Employees rights in the event of an insolvency

Of the many negative effects of the global economic and financial crisis caused by Covid, one not frequently considered is the inability of companies to meet their obligations to both their suppliers and their staff. The legal consequence of this is that companies are forced into insolvency.

As it is common practice under insolvency, when a company cannot pay its debts, any creditor having a claim against it over a certain threshold is entitled to move to court and file and or initiate insolvency proceedings in order to recover part or all of the debt from the remaining assets.

Insolvency has a variety of impacts on employers and workers. An insolvent firm may owe creditors such as banks, suppliers, and landlords among others partial or full payments for outstanding debt. At the same time, the company as an employer may accumulate internal debts to employees if they have not paid part or all of wages and remuneration. This can have profoundly negative consequences for employees as they and their families may be wholly dependent on that wage or remuneration to live.

For these reasons policy, legal, and institutional mechanisms are important in addressing worker wage claim in company undergoing insolvency. Below are some of the key considerations to be made when addressing employee wage claims in insolvency.

To begin with, a company is said to be insolvent when its debts (liabilities) are greater than the value of its assets and income. In effect, such companies are not able to pay back money owed, either currently or in the future.

Similarly, It is possible for a company to be insolvent even if their assets outweigh their liabilities where the assets are not easily convertible to liquid cash needed in order for the company to make the necessary payments.

The main objective of insolvency proceedings thus is to consolidate and manage the company and or employer’s assets with a view to the collective reimbursement of its creditors some of whom are its employees.

However, certain categories of workers, mainly government employees are excluded from these proceedings due to the nature of their employment relationship or other forms of protection available to them.

Under the ILO Convention No. 173 (1992), there are two ways of safeguarding employee’s interest with regard to their claims against their employer. They include; granting staff preferential rights; and establishing a guarantee institution to deal with their claims in the event of insolvency, for instance a group cover.

Thus, if preferential rights have been granted, employees’ claims take precedence over the claims of other creditors with regard to the payment of wages from the insolvent employer’s assets. In other words, the ILO Convention No. 173 (1992) considers the employees’ claims as preferential debts and establishes a priority regarding their payment.

The convention includes a priority list of employee claims considered as privileged debts to be covered by the employer such as employees’ claims for wages relating to a prescribed period, which shall not be less than three months, prior to the insolvency or prior to the end of the employment contract; Employees’ claims for amounts due in respect of other types of paid absence relating to a prescribed period, which should not be less than three months prior to the insolvency and lastly allowances due to employees on the termination of the employment contract such as notice pay, gratuity among others.

With regard to the protection of employees’ claims by means of a guarantee institution or group cover, payment may be made from a special fund in the event of an employer’s insolvency and insufficient assets. Similar to the list of preferential debts, the convention provides a limited list of employees’ claims to be paid from the Guarantee Fund.

Oscar Onyango, Advocate of The High Court

• The Lancet Commission on Global Surgery estimates that 98 percent of people residing in emerging countries, including Kenya, lack access to multi-specialty surgical services.
• The commission further describes this access to the services as including timeliness, safety, affordability for patients and an adequate capacity by providers.
• This gap forms a good starting point for pursuing the implementation of a multi-specialty growth strategy by clinics and hospitals.

It is an inherent ambition for most healthcare facilities to, over time, increase their scope of services in order to serve a wider catchment population whilst providing a broader array of clinical services.

However, the conundrum that most healthcare managers grapple with is on how, where and what specific activities to pursue in order to actualize this desire in a cost effective and, ultimately, productive manner.

The Lancet Commission on Global Surgery estimates that 98 percent of people residing in emerging countries, including Kenya, lack access to multi-specialty surgical services.

The commission further describes this access to the services as including timeliness, safety, affordability for patients and an adequate capacity by providers. This gap forms a good starting point for pursuing the implementation of a multi-specialty growth strategy by clinics and hospitals.

It is important for healthcare managers to digest available datasets in order to elucidate the characteristics of the disease burden surrounding their health facilities. Such datasets are available both internally and externally.

Internally, records of disease profiles attended to in the facility will be of use; especially of cases that eventually required referral to another center due to non-existence of the needed clinical services.

Externally, the Kenya Health Information System is a freely available online database that contains information on disease burden by type and location in the country. Also, there are specialty-wise medical journal publications that bear extensive information on various disease burdens.

As an example, one may establish that a general outpatient clinic in a hospital setting saw many patients with backaches and of these, the MRIs done showed that most of the patients had spinal compressions but were not definitively attended to due to the unavailability of a neurosurgeon or an orthopedic surgeon specializing on the spine.

The next step would be to consider setting up a spine clinic running on specific days wherein patients presenting with such back problems can be booked into. At this stage, a consideration may be made to invite a visiting specialist doctor to run the clinic on those specified days.

It is worthwhile that during this introductory phase, patients are informed on the need to subscribe to a health insurance scheme so as to limit their need for out-of-pocket expenditure and increase the affordability of such highly-specialized care.

As these occur, the healthcare manager should be forecasting on the supportive services that are required along this specialty line and making plans for the accompanying capital and operational expenditure.

If these cases require surgical interventions, this planning should be around ancillary requirements such as the availability of surgical instruments and implants, staffing cadre, rehabilitative services such as physiotherapy and so on. It helps a great deal to involve input from a specialist in the particular field.

Whereas this example covers a surgical specialty, the same data - driven approach can be applied in all other facets of medical specialties to ensure that an iterative and productive growth approach is undertaken.

The writer is a healthcare leader and geospatial epidemiologist

• The High Court has dismissed a suit filed by minority owner of Bluebird Aviation who accused his partners of siphoning more than $1 billion (Sh108 billion) from the airline through tax evasion, fraud and money laundering.
• Justice Alfred Mabeya brought to an end the five-year court battle pitting Adan Abdi Yussuf against three other owners of the 29-year-old airline.
• The judgment came after the Director of Criminal Investigations (DCI) cleared three shareholders and executives of Bluebird — Hussein Farah, Unshur Mohamed and Mohamed Abdikadir — from financial malpractices after a nine-month investigation.

The High Court has dismissed a suit filed by minority owner of Bluebird Aviation who accused his partners of siphoning more than $1 billion (Sh108 billion) from the airline through tax evasion, fraud and money laundering.

Justice Alfred Mabeya brought to an end the five-year court battle pitting Adan Abdi Yussuf against three other owners of the 29-year-old airline.

The judgment came after the Director of Criminal Investigations (DCI) cleared three shareholders and executives of Bluebird — Hussein Farah, Unshur Mohamed and Mohamed Abdikadir — from financial malpractices after a nine-month investigation.

The investigation followed a criminal complaint from Mr Yussuf against his fellow shareholders, accusing them of fraudulently channelling massive funds out of the company as part of a money laundering scheme.

Justice Mabeya dismissed Mr Yusuf’s allegations, saying he failed to prove claims of fraudulent accounting, tax evasion, fraud and money laundering.

“In the present case, all that the plaintiff did was to make sweeping allegations without any backing by way of evidence. He only stated that he had carried out investigations and made discovery of the allegations he made,” said the judge.

“The documents that were produced were not authenticated to prove any of the allegations made against the defendants.”

Mr Yussuf, who claims to own 25 percent of the charter airline, argued that more $1 billion (about Sh108 billion) has been stolen and put in offshore accounts and investments in Western capitals after being transported physically out of the country without declaration. He said the three directors were using the airport passes granted for restricted areas in airports to move the billions.

The DCI dismissed the secret movement of cash at the airports, arguing its investigation and probe by Kenya Airports Authority (KAA) found no evidence of money laundering.

The Financial Reporting Centre through the DCI said it failed to detect breaches while tracking the flow of cash in and outside Blue Bird Aviation.

Mr Yussuf claimed that his partners were stashing proceeds from the airline in international banks under Amazon International FZE. But Justice Mabeya said his partners had sufficiently showed that their relationship with Amazon was purely commercial.

“That the plaintiff had failed to demonstrate the directorship or shareholding of the defendants at Amazon or that they had stolen money from the Company and deposited the same at Amazon’s accounts,” he said.

“No faithful director exercising independent judgment would take any of the said measures, none of which are beneficial to the Company. In fact, all the steps taken by the plaintiff were contrary to the success of the Company. They were meant to sound a death knell on the company,” he added.