Questions to consider asking

Employee meeting

Usually shortly after a practitioner has been appointed, they or their staff will speak to the employees to explain the situation.

This meeting is important as it provides employees the opportunity to ask questions so that they understand the position.

Such a meeting may be emotional especially if employees have worked there for a long time. The person conducting the meeting may be on the receiving end of the employees' frustration and emotion but employees should bear in mind that the person appointed is not responsible for the problems - they have been appointed to try to resolve the problem.

What questions should I ask at the meeting?

Employees should ask if they are unsure of anything. The table below only suggests some questions that could be considered.

Question	Reason why the question should asked
General
Why the appointment has been made – what are the reasons for the business’ financial difficulties.	This may assist employees to understand how serious the difficulties are.
Who made the appointment or applied for the appointment to be made.	This may help employees understand what party is driving the process; the directors, shareholders, creditors or the bank.
What is the type of appointment: i.e. liquidation, administration, administrative receivership, company voluntary arrangement, etc.	It is important to distinguish between the types of appointment. See section on types of appointment - link.
What is the strategy, i.e. is the business to continue to trade or be shut down.	It is important for planning purposes for the employees to understand if they are definitely to be made redundant or whether it is just a possibility.
Are redundancies anticipated and if so how many.	May assist in understanding the likelihood of being made redundant.
What criteria is to be applied for selection of redundancy.	May assist in understanding the likelihood of being made redundant.
What will happen to the pension scheme.	The pension scheme may or may not be affected by this process. It may be useful to bring the issue to the attention of the person appointed to manage the business.

If trading under the supervision of the practitioner

Is this to sell the business or to close the business in an orderly manner.	Sometimes a business will continue to trade even if there is little prospect of it being sold. This allows an orderly closure and assists in collecting money from customers and selling stock at a higher price. May assist employees in planning.
What is the anticipated timescale for selling or closing the business.	May assist employees in planning.
Does the person appointed intend to pay the employees for ongoing wages and salaries.	Where employees are retained it is ‘best practice’ to pay them for work after the date of appointment. However there is a ‘liability free’ period of 2 weeks which could legally allow the person appointed not to pay employees for this period. It is important to understand whether the person appointed ‘undertakes to pay’ the employee’s qualifying liabilities or whether there is the possibility of not being paid for this period. Link to getting paid.
Who is funding the trading period .	Even if the person ‘undertakes to pay’ (they will never ‘guarantee’ payment) they only have to pay if the business has the funds to do so. Therefore it may help employees to establish the likelihood they will be paid as normal if they know where the money is coming from (e.g. from selling goods, assets or from a bank).
What are the arrangements for taking holidays whilst trading.	Qualifying liabilities (i.e. those amounts payable during the process) include ongoing holiday pay. Therefore if an employee takes a holiday they should (subject to the availability of funds and an undertaking to pay) be paid for the holiday provided that they have accrued sufficient holiday since the date the undertaking was given. It is therefore unlikely that an employee taking a week’s leave would have accrued sufficient holiday and therefore it would potentially be unpaid. Employees may also wish to establish whether they will be permitted to take leave and the approval process.
Is the death in service cover being maintained.	To enable employees to make alternative arrangements as necessary.

If seeking to sell the business

Are there already any interested parties.	Could provide an indication of how likely a sale is.
Has management expressed an interest in buying the business.	It is unlikely that a clear cut answer would be given to this but it could provide an indication as to the confidence of the management team in the business.
Are there any intentions to vary the employees' contracts.	Since April 2006 it is possible under certain circumstances for the contracts of employees to be re-negotiated on less favourable terms to assist in selling the business. This can only be done with consent of employee representatives but an indication may assist employees in planning what action to take.
What arrangements are to be made regarding consultation.	Employees should be consulted regarding any potential transfer and employee representatives should be elected in order to undertake this role.

Other

How will the workforce be kept up to date with progress?

The uncertainty surrounding such a procedure can be reduced through effective communication.

Can this all be confirmed in writing?

Best to get written confirmation to reduce possible misunderstandings.

What will happen to amounts owed to the employees at the date of appointment.

The practitioner or their staff should explain the arrangements for payments to the employees.

This will depend upon the outcome of the process; whether the employees are made redundant or transferred to a new employer.

Under certain circumstances the practitioner may be in a position to pay certain arrears payments as a gesture of goodwill or effectively a bonus for successful ongoing trade.

General