In order to make a claim to the Redundancy Payments Service, the Director needs to have been properly employed by the company. In practically all circumstances, they will need to have been on the company payroll and working on the company's trade, rather than just carrying out their Director's duties.

The RPS will scrutinise claims by directors far more than other employees, and you will need to provide them with various documents and explanations. The RPS will consider your claim form along with other documents that they request, before either accepting or rejecting it. If your claim is rejected, you do have the option of taking your claim to an Employment Tribunal.

Whilst there are more hurdles to jump for a director, if you were a genuine employee of the company, you have right to claim against the National Insurance Fund.

Over the years, the Redundnacy Payments Service have strengthed their checks against Directors' claims to prevent ineligible claims being paid out of the National Insurance Fund.

You will be asked to complete a questionnaire, answering various questions about your role, and provide documentation to support your claim.

Again, the questionnaire has evolved over the years to ask more specific questions, and you can view the current version here

Taken directly from the RPS' guidance:

Additional information required will be based on the claimant’s circumstances and may include (this is not an exhaustive list):
• Details as to the structure of the company in terms of directorships and shareholders.
• The last 3 years’ P60s.
• The last 3 months’ wage slips.
• Employer’s bank statements for the last 12 months to review regularity of payments.
• A comparison of the contracted hours being claimed in relation to the work being undertaken.
• Compliance with national minimum wage.
• A copy of the contract of employment and whether the terms of the contract were enacted.
• Dividends received in the last 3 years.
• Holiday pay arrangements.
• Workplace pension arrangements.
• Sick leave procedures.
• Grievance and disciplinary procedures.

It is not uncommon to see directors being paid a nominal salary of around £1,000.00 per month. It is kept at this level for tax purposes, below the Employee National Insurance threshold. Whilst that works well when the company is performing, in an insolvency it can have severe drawbacks.

Firstly, if you take out more money than your entitled to through payroll, you are operating a Director's Loan Account. See below for how that affects your claim and here for the potential issues you will face in liquidation.

Secondly, there have been reports that claims are being rejected by the RPS purely on the basis that National Minimum Wage ("NMW") has not been met. I have not yet had that experience, but if you were a genuine "worker" then the NMW probably should have applied to you.

In the past, the RPS had issued guidance on this, stating that they would uplift the rates inline with NMW but would require the director to sign a declaration acknowledging that they breached the Nation Minimum Wage Act 1998. They could then pass to both HMRC and the Insolvency Service's Investigation and Enforcements Services for further review.

If you have an overdrawn Director's Loan Account, where you owe money to the company, then that will be offset against your claim to the RPS.

If the amount you owe to to the company is more than the value of the claim, you will receive no payment but the loan account will be reduced by that amount instead.