A Case To Ammend The Insolvency Act To Give Employees Terminal Priority
Correspondent | Monday October 31, 2016 16:14
But what the liquidation of BCL has also exposed, is the position of Botswana workers in the ranking order of creditors. According to the Insolvency Act, when a company undergoes liquidation, there are creditors who are given preference as compared to others. We have since learnt that the ranking order of creditors are divided into two categories, secured creditors and preferent creditors. Secured creditors are those that are given in simple parlance first priority in the payment of debts. These are holders of mortgage bonds hypothecating immovable property.
This means if banks have any mortgage bonds against BCL and TNCM, they will be paid first in any remaining estate because they are secured creditors.
After the secured creditors are paid, then follows preferent creditors, these will be holders of notarial mortgage bonds, hypothecating specially described movable property. Again, this could be financial institutions which have used BCL machinery as security for advancement of some loans. The fact is that although these creditors are not secured creditors, however their claims are given priority to payment of employee benefits and salaries. The workers’ salaries and terminal benefits in terms of our laws are not a priority because they are not guaranteed to be paid until banks have been paid.
If we are to go by the allegations doing rounds in the media that BCL liabilities exceed its assets, it is clear that more than 5,000 employees will not receive their benefits because they are not a priority in the ranking order of creditors. These are the same employees who toiled and worked hard for BCL for decades.
BOFEPUSU will like to call upon progressive members of Parliament to ammend the Insolvency Act to ensure that employee terminal benefits are given priority when the estate of a company undergoing liquidation is being divided. We cannot have a situation like the current one where workers’ terminal benefits are not even being mentioned during liquidation. In fact, the costs of the liquidation are also given priority.
This means before the employees are considered, the liquidator, and his assistants, including his lawyers are going to be given priority.
BOFEPUSU is calling upon progressive legislators to take a leaf from countries like Brazil, where employee terminal benefits take precedence over secured creditors. In Canada, wage and pension claims of employees are also given priority in companies undergoing liquidation. India and Mexico also give priority to employee wages and other monetary benefits due to the debtors’ employees.
We therefofore urge the government to make the necessary amendments to the Insolvency Act with a view to elevate employee benefits to the status of secured creditors for a company undergoing liquidation.
T. Rari