There are limits on making any legal claim against your employer in an insolvency situation.
The administrator who is appointed to run the company has a period of 14 days after their appointment to decide if they want to retain the company’s employees- or offload the costs of those employees by dismissing them.
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.
If the latter has occurred and liquidation proceedings are in order, then you as an employee will be laid off and will have to find another job.
This includes your continuity of employment and any outstanding payments owed to you.
Such circumstances are as follows: However, even if a wrongful dismissal claim is found to be valid and the claim is awarded to the employee, the amount awarded will be classed as unsecured debt and therefore not preferential.
This means that it is likely the employee will see only a small amount of that money, or none at all especially if the company has little or no assets to sell.
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.