Directors of an insolvent business have been granted permission to pursue a case for unfair dismissal in a landmark ruling against a company controlled by former health secretary Stephen Dorrell.
A Tribunal ruled that employees of the insolvent company can sue the business “born out of the ashes” of the one that employed them and where there is “commonality” of ownership between the two.
Experts said the ruling could “pave the way” for future legal decisions for corporate insolvencies.
The Tribunal heard how Mr Dorrell allegedly used a controversial insolvency procedure – a pre-pack administration – to move assets of a publishing company into a new corporate entity owned by himself.
The insolvency made shares owned by Mr Dorrell’s business partners worthless, the report said.
The Judge ruled 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”.
Claimants, Matti Rogers and wife, Kate, said they were delighted by the decision of the West Midlands employment Tribunal.
They claim that they were removed from the publishing company through a “shame redundancy exercise” that paved the way for Dorrell to then transfer assets out of the business.
Mr Rogers says he and his wife were pushed out of their roles at the company last summer after opposing Mr Dorrell’s proposals to take over the firm.
The unfair dismissal hearing will take place in May.
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