October 1998

2.50 Power to employ or dismiss

The appointment of a provisional liquidator or interim receiver does not of itself affect the rights or status of employees. Depending on whether or not a business, or part of a business, is to be continued, a provisional liquidator or interim receiver should ask the court to order that he have power on the company’s or debtor’s behalf to continue the employment of and pay some or all of the employees or that he cause the company or debtor to terminate their employment at his discretion. Where an insolvent’s business is to be continued it will often be necessary to keep on key staff, such as office managers and computer operators.


2.51 Dismissal

If employees are dismissed, the notices effecting dismissal should be issued by the official receiver where he is acting as provisional liquidator or interim receiver, and not by any special manager who may be acting and who may, if he issues such notices, become personally liable in relation to the termination of employees’ contracts. When considering dismissal the official receiver should wherever possible attempt to minimise possible claims against the estate by employees whose contracts have been terminated. For instance, he should always try to give an adequate period of notice in accordance with the employee’s contract of employment. Where urgent action is required, however, it may not be possible to comply fully with the terms of the contract.


2.52 Redundancy payments

An employee who is dismissed should be advised to apply to the local office of the Department of Employment for a redundancy payment under section 106(1)(a) of the Employment Protection (Consolidation) Act 1978 on the grounds that his employer is unable to pay because of financial difficulty. The Department of Employment will ask the provisional liquidator or interim receiver to acknowledge the company’s or debtor’s liability for the payments concerned and the subsequent debt to the Redundancy Fund. Such acknowledgement should be given as soon as possible, as redundancy payments cannot otherwise by made.


2.53 Insolvency payments under Employment Protection Acts

Dismissal in these circumstances does not trigger an employee’s right to any insolvency payments under the Employment Protection Acts for arrears of wages, holiday pay, etc. These will only arise if and when a winding-up or bankruptcy order is subsequently made.


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