Corporate Insolvency: Protection of Employee Rights in Kenya

Abstract

Employees are an integral part and the lifeblood of any corporate entity. They play a crucial function in the existence of a corporate entity. They have immense stake in its continued existence and its sound financial health for purposes of keeping their jobs. Their jobs are a source of livelihood to them. The financial ill-health or insolvency of their employer poses a risk to their jobs. COVID-19 exacerbated the risk of losing jobs. Insolvency of the corporate employer, causes employees to lose their jobs and entitlements and to be condemned to abject poverty. This is largely because developing countries like Kenya have weak social welfare programmes to support the unemployed. Over the years, insolvency law has developed with the aim of addressing the interests of stakeholders in insolvency. The development of the law has been informed by the proceduralist and traditionalist theories discussed in chapter 2. The traditionalist theory informed the development of the law to take care of interests of all stakeholders in corporate insolvency including employees. The laws of Kenya, discussed in chapter three, have structures whose intention is to protect employees in the wake of insolvency of their corporate employer. These include preferential treatment of a portion of their entitlement, providing a guarantee payment under the National Social Security Fund and corporate rescue through administration. Despite the legal regime providing some measure of protection to employees, the mechanisms are not sufficient to protect employee entitlements which exist prior to insolvency. These laws can be improved to effectively and adequately protect employee rights in corporate insolvency. In chapter four, this research discusses lessons from other jurisdictions on effectively and meaningfully protecting the interests of employees in corporate insolvency. In chapter five, this research recommends lessons from other jurisdictions to be adopted in Kenya, together with some amendments to the laws of Kenya to further buttress the protection of employees in corporate insolvency.