Q&As

A claimant is pursuing a claim against their former employer in the Employment Tribunal for unfair dismissal and discrimination. What would happen to their claim and/or any settlement agreement reached if the employer becomes insolvent? If the employer does go into administration, what action can be taken to protect the claimant's position? The employer's insurance provider is funding/supporting the litigation. What would be position regarding the insurance company upon the employer becoming insolvent?

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Produced in partnership with Eleanor Stephens
Published on LexisPSL on 12/01/2021

The following Restructuring & Insolvency Q&A produced in partnership with Eleanor Stephens provides comprehensive and up to date legal information covering:

  • A claimant is pursuing a claim against their former employer in the Employment Tribunal for unfair dismissal and discrimination. What would happen to their claim and/or any settlement agreement reached if the employer becomes insolvent? If the employer does go into administration, what action can be taken to protect the claimant's position? The employer's insurance provider is funding/supporting the litigation. What would be position regarding the insurance company upon the employer becoming insolvent?

A claimant is pursuing a claim against their former employer in the Employment Tribunal for unfair dismissal and discrimination. What would happen to their claim and/or any settlement agreement reached if the employer becomes insolvent? If the employer does go into administration, what action can be taken to protect the claimant's position? The employer's insurance provider is funding/supporting the litigation. What would be position regarding the insurance company upon the employer becoming insolvent?

When a company or an individual enters into a formal insolvency or enforcement process, restrictions may be imposed on the ability of creditors or prospective creditors to bring claims against that insolvent company or individual. This is distinct from the commercial considerations of whether it is worth (economically or otherwise) bringing, or continuing with, a claim against an insolvent opponent.

In a compulsory liquidation (ie a liquidation commencing with a winding-up order), claims and actions against the company in liquidation or its property are limited by virtue of a statutory stay that takes effect under section 130 of the Insolvency Act 1986 (IA 1986). The stay means that no action or proceedings can be brought, or continued with, against the company without the leave of the court. For further reading, see Practice Note: Effect on proceedings against a company being wound up and after a winding-up order is made.

In an administration, a statutory

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