The insolvency of an employer is likely to have significant ramifications for the contractual relationship between an employer and employee. Three main issues arise.

  1. The insolvency may bring about the termination of the contract of employment through the dismissal of the employee.

  2. If the employee is dismissed they may be able to recover any unpaid sums due under the contract of employment or statutory employment rights.

  3. Where the contract of employment continues, liabilities arising out of the employment relationship will be affected by any alteration to the legal status and/or identity of the employer.

This topic examines the main types of insolvency — bankruptcy, administrative receivership, administration and liquidation — and the legal implications and employer duties that arise under each circumstance.

The legal procedures governing employee dismissal after insolvency are explained and the preferential status of the various types of debts and monies owed to employees is covered.

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