Employee and creditor questions when a company is insolvent

A liquidation usually means the business stops trading, so most employees are made redundant, often on the day the liquidator is appointed or soon after. The liquidator, or the official receiver if a court made the order, must tell you how your job is affected and give you an RP1 fact sheet and a case reference number beginning "CN". You need that CN number to claim.

With it you apply online to the Redundancy Payments Service, part of the Insolvency Service, for redundancy pay, unpaid wages, holiday pay and statutory notice pay. The money comes from the National Insurance Fund, so it does not depend on what the company's assets sell for. Each element is capped at £751 a week (£719 if you were made redundant before 6 April 2026), and you must claim within 6 months of being dismissed (gov.uk). Anything you are owed above the caps is claimed from the liquidator as a creditor.

Administration is meant to rescue the company or its business, so it does not automatically end anyone's job. The administrator may keep some or all staff working while the business trades on or is sold, make some redundant straight away, or transfer staff to a buyer if the business is sold.

If you are made redundant, the claim route is the same as in a liquidation: a CN reference from the administrator, then an online claim to the Redundancy Payments Service. If the administrator keeps you on beyond 14 days after their appointment, your contract is treated as "adopted", and wages and salary for work done after that point are paid ahead of the administrator's own fees and expenses (Insolvency Act 1986, Sch B1 para 99(4) and (5)). One trap to know: gov.uk says that if you keep working after the insolvency and are dismissed later, you cannot claim wages, holiday pay, bonuses or commission from the government for the period between the insolvency and your dismissal.

For work you do after the administration starts, the administrator should pay you, and adopted contracts get the priority described above. For money already owed on the day the company went into administration, the answer is split in two. Up to 8 weeks of unpaid wages, capped at £751 a week, is paid by the Redundancy Payments Service once you are dismissed. Arrears for the 4 months before the insolvency are also a preferential debt in the administration, up to £800 per employee, along with accrued holiday pay (Sch 6 paras 9 and 10). Preferential debts are paid before HMRC's secondary preferential claim and before floating charge holders, if there is enough money to reach them.

You are normally entitled to statutory redundancy pay if you were an employee, were made redundant and had worked for the business continuously for at least 2 years (gov.uk). When the employer is insolvent, the Redundancy Payments Service pays it from the National Insurance Fund, not the company.

The formula is half a week's pay for each full year worked under age 22, one week's pay for each full year from 22 to 40, and one and a half weeks' pay for each full year at 41 or over, counting a maximum of 20 years and capping a week's pay at £751 (gov.uk). The most the statutory formula can produce is therefore 20 years at one and a half weeks, 30 weeks at the £751 cap: £22,530. The Redundancy Payments Service does not deduct tax or National Insurance from the redundancy award (gov.uk). Enhanced or contractual redundancy above the statutory amount is not covered and becomes an unsecured claim in the insolvency. Estimate the statutory figure with the employee redundancy calculator.

Get the CN case reference from the insolvency practitioner or official receiver, then make one online application covering redundancy pay, unpaid wages and holiday pay. You can apply as soon as you have been made redundant, and must do so within 6 months. "Wages" here means money due under your contract, including overtime, commission and bonuses, for up to 8 weeks, capped at £751 a week (gov.uk). Tax at the basic rate of 20% and National Insurance are deducted, and you can ask HMRC for a refund if that is too much (gov.uk).

Your claim is checked against the employer's records, and the Insolvency Service aims to pay most claims within 6 weeks (gov.uk). Anything above the cap, or older than 8 weeks, is claimed from the office holder as a creditor. If you are not an employee, for example a contractor, you cannot use this scheme and register as a creditor instead. If the employer has not entered a formal insolvency, the Redundancy Payments Service cannot pay your wages (for a solvent employer it can only cover statutory redundancy pay); the route then is an employment tribunal claim, which starts by notifying Acas (gov.uk).

Partly. In a liquidation or administration, these employee debts are "ordinary preferential" and are paid after the office holder's costs but before almost everyone else: wages for the 4 months before the insolvency up to £800 per employee, accrued holiday pay, and certain unpaid occupational pension contributions (Insolvency Act 1986, Sch 6 paras 8 to 10; the £800 limit is set by SI 1986/1996, as the Insolvency Service's guidance confirms). Redundancy pay, notice pay and wages above the limit are ordinary unsecured claims.

Where the Redundancy Payments Service has already paid you, it takes over that part of your claim and is paid ahead of your own remaining preferential claim. Being preferential only helps if there is money: see how often preferential creditors are actually paid in our preferential creditor outcomes page.

Yes, if you were an employee of the company as well as a director. A director is an office holder, and the Insolvency Service will only pay if it is satisfied there was a contract of employment, written or implied. It may ask for your last 3 years of P60s, your last 3 months of payslips, 12 months of company bank statements, your contract, your working hours, whether you were paid at least the national minimum wage, and the dividends you took in the last 3 years (gov.uk).

One detail that catches directors out: money you owe the company, including an overdrawn director's loan account, is deducted from what the Redundancy Payments Service pays you (gov.uk). The full answer is in can I claim director redundancy if my company is liquidated?, and the director redundancy calculator estimates the figure.

The RP2 is the Insolvency Service's second online application, the one for statutory notice pay (also called loss of notice pay). You cannot start it straight away. You first apply for redundancy and any other money owed, even if you are owed nothing, and the Insolvency Service then emails you once your statutory notice period has ended, with an "LN" reference that the RP2 needs (gov.uk).

Notice pay is compensation, so any benefits you received or could have claimed during the notice period, and anything you earned, are deducted. Directors can be asked extra questions at this stage, including who first approached the insolvency practitioner and when the practitioner advised a formal insolvency (gov.uk).

The statutory redundancy element is not. Statutory redundancy pay under £30,000 is not taxable, and the Redundancy Payments Service pays the redundancy award without deducting tax or National Insurance. The other elements are treated as pay: arrears of wages, holiday pay, notice worked but not paid and statutory notice pay are taxed at the basic rate of 20%, with National Insurance at 8% on amounts above the primary threshold. If that over-deducts, you can claim a refund from HMRC (gov.uk). The same rules apply to directors and to other employees.

Money from assets is paid out in a fixed order set by the Insolvency Act 1986 (sections 175, 176A and 386), summarised by HMRC like this: fixed charge holders from the assets their charge covers (after the costs of selling them); the insolvency practitioner's fees and expenses; ordinary preferential creditors, mainly employees and pension contributions; secondary preferential creditors, which since 1 December 2020 means HMRC for VAT, PAYE income tax, employee National Insurance, student loan deductions and CIS deductions; the prescribed part set aside for unsecured creditors; floating charge holders; unsecured creditors; and finally shareholders (HMRC policy paper). Each class is paid in full before the next receives anything, and a class that cannot be paid in full shares what there is in proportion. The priority table below sets this out, and the creditor dividend estimator runs the order on your own figures.

It depends which way the balance runs. If you lent money to the company and the loan account is in credit, you are a creditor for that amount, normally unsecured and ranking alongside suppliers, unless you took a registered charge. If the account is overdrawn, you owe the company, and the liquidator will collect it from you as an asset. Repaying your own loan ahead of other creditors shortly before an insolvency can be challenged as a preference; see is repaying my director's loan before liquidation a preference? and the director's loan account guide.

Rarely to any useful effect. In a compulsory liquidation no action can be started or continued against the company without the court's permission (section 130(2)). A creditors' voluntary liquidation has no automatic stay, but the liquidator can ask the court to stop proceedings (section 112), and in administration no legal process can start without the administrator's consent or the court's permission (Sch B1 para 43(6)).

More importantly, a court claim does not move you up the queue. In a voluntary winding up the company's property goes to creditors equally, subject to the preferential rules (section 107). The practical route is to submit a proof of debt to the liquidator with your invoices and statements, and to take legal advice if your claim is really about property that is yours rather than a debt, such as goods supplied on retention of title terms.

Any creditor can petition (section 124), but must show the company cannot pay its debts. The usual evidence is a statutory demand for more than £750 left unpaid for 3 weeks, or a court judgment where enforcement has come back unpaid in whole or part (section 123(1)). You file forms Comp 1 and Comp 2 with the right court, pay a £352 court fee and a £2,600 petition deposit, serve the petition on the company, and advertise it in The Gazette at least 7 working days before the hearing (gov.uk, checked 1 November 2026).

If the court makes a winding-up order, the official receiver takes over and your debt is paid in the order above with every other creditor, so you may get little or nothing. For the company's side of this, see winding-up petitions and the statutory timeline.