Legal advice

A company that I work for doesn’t pay salaries for a few months. According to unofficial information, the owner of the company plans to submit application for initiation of the insolvency proceedings. What are the chances to receive unpaid salary, if the company will be declared bankrupt?

10.03.2010 Jevgenijs Belajevs, lawyer

After declaring insolvency proceedings, the company is managed by an administrator appointed by the court. If the company didn’t pay out the salary to its employee, then he or she shall submit a relevant creditor claim to administrator. A creditor claim shall contain grounds for the request of salary payments, information regarding amount of unpaid salary, and other necessary information. All documents proving the claim of the employee shall be attached thereto.  

If the claim of the employee is founded and documents submitted comply to the law, administrator shall satisfy the request of the employee. In such case the salary will be paid to the employee from the funds of the insolvent company (if there are any), or from the guarantee fund, hereinafter referred to as the Fund. 

Administrator shall submit an application in respect of satisfying the claims of the employees to the government agency “Insolvency administration”. Insolvency administration examines whether the claims of the employees are founded and takes a decision for granting the money for the needs of satisfying the claims of employees in respect to the unpaid salaries and other sums due to employees in accordance with the law. 

An employee has the right to receive the money from the Fund in conformity with the order mentioned in the Law On Protection of Employees in the Case of Insolvency of the Employer. According to Section 4 of the Law, an employee is entitled to receive money from the Fund regarding work remuneration, reimbursement for annual paid leave, reimbursement for other types of paid leave, severance pay in connection with the termination of an employment legal relationship, reimbursement for injury in connection with an accident at work or an occupational disease. 

In accordance with clause 7 of the Transitional Provisions of the Law On Protection of Employees in the Case of Insolvency of the Employer, the overall sum due to employee from the Fund shall not exceed the amount of 4 minimal monthly salaries for one employee, if the application for satisfying the claim of an employee has been submitted to Insolvency Administration in the period from the 10th of July 2009 till 21st of December 2011.

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