TR EMERITUS

I generally don’t post about insolvency issues even though I’ve worked in the Insolvency industry for around a decade. The reason is simple. I am not a qualified insolvency practitioner and I am not in the position to give “advice.”

However, there was a discussion on Linkedin about the fact that the staff of Flash Coffee were not getting paid because the company was in liquidation. While I am not a qualified insolvency practitioner, I’ve often been broke (still am most of the time) and been in situations where payment has been delayed, I thought I’d have a crack and giving my two cents worth. [LINK]

Not getting paid for work sucks. As much as we talk about money not being everything, it is one of the key reasons why we go to work. Money remains the essential element in ensuring that we have food on the table and a roof over our heads. Like it or not, we have bills to pay at the end of every month.

So, when you don’t get paid for the month, you get f***ed. The mortgage or rent, phone bills, transport bills still keep going whether you get paid at the end of the month. Unless you have a huge cash cushion, not getting paid for the month is something that can put you into the financial dog house. So, what can one do about it?

Well, the best thing to do is to expect the situation. Most of us go to work with the guaranteed expectation of getting paid. For the most part most of us get paid on a regular enough basis to take the mindset that getting paid is a given, its merely a question of whether you can reach a stage of getting more.

However, what most of us in the private sector forget is that our employers are enterprises of one sort or another and by their very nature required to make money. The reality is that businesses can fall into financial difficulty and the reality is that jobs are expendable and like or not businesses go down and your salary can be delayed and denied.

So, start on the premise that being screwed is a very real possibility. As long as you, as an employee, accept that you can get screwed as a possibility, then you can prepare for it. Accept that you will need to put money aside. You will need a side-hustle or an investment portfolio that can replace your main income should you ever need it.

It also pays to understand that there are obvious signs if your employer is facing financial difficulties. The most obvious one comes when getting your basic salary is a struggle. Look for something else the moment your salary is a problem for your employer. The logic is simple – if he or she cannot pay you for a month – what makes you think they’ll be able to pay you for the next?

Now, what happens when your employer goes under and a liquidator replaces the directors as the main point of contact in the company?

The only thing you can realistically do is to fill out what is known as a Proof of Debt or POD. This form should be provided to you by the liquidator. This form means that you “officially” are recognised as a creditor of the Company. For Singaporeans reading this, you can find out more about the various forms that need to be filled out in an insolvency situation: [LINK]

As a creditor you have the right to attend creditor’s meetings and you have the right to find out what’s going on.

However, you need to understand that the liquidator is duty bound to minimise liabilities for the benefit of ALL creditors. Your legal employment will be terminated because everyday you are legally employed adds to the liabilities, which inevitably means that there is less for the everyone.

Now, one needs to look at being paid from an insolvent Company. Under Singapore’s insolvency regime (which should be similar to most Common Law jurisdictions), there is an order in which certain people get paid. [LINK]

As an employee, your salary ranks as a preferential payment. Hence, once the liquidator has taken his or her cut, the salaries become the next priority, even ahead of the tax man.

However, you, as an employee who is owed money needs to understand two key things. First and foremost, the only way anyone gets paid is from what’s left over of the Company. Think of the liquidator as a butcher trying to carve meat from the bones of a carcass. You only get meat if there’s meat to carve off.

So, once a company enters an insolvent situation, you have to be prepared for the reality that there simply isn’t enough money to pay off ANY creditor.

Then, the nature of the debt also changes. In a normal situation a salary is what you get for doing work. However, in an insolvent situation, even if the debt incurred is a result of salary owed, its more like an IOU. There is no obligation on the part of the liquidator to pay you within a certain time frame as in the case of a normal salary.

Liquidators do not just make payments to creditors. There is a statutory requirement for them to advertise their intention to pay and then details of the payment. Such advertisements are usually in the “notice” section of the financial press (in the case of Singapore, it’s usually Business Times).

Treat any employer like an elderly relative, where you do what you need to do and they will need to do in a relationship marked by obligations. However, expect that one day, they will pass on and the obligations they once had to you will no longer exist and treat what you get from the will as a bonus.

Tang Li

*Although I’ve been based mainly in Singapore for nearly two decades, I’ve had the privilege of being able to meet people who have crossed borders and cultures. I’ve befriended ministers and ambassadors and worked on projects involving a former head of state. Yet, at the same time, I’ve had the privilege of befriending migrant labourers and former convicts. All of them have a story to tell. All of them add to the fabric of life. I hope to express the stories that inspire us to create life as it should be.

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