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JGM, Solicitor
Category: UK Employment Law
Satisfied Customers: 11286
Experience:  30 years experience as a solicitor.
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We are a limited UK company with 15 employees, and have been

Customer Question

Hi, We are a limited UK company with 15 employees, and have been trading for 16 years. We currently have no income stream, but are in negotiations with several companies for new contracts. We have no debts. We have 100k in the bank and our overheads (including
payroll) are 50k per month. If we made all employees redundant, the redundancy cost (notice & pay) would be 85k. My question is, where do we legally stand as directors regarding continuing to trade and/or go insolvent as if we paid the staff one more month
we wouldn't have the cash to pay redundancy. Thanks, ***** *****
Submitted: 1 year ago.
Category: UK Employment Law
Expert:  JGM replied 1 year ago.

At the moment you aren't trading whilst insolvent and you have two months worth of overheads. There is no duty on you to make employees redundant but if the money does run out you cannot trade as you would be doing so whilst insolvent. The important test is can you pay your debts AS THEY FALL DUE. If yes you can trade, if not, you can't. If you run out of money and don't get new contracts in the interim you will have to cease trading. The employees may have to apply to the state via the liquidator for redundancy payments. At the moment, however, there is no redundancy liability and you don't have to budget for it anyway. I hope that helps.