Too good to be true?
3 October 2019: BRI Business Recovery and Insolvency’s Northampton office were called with a query whereby the advice already received from an unregulated advisor appeared to be “too good to be true”. A summary below of the issue, advice received from the unregulated advisor and BRI’s subsequent advice:
Company had ceased trading, no assets and a liability of £4,500 which was in respect to one quarters rent. The director had explained the situation to the landlord’s solicitors that it had no assets and was looking to make an application to strike off the company. The solicitors suggested that a strike off application would be opposed. The only employee of the company was the director earning a minimum salary.
Advice from unregulated advisor:
As director you can claim redundancy, your earnings are effectively below the minimum salary. We can arrange for you to obtain a redundancy payment although the company will have to enter creditors’ voluntary liquidation. We can arrange this for you. We have calculated you are entitled to £7,000 in redundancy. Our fee would be 20% of the redundancy entitlement, the costs of the liquidation would be £4,500. The costs of the liquidation process is payable from the redundancy so you will receive £1,100.
Advice from BRI
We are aware that this practice to fund a liquidation is used by some insolvency practitioners however, this is something BRI do not entertain. Did the advisor discuss the duties of a liquidator once appointed? The answer was nothing discussed whatsoever. BRI offered to discuss the matter with the landlord’s solicitor whom they know. Following contact and informing them of the advice from the unregulated advisor, the solicitor, firstly staggered at what was being suggested, also agreed and in the full knowledge of BRI providing the right advice in all circumstances, that it is right that the director now apply for strike off of the Company which would not be opposed.
In a formal insolvency procedure then directors can look to claim redundancy but there are guidelines to follow and certain points to prove to make a successful claim and it is for the appointed liquidator to validate that a redundancy claim is appropriate give the circumstances. Should you have a query relating to any insolvency related matter or redundancy entitlements please call any one of BRI’s management team that can advise accordingly.
Finally, below is an email from the director after BRI’s advice and assistance was provided.
I just wanted to say again, thank you very much. Your advice was very helpful, and I appreciated the explanations when I needed them! You have gone above and beyond for me and my company – I just wish everyone worked the way you do.