Parliament has received recommendations seeking to prioritise payment of outstanding dues to workers ahead of secured or privileged creditors when distributing proceeds of liquidation of insolvent companies.
It was also recommended that judicial management fees on gross turnover be reduced from 6 to 3 percent in order to reduce overall costs of judicial management.
Currently, workers are the last to be paid from “free funds”, which the Portfolio Committee on Justice, Legal and Parliamentary Affairs said was deemed a violation of section 65 of the Constitution of Zimbabwe during public hearings on the Insolvency Bill.
The Portfolio Committee on Justice, Legal and Parliamentary Affairs recently held public hearings on the Bill in Masvingo, Mt Darwin, Mutare, Chinhoyi, Gweru, Bulawayo, Gwanda, Lupane, Hwange as well as Harare.
Most participants’ concern was that provision must be made for liquidators to prioritise workers’ welfare over payment of judicial managers and other obligations.
At virtually all the public hearings, participants expressed their great consternation at the way Clause 89 (1) (2) (3) (4) and (5) violate Section 65 (1) of the Constitution, which provides that “every person has the right to fair and safe labour practices and standards and to be paid a fair and reasonable wage”
It was submitted that the clause seeks to pay workers from “free residue”, in the event of insolvency, thereby ranking workers’ claims in the second position.
“Participants said that the best practice is to place the human element first before any other claims because workers’ wages and benefits are a human right which deserves the highest protection even in the event of insolvency,” said Parliamentary Legal Committee chairman Fortune Chasi in a report to Parliament.
The PLC delivered a non-adverse report on the Bill, which seeks to repeal the current Insolvency Act, after Justice, Parliamentary and Legal Affairs Minister Ziyambi Ziyambi had presented the second reading of the Bill.
Mr Chasi said the argument was that if workers’ claims were paid from residues, they will get nothing if there was no such residue and years of work will go unpaid for.
This is based on recommendation 180 of 1992, which states that ‘national laws or regulations’ shall give workers’ claims a higher rank of privilege than other privileged claims’ and it also states that the minimum period of such claims should not be less than 12 months.
On judicial managers the Parliamentary Committee Affairs received submissions recommending that remuneration of liquidators be changed to reflect rates as stated in Part D of Statutory Instrument 50 of 2017.
Proposals were made for the remuneration of the business rescue practitioner to be paid according to the tariff applicable to the business rescue practitioner/judicial manager, as reflected in Part F of Statutory Instrument 50 of 2017.
It was also said at the public hearings that the Bill’s intention to put a limit of not more than three months on wages and accrued leave was totally unacceptable.
“The $750 per employee as wages and $250 for pension arrears and medical aid was deemed to be too little.”