A. INTRODUCTION

B. CONTEXT AND METHODLOGY

(3) Theoretical framework

(4) Presentation of the chapter

C. PERSPECTIVES ON DEBT, INSOLVENCY AND MORAL HAZARD

D. JUSTIFYING EMPLOYEE PREFERENCE OVER FLOATING CHARGES

E. ARE FLOATING CHARGES FAIR TO VULNERABLE STAKEHOLDERS?

A. INTRODUCTION

Insolvency and bankruptcy are words that tend to conjure disappointment, fear and blame in most corners of the globe, with the notable exception of the US, which has the aura of rewarding risk-taking entrepreneurs by frequent do-overs. The same cannot be said for most of the rest of the world, particularly within the UK, which until quite recently has ever been hesitant to introduce insolvency or restructuring procedures that allow the debtor company's management to remain in control of the ailing firm. Along with these procedures, whether debtor in possession or otherwise, come adjustments to the rights and entitlements of creditors and other stakeholders associated with the company in financial distress. This includes, whether directly or indirectly, an impact on employees who are essentially involuntary creditors to an insolvency process entered by their corporate employer, along with other vulnerable and involuntary creditors such as franchisees and tort (or delict) claimants. Although there are a number of firebreaks that provide a buffer for employees under such circumstances in most countries, the underlying paradigm of the insolvency process resembles a re-commoditisation of labour as one of a number of stakeholders who become categorised in terms of preference, priority and payment as creditors, reducing employees to the value of what they are owed for their labour.

While insolvency and restructuring have a significant impact on a debtor company's employees, there are also devices that may indirectly interfere with the full complement of employee rights, whether statutory or contractual.