Employment Tribunal authorises action by employees of insolvent company against another company where there is “commonality of ownership”

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An Employment Tribunal in the West Midlands has given the go-ahead to former employees of a company that went into liquidation to bring a claim against a related business which had a “commonality of ownership”. 

The case is being brought by two former directors of Project Viva, a publishing company, against a new company, Pixel West. The directors, Matti Rogers and his wife, Kate, maintain that the insolvency of Project Viva made their shares worthless and thwarted their unfair dismissal claim against the company. They allege they were removed from Project Viva through a “sham redundancy exercise” that paved the way for the owner, Stephen Dorrell (a former minister in the UK government) to then transfer assets out of the business.

The insolvency procedure used – a “pre-pack administration” – is lawful but controversial, because it allows a company in effect to walk away from its debts, according to The Guardian. However, this ruling shows that the new company can be made liable for the liabilities of the old company. The judge said there was “commonality of ownership and directorship between the companies so this [action] was hardly out of the blue”.

The unfair dismissal hearing will take place in May. 

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