Telling staff that the company is closing is one of the hardest conversations a director can face. You may have worked with these people for years. You may know their families, their routines, and how much they rely on the business for stability.
That’s what makes this so difficult. You need to be honest, but you also want to handle the situation with care. In many cases, the best way forward is to get clear advice first, then speak to staff plainly and calmly once you understand the likely route ahead.
When Should You Tell Staff the Company Is Closing?
The timing of your announcement matters. Speak too early and you may cause unnecessary alarm before a decision has been made. Leave it too late and staff may feel they have been kept in the dark, especially if there have already been signs that the business is under pressure.
In most cases, the right moment is when closure is no longer just a possibility and you have taken advice on the next step. That gives you a firmer footing. Instead of speaking in vague terms, you can explain what is likely to happen and what staff can expect from here.
Where the company is already insolvent, directors also need to think carefully about their legal duties. Once insolvency is clear, your focus has to shift towards protecting creditors’ interests. Delaying decisions can make matters worse, both for the business and for the people affected by it.
Be Clear on Closure Routes
Before you talk to employees, it helps to understand the route the business is likely to take. Some companies can close in a relatively straightforward way. Others cannot, particularly where debts have built up or the company can no longer meet its obligations. That is why it is worth understanding the main routes to company closure.
If the company can pay its debts, strike-off may be discussed. Where the business is insolvent, though, the position is different. In that situation, company liquidation is often the more relevant framework.
For many directors, a Creditors’ Voluntary Liquidation becomes the practical route when the company cannot continue and debts cannot be cleared. That process allows the company to close in an orderly way under the supervision of a licensed insolvency practitioner.
The route matters because it shapes what you need to tell staff. Employees will want to know whether the business is simply winding down, whether liquidation is likely, and what that means for their jobs and pay.
As licensed insolvency practitioners, Anderson Brookes can offer you expert advice about the types of company closure that are most suitable for your company’s situation. Speak to us over the phone on 0800 1804 935, or email advice@andersonbrookes.co.uk.
What to Say When You Tell Employees
You don’t need a perfect script for this conversation. But you do need to be clear.
Lead with the truth. Tell your staff that the business is closing, or that it’s entering a formal process that’s likely to end in closure. Give them an honest reason, in plain language: not dressed up, not softened into something unrecognisable.
People won’t expect a full breakdown of the finances. What they will expect, and what they deserve, is a straight answer about where things stand and what happens next.
You should cover:
- The fact that the business is closing, or entering a formal process
- Why that decision has been reached
- Whether they need to work through any of the remaining period
- When they’ll hear more
- Who they can talk to if they have immediate questions
The tone matters too. It’s usually better to say, “We have taken advice and the business cannot continue in its current form,” than to dress the situation up in language that leaves people unsure about what you really mean.
Don’t make promises you can’t keep. Until you’ve taken proper advice, avoid giving firm commitments about wages, redundancy pay, notice periods, or timescales. It’s better to say “I don’t have that answer yet” than to say something you’ll later have to walk back.
How to Handle the Meeting with Care
The way you deliver the news can shape how it is received. Where possible, speak to employees directly rather than letting word spread informally. A short meeting is often better than an email arriving without warning, even if you plan to follow up in writing afterwards. For remote teams, a live video call will usually feel more respectful than a brief written message on its own.
A few simple steps can make that meeting easier to handle:
- Choose a private setting and allow enough time.
- Keep the message consistent and easy to follow.
- Acknowledge the impact without becoming defensive.
- Give people room to ask questions.
- Confirm the next stage in writing afterwards.
That does not mean you need every answer on the spot. It means staff should leave with a basic understanding of the situation and a sense of what will happen next.
What Happens to Employees if the Company Enters Liquidation?
Once liquidation becomes the likely outcome, staff usually want to know what happens to their employment.
In many cases, employment comes to an end when the liquidator is appointed, although some employees may stay on for a short period if there is a clear reason for that. What happens in practice depends on the business, the timing, and the role involved.
Employees may also be able to claim certain sums they are owed. That can include statutory redundancy pay, arrears of wages, holiday pay, and statutory notice pay, depending on their circumstances and eligibility.
For directors, it’s common to know that the business cannot continue, but not yet feel confident explaining the employee side of the process. That is exactly why getting advice early helps. It allows you to speak with more certainty and avoid causing extra confusion at a difficult moment.
If you want a fuller explanation before talking to staff, our guide to the impact of a CVL on your employees covers this in more detail.
Where Do Employee Claims Stand in Liquidation?
After the initial shock, employees often begin to ask a more practical question: where do they stand financially?
Not every payment comes directly from whatever is left in the company. In formal insolvency, some employee claims may be treated differently from ordinary unsecured debts, and some may be made through the government process rather than from company funds alone.
That is why it helps to understand who gets paid first in liquidation. Employee claims can have a different status depending on the type of money owed, and that can affect how the process unfolds.
This is an area where careful wording matters. It is fine to explain that there may be routes for claims to be made. It is less helpful to suggest that everyone will receive the same outcome or that all payments are guaranteed in full.
A steadier approach is better. Explain that staff may be able to make claims for certain entitlements, and that the detail will depend on the liquidation process and their individual position.
What to Do if a CVL Is the Right Step
For directors, a CVL can feel daunting at first. In reality, it often brings more structure to a situation that has already become difficult to manage alone.
The process usually begins with professional advice and a review of the company’s financial position. From there, shareholders pass the necessary resolution, creditors are notified, and a licensed insolvency practitioner is appointed to deal with the liquidation.
That appointment is a key moment. It means the company is no longer drifting towards closure without direction. There is now a formal process in place, and staff, creditors, and directors all have a clearer framework to work within.
For employees, that can at least bring some certainty around the process. For directors, it can mean fewer unanswered questions and a more controlled way of dealing with the closure.
At Anderson Brookes, we help directors understand whether a CVL is the right option, what the process involves, and how to approach difficult staff conversations with more confidence.
Common Mistakes to Avoid
Most mistakes happen before or around the conversation, not during it. One of the most common is waiting too long. If wages have been delayed, stock has dried up, or suppliers are pressing for payment, staff may already realise that something is wrong. Saying nothing rarely makes that easier.
Another problem is speaking before the likely closure route is clear. That can leave you giving mixed messages, especially if you are still unsure whether the business is heading towards strike-off, liquidation, or a rescue option.
A few other common mistakes include:
- making promises about pay or redundancy before taking advice
- using vague wording that leaves staff unsure what is really happening
- focusing only on the financial side and not the impact on people
- failing to follow up in writing after the meeting
The aim is not to make a painful conversation feel easy. It is to make it clear, respectful, and properly handled.
Speak to Anderson Brookes First
If your company may need to close, you do not have to work out the message on your own first. Taking advice before you speak to staff can help you understand whether a CVL is the right route, what your responsibilities are as a director, and how to explain the situation in a way that is clear and fair.
At Anderson Brookes, we know this is not just about process. It is about people, pressure, and trying to do the right thing in a difficult position. We help directors understand their options, take the next step, and handle staff conversations with greater clarity.
If you need straightforward advice before speaking to your team, contact Anderson Brookes online, call us on 0800 1804 935, or email us at advice@andersonbrookes.co.uk.