility of the directors to receive redundancy pay when the company cannot pay its creditors. To claim this pay, the directors must follow the necessary steps.

Get Information on Director Redundancy Claims


When a company enters into a Creditors’ Voluntary Liquidation, a liquidator is appointed to act on behalf of the creditors and aim to provide the highest possible return. The liquidator will conduct a professional evaluation of the company’s assets and sell them to repay creditors.

However, this is a formal process that comes with professional fees, which can make directors believe it’s not a feasible option for their financially struggling company. But making a successful claim for redundancy pay can help directors cover the CVL fees, avoiding the need for a creditor-forced liquidation.

Discover Eligibility for Director Redundancy Pay


In some cases, directors can claim redundancy during an insolvent liquidation of their company. Besides the main redundancy payment, they may also be eligible for additional benefits such as unpaid wages and holiday pay. To make a claim, the following criteria must be met:

  • Employment under a written, oral, or implied contract for a minimum of 2 years
  • A minimum of 16 hours of work per week in a practical role
  • Owed money by the company.

If the claim is approved, the redundancy pay will come from the National Insurance Fund (NIF). The amount that can be claimed depends on various factors.

Find Out the Potential Director Redundancy Pay Amount


The amount of director redundancy pay you may be eligible for depends on various factors such as:

  • Age
  • Length of service (capped at 20 years)
  • Gross weekly pay (capped at £571 for redundancies after 6th April 2021)

Redundancy pay up to £30,000 is exempt from tax and National Insurance Contributions (NICs), but arrears of wages and holiday pay are taxable. The liquidator will provide the necessary form for the claim, but it’s advisable to seek confirmation from a specialist in director redundancies.

On average, director redundancy claims amount to around £9,000. It’s beneficial to consult with a specialist to determine your eligibility.

Even if the redundancy pay is not needed for liquidator fees, it may be used to repay some of the company’s debts or to support you and your family after the closure of the company.

Assess Your Eligibility for Director Redundancy is well-versed in guiding directors through a CVL and has the expertise to support you. Our partner-led team can offer advice on director redundancy eligibility and provide a clear understanding of the process.

For a free, same-day consultation, reach out to our team, which operates from a network of offices across the UK.

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