BusinessBusiness RecoveryEmployees to win under receivership changes

Employees to win under receivership changes

The government is considering moving redundancy payments to sacked workers up the list of preferences when companies go into receivership.

Ministers are ready to abolish the Crown Preference, which at the moment puts government bodies such as the Inland Revenue and Customs & Excise at the head of the queue of debtors to bankrupt companies.

A recent White Paper on the subject is soon to be incorporated in the proposed new Enterprise Bill.

This would leave more money in insolvent companies for unsecured customers such as employees and former employees.

Now Small Business minister Nigel Griffiths has revealed that he is ready to change the system which puts redundancy payments at the end of the queue – below holiday and sickness pay arrears.

He told South Shields Labour MP David Miliband, who expressed concern about lost redundancy pay when electronic firm Viasystems went into receivership: ‘We have it in mind to introduce a ring-fence mechanism to ensure that the benefits of abolishing Crown preference flow to unsecured creditors. Employees may benefit in that capacity for the part of the debt that is not preferential.

‘I note your suggestion that redundancy payments should be accorded the same preference as debts such as pay arrears. Although not mentioned in the White Paper, I can confirm that we are giving further thought to that point.’

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