15/10/2026
Protecting Employees is one of the 3 main pillars of our focus when helping your business, along with Stabilising Trading and Recovering Value.
Insolvency can be a very distressing time for everyone involved. Employees need to know exactly how they are protected throughout an insolvency process and what rights they are entitled to should the company be liquidated.
When an insolvency event occurs, a company has several options open to them. The route they take can have a huge bearing on employees. Once insolvency is announced an insolvency practitioner will be brought in to take the next steps.
What happens to employees depends on whether they are made redundant, kept on or TUPE transferred to a new employer. If there are to be redundancies, employers must carry out a consultation about the reasons for making redundancies and whether any alternatives exist.
The three main insolvency procedures that may be initiated by an insolvency practitioner to either rescue the business or close it down are:
✅ Administration
✅ Company Voluntary Arrangement
✅ Liquidation
In Administration the insolvency practitioner is placed in control of the company and will be looking to rescue the business. If administration fails, the business will be liquidated.
A Company Voluntary Arrangement (CVA) is an agreement between the business and its creditors, which results in a compromise with creditors and repayment plan aimed at saving the business. In this instance, day to day control remains with the directors and the process is supervised by an Insolvency Practitioner. Again, if a CVA fails liquidation will follow.
Liquidation occurs when the debts are too high, and the company needs to be cease trading altogether. Employees lose their jobs and company assets are sold off to pay creditors. There are two types of Liquidation it may be voluntary, or it can be forced by creditors through a Court process.
What happens to employees depends on what course of action is taken. If the Insolvency Practitioner appointed is trying to rescue the company, then the employees may be asked by an Administrator to continue working. They may also be asked to take a pay cut short term to help the Company’s finances. The same can happen in a Company Voluntary Arrangement.
When insolvency occurs an employee’s job isn’t protected even if the company is being saved. If the company is saved, this can be a good position for the employee. If a business is sold to new owners, then all employee rights are automatically transferred over. However, as part of a restructuring plan, employees may still be let go.
If the company goes into liquidation and the company is closed entirely, this means that all employees will lose their jobs and it is important employees are advised what they are entitled to. The biggest concern for employees is financial.
For more information on protecting employees, contact me direct.
☎️ 07876 790 563
✉️ [email protected]