What is the impact of bankruptcy & insolvency proceedings on the employees of the debtor company?

Answer By law4u team

Bankruptcy/insolvency proceedings can have a significant impact on the employees of the debtor company. Here are some of the key implications: Job Loss: In many cases, bankruptcy/insolvency proceedings lead to job losses as the company may not have sufficient funds to pay salaries or sustain the workforce. The employees may be laid off or terminated as a result. Delayed Salaries: If the company is unable to pay salaries on time, the employees may face financial difficulties and may have to resort to legal action to recover their dues. Reduction in Benefits: The company may be forced to cut back on employee benefits such as health insurance, retirement plans, or bonuses in order to conserve cash. Uncertainty: Bankruptcy/insolvency proceedings can create a great deal of uncertainty for employees, as they may not know whether their jobs are secure or whether they will receive their salaries or benefits. Impact on Reputation: The bankruptcy/insolvency of a company can damage its reputation and make it difficult for employees to find new jobs or advance their careers. However, it is important to note that the Insolvency and Bankruptcy Code (IBC) provides some protection to employees of the debtor company. Under the IBC, the resolution professional appointed to manage the affairs of the company during the insolvency process is required to take into account the interests of the employees and ensure that their rights and interests are protected. The IBC also provides for the payment of unpaid salaries and dues to employees as part of the resolution plan.

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