What does run down a company mean

Hello,


Another employee close to our MD has said he intends to 'run down' the business, my take on this would be they aim to close it, its not making any money hasn't done so for a couple of years so I fully understand the decision, there is some money in the company, is it possible they could take all the money out as say by a share dividend and then go into bankruptcy, if that happens would be get redundancy from the government and how long would this take, I have been here for just over 20 years now, just a little worried as I still have bills to pay and a wife and small child to support and not much to fall back on,
Thanks

Replies

  • discat11discat11 Forumite
    515 Posts
    Part of the Furniture 500 Posts
    Forumite
    It depends whether he intends to go bankrupt or not.
    If any of the companies liabilities are likely to come back on him/other shareholders then he'll probably not do this.

    Running down usually means cutting out all non-vital expense and doing more of the daily work himself making redundancies at the minimum cost.

    You're entitled to statutory redundancy -depending on your notice period you'll get paid notice plus a maximum of 12 weeks pay (tax free).

    https://www.gov.uk/calculate-your-redundancy-pay
  • edited 28 October 2016 at 3:09PM
    sangie595sangie595
    6.1K Posts
    edited 28 October 2016 at 3:09PM
    discat11 wrote: »
    It depends whether he intends to go bankrupt or not.
    If any of the companies liabilities are likely to come back on him/other shareholders then he'll probably not do this.

    Running down usually means cutting out all non-vital expense and doing more of the daily work himself making redundancies at the minimum cost.

    You're entitled to statutory redundancy -depending on your notice period you'll get paid notice plus a maximum of 12 weeks pay (tax free).

    https://www.gov.uk/calculate-your-redundancy-pay

    I can't quite figure out what this post is supposed to mean.

    Running down a company, assuming we address talking about a limited company, means that he is going to run it into the ground, maximising his ability to draw money and assets from the company. Provided he does so lawfully, and that isn't hard, then the company will cease trading leaving no assets for any creditors, including any remaining employees. The best way to do this would usually entail making no redundancies and stringing the employees along with false promises of payment so that they make him as much money as possible.

    Insolvency (which is what it is called when a company cannot manage its liabilities, not bankruptcy) is an option. The company declares insolvency and brings in an insolvency practitioner to wind up the company, and ensure as many creditors as possible are paid something from what remains. This costs money, but it is the honest way to do it. In this case, if there is no money to pay employees redundancy and other claims, the government scheme will pick up the bill, subject to certain payment caps and conditions.

    The dishonest way is to run the company into the ground and simply close the doors. If this happens there is a very high chance that the government scheme will not step in and you will not see a penny. Payment by the government is not automatic. Unless the company becomes insolvent, officially, it will not pay up because the employer still exists. It would then be up to you to take a claim to a tribunal, at your own cost, and try to enforce it. At the end of all that, if the ruling of a tribunal cannot be enforced, you will be referred to the government scheme to see if they will pay up. But it would take a lot of time and some money to get to that stage. Even if you could get fee remission for the tribunal, enforcement costs money which you will have to find.

    So it isn't straight forward, and nobody can tell you what would happen. Not with certainty. What I have described are the possibilities. You know your employer - do you think they are honest or not?

    If you have a family to support, regardless of what redundancy might bring in in terms of cash, it is a "might" and it is also something that runs out. I'd take this as the writing on the wall, and that the writing says that you should get yourself a nice new job. You have a bit of time so you aren't desperate to take whatever comes along yet, and you have the time to secure your families future income for now.
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