Rule 325: Gratuity arrangements when the employer's business is wound up
Rule 325 protects beneficiaries on closure. Rules 316 to 329 govern approved gratuity funds under Part B of Schedule XI to the Act. Where the employer's trade or undertaking is to be wound up or discontinued, the trustees must, with prior approval of and subject to conditions of the approving authority, make satisfactory arrangements to pay gratuity to existing beneficiaries.
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Bare law
Rule 325 - Arrangements for winding up, etc., of business
Where the trade or undertaking of the employer is to be wound up or discontinued, the trustees shall, with the prior approval of, and subject to such conditions as may be imposed by, approving authority, make satisfactory arrangements for the payment of gratuity to the existing beneficiaries.
Rule breakdown
Requirement
Prior approval of the approving authority.
Satisfactory arrangements for payment of gratuity to existing beneficiaries.
Subject to conditions imposed.
Key takeaways
Prior approval
Required.
Existing beneficiaries
Protected.
Superannuation parallel
Rule 311.
Practical checklist
- Seek approval early.
Avoid
- Do not distribute without approval.
FAQs
What happens to gratuity if the business closes?
Trustees make satisfactory arrangements to pay gratuity with prior approval (Rule 325).
Who approves?
The approving authority.
Who is protected?
Existing beneficiaries.
Glossary
- Undertaking
- The employer's business or unit.
- Approving authority
- Defined in Rule 316(a).