Looking after employees and your interests when money is
tight.
Contemplating a company's state of insolvency is a difficult
position to be in. People's livelihood and relationships are at
stake, and usually, all energy is going into keeping the cash-flow,
well flowing, and the focus is on keeping the product or services
out in the world for the market to pay for.
And to keep the business wheels oiled, employees must be
paid.
Often, directors will loan money to the company to pay
wages/salaries/superannuation. However, there's a little-known
protection that directors can leverage in the worst-case scenario
of an insolvency appointment.
Section 560 of the Corporations Act 2001 says that a
person who loans money to a company before or after an insolvency
appointment commences, to pay for wages, superannuation, and leave
etc., will have the same rights to a priority payment. Essentially,
it gives the person the same priority creditor rights, which
employees had
