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Glossary of Terms

Insolvent company

A company is insolvent when its liabilities exceed its asset and/or it can’t settle its liabilities when they fall due.

Compulsory liquidation

A formal legal procedure for closing an insolvent company through the courts; may be initiated by a company’s creditors or the directors may apply to the courts to liquidate the company.

Company dissolution or ‘striking off’ the company

You can apply to companies house to dissolve, or strike off a company that is no longer required. It is not a formal legal procedure, costs £10 and is only suitable for companies that do not owe any money to creditors – including employees. New government legislation has recently been announced, making directors personally liable for the offence of allowing a company to be dissolved whilst still having debts

Redundancy payments

Payment you are entitled to as an employee of the company (once you have been employed continuously for 2 years or more for actual redundancy pay) in compensation for your job ending because your employer / the company is insolvent.

Employee

Not always as straightforward as you might think! Anyone working for the limited company under a written, verbal, or implied contract of employment or contract of service.

Employment contract

Statement setting out the main contractual terms and conditions of your employment. Usually includes gross annual salary, working hours, notice periods, holiday entitlements, main duties and responsibilities etc.

Implied contract of employment

The relationship between an employee and a company where no formal, written contract of employment exists. The working conditions of the employee will often reflect an implied contract of employment i.e. where the company has a duty to provide work for an employee, and in return for their service, the employee is entitled to remuneration and other benefits consistent with a contract of employment.

P60

Annual statement of salary earned and taxes paid during the tax year provided to employees by the limited company.

P45

Final statement of salary earned and payment of taxes during the current tax year given to employees at the end of their employment.

Date of liquidation

Day on which the shareholders and creditors’ meetings fo the company tax place, where the company is formally placed into liquidation.

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