DIRECTORS’ LIABILITY FOR NON-PAYMENT OF EMPLOYEE ENTITLEMENTS IN CASE OF INSOLVENCY OF EMPLOYER

Abstract

The opening of insolvency procedures undoubtedly causes significant consequences for those who are related with the debtor. Majority of legislators recognise employees as particularly vulnerable category of creditors in insolvency. This paper will briefly summarise employee protection mechanisms in insolvency (priorities in payment order and guarantee institutions for payment of accrued entitlements). The central part of the paper will deal with directors’ liability for nonpayment of employee entitlements in case of insolvency. The paper will review Canadian company legislation which introduces liability of directors for non-payment of employee entitlements and Australia which reformed its company law to introduce special norms aimed at better protection of employees’ interests.