26 May

In our previous blog, UASA addressed what is Business Rescue and Liquidation. We briefly touched on the two processes, what they entail and their purposes.

If you haven’t read part one of this this blog kindly click on the link below to catch up.

https://www.uasa.co.za/news-publications/uasa-blog-1/1958-liquidation-and-business-rescue-what-are-workers-rights-part-1

In this blog we are going to be addressing the workers’ rights during these two processes.

Business Rescue

What effect does business rescue have on workers?

Section 136 of the Companies Act regulates the interests of workers and other creditors during business rescue.

Workers of the company will remain employed by the company on the same terms and conditions on which they were employed prior to the commencement of business rescue proceedings.

Not only is a worker protected during the business rescue process, workers are considered ‘preferred unsecured creditors’, this means any remuneration, that becomes due and payable by a company to a worker during business rescue proceedings, will be paid to the worker after the Business Rescue Practitioner’s remuneration have been paid.

The chief responsibility of the Business Rescue Practitioner is to endeavour to rescue the business of the Company from having to be liquidated and to seek Post Commencement Financing (“PCF”) in order to allow the company to continue operating as a business.

The rights of a registered trade union such as UASA is guaranteed by the Companies Act to represent their members during the course of the business rescue process. They have the same participation rights and rights to information as creditors.

This empowers UASA-The Union to represent the rights of its members who were employed at the time that their employer is placed into Business Rescue.

UASA members are rest assured that their representatives will be involved in the process and will participate and actively look for information throughout the process to make sure our members receive the best possible results.

In the event that retrenchments are unavoidable, any retrenchment contemplated in the company’s business rescue plan is subject to both section 189 and 189A of the Labour Relations Act, 1995, and other applicable employment-related legislation.

Liquidation

The first point regarding employment rights is to note that employees’ rights not the same depending on whether the application for liquidation is initiated voluntarily by the board of directors or by creditors.

In the case of a voluntary liquidation, because the process is controlled by the employer, if the employer wishes to dismiss employees after the liquidation, the liquidator must follow the requirements of the LRA and ensure it has a fair reason relating to either the employee’s misconduct or incapacity, or the employer’s operational requirements, and that the liquidator followed a fair procedure in dismissing any employees.

But in the case of a creditor applying for liquidation, because the act of liquidation is not controlled by the employer and is brought about by a third party creditor, the liquidator has additional rights.

In this case, the Insolvency Act 24 of 1936 provides that when a court grants a provisional order of liquidation, the contracts of employment are suspended.

The liquidator then has the power to terminate any contract on notice only, or can enter into new contracts with workers to assist in the liquidation process; these are normally fixed term contracts.

Workers are entitled to claim severance pay and outstanding wages and salaries from the company in liquidation.

In either instance: Business Rescue or Liquidation, UASA-The Union has experience and is fully prepared to fulfil the mandate of our members and make sure their interests are put first.

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