Latest Information

Controlling Shareholders

26/05/2009

Controlling Shareholders

Approximately 12,000 claims were made in 2008 by Directors of insolvent companies for redundancy payments out of the National Insurance Fund.

600 of these have gone to the Employment Tribunal for a decision due to the conflicting and confusing judgments in this area.

In April 2009, the Court of Appeal ruled that it was possible for a controlling shareholder and Director to be deemed an employee of a company and therefore entitled to claim any unpaid pay or a Basic Award for Unfair Dismissal from the Nation Insurance Fund.

It was decided that the controlling shareholding will only be one factor taken into consideration by the Employment Tribunal in all the circumstances and the whole picture will examined so that all of the contributing factors may be balanced.

The Employment Tribunal will first have to consider whether the employment contract was genuine or a sham. Secondly, if the contract is genuine the Employment Tribunal will examine whether it was a contract of employment.

It is also important to note that the employment status of an individual will be determined at the date the Company became insolvent.

Example:

Main Shareholder - 20 plus years service

  • Maximum statutory redundancy pay - £10,500 .00 ;
  • 12 weeks Notice Pay (subject to current weekly cap) £4,200.00 ;
  • Unpaid holiday pay (subject to cap of 6 weeks ) - possible £2,100.00 ;
  • Other unpaid salary (subject to cap of 8 weeks) - possible £2,800 .00 ; Total - £19,600.00

KBL has expertise in advising on employment issues such as this and is more than willing to assist owners and shareholders with the drafting of a robust application to the Redundancy Payment Office (i.e. the National Insurance Fund) which may maximize the potential for a successful outcome.

If you require advice or assistance in respect of the above or any other employment matter, please call or email John Hassells, Head of Employment on 01204 527777.

Would your colleagues or associates like to receive our free Employment email updates? If so, please contact Gill Hart.