Receivers and employees are the greatest losers from a recent
chain of court cases. Unless overturned on appeal or by
legislation, the cases impose financial burdens on employees and
administrative burdens on receivers.
At stake are employees' accrued leave entitlements and the
statutory requirement to pay them once a company enters external
administration. Employees of companies in receivership can lose
entitlements they would ordinarily receive during liquidation
depending entirely on the time at which a company enters
administration or liquidation.
Background
Sections 433 and 561 of the Corporations Act 2001 (Cth)
(CA) give priority to the payment of
employees' entitlements. Section 433 CA requires a receiver to
pay employee entitlements before paying the secured creditor who
appointed him under a circulating security interest. Section 561 CA
imposes a similar obligation on companies in liquidation
– although payment of employee entitlements from
