Directors set to share £130m

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The Independent Online
Some 1,000 former directors of bust companies will share compensation payments totalling £130m under a Law Lords ruling made two weeks ago, unless the Government passes emergency legislation.

The Society of Practitioners of Insolvency (SPI), the receivers' trade body, said yesterday that claims brought against them by ex-employees, who were sacked by receivers more than two weeks after their companies collapsed, could total £500m.

Allan Griffiths, senior receiver with the accountants Grant Thornton, who takes over at the head of the SPI today, said: "It really is ludicrous that we will be paying people that are the high earners. There are potentially huge claims."

The ruling made receivers liable for severance pay and pensions contributions of employees kept on for more than 14 days. The judgment affects those sacked between 29 December 1986 and March 1994.

SPI held secret talks with Jonathan Evans, the Minister for Corporate Affairs, last week in which they called for emergency legislation to overturn the Lords' judgment. Mr Evans asked them for a detailed estimate of possible claims - some guesses had been as high as £2bn.

The SPI handed over its findings to the Government yesterday. It said that "fat-cat" directors on rolling contracts are likely to get up to a third of all successful claims. Ordinary workers on up to £350 per week would receive nothing, because they would already have received statutory redundancy payments for the Department of Employment.

Some receivers have started to pay claims. The SPI estimates that about three-quarters of such claims will be uncontested by the receivers.

Claims received, the SPI said, include a former director on a 25-year contract. Mr Griffiths called on the Government to pass retrospective legislation to stop this "march of the fat cats".