Protection of Employees Upon Corporate Liquidation: A Case of the Companies Act, Cap. 212 R.E. 2002.
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Abstract
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The study examines the protection of employees offered under the company law in Tanzania
regime, the expected reasonable protection standard and the implication towards employees upon
company liquidation.
The study is governed by the main objective which is to assess the effectiveness of Tanzania
Companies Act Cap 212 R.E 2002 on the protection of employees and to draw experiences from
other jurisdictions such as in Uganda and South Africa in treatment of employees as specific
objective, and it recommends the way forward in terms of changing the law in Tanzania. The
documentary reviews methodology was used to conduct the study so as to get a variety of data.
The key finding of the study is that the Companies Act does not protect the employees should the
event of liquidation materialise as their rights are not secured by the company. The study further
found that, the same law offers the best protection to the secured creditors, the creditors who
have the right, on the debtor‟s default, to proceed against collateral and apply it to the payment
of the debt. Again, the study found that the expenses that relate to winding up tend to be paid up
first out of assets of the company. Similarly, it is established that the legal framework on
protection of employees during liquidation in some other jurisdictions like in Uganda, South
Africa, and Australia, just to mention a few, is fairly adequately compared to Tanzania
jurisdiction.
Throughout of these findings, the study recommends the amendment of the existing law so as to
balance the risks among all types of creditors. A pro rata payment system should be applied at
least to enable employees to be considered for payment, and should the assets proved insufficient
to settle the claims of employees, government taxes, local rates and customs and excise duties
due from the company should not be paid until employees are paid in full.
Keywords
Corporate Liquidation