Government rejects proposals to prioritise workers’ pay in insolvency process

The government has rejected a recommendation made in a joint report by Parliament’s Scottish Affairs and Business, Innovation and Skills Committees to update the order of payments in the Insolvency Act 1986.

Published in March following the insolvency of City Link last Christmas, the report stated that the insolvency process offered inadequate protection for workers, suppliers and contractors. The committees recommended that preference in the order of payments process should be given to all workers, regardless of whether or not they were directly employed by a company.

Sajid Javid, secretary of state for business, innovation & skills, rejected the proposals stating that altering the order of payments hierarchy to favour workers could only be achieved at the expense of other creditors, which might make them more reluctant to extend credit to a company in difficulty.

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