Insolvency Act · 2022 Revised Edition · Chapter VIII
147. Preferential payments
Official textFrom Attorney General's Chambers, unchanged
Subject to the provisions of this Act, in a winding up there shall be paid in priority to all other unsecured debts —
firstly, the amount payable to any creditor for any unsecured credit granted by the creditor after the commencement of any insolvency proceedings;
secondly, the costs and expenses of the winding up, including the taxed costs of the applicant for the winding up order payable, the remuneration of the liquidator and the costs of any audit carried out;
thirdly, subject to subsection (2), all wages or salary
(whether or not earned wholly or in part by way of commission), including any amount payable by way of allowance or reimbursement under any contract of employment or award or agreement regulating conditions of employment of any employee;
fourthly, subject to subsection (2), the amount due to an employee as a retrenchment benefit or ex gratia payment under any contract of employment or award or agreement that regulates conditions of employment whether such amount becomes payable before, on or after the commencement of the winding up;
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fifthly, all amounts due in respect of contributions payable during the 12 months next before, on or after the commencement of the winding up by the company as the employer of any person under any written law relating to employees’ superannuation or provident funds or under any scheme of superannuation which is an approved scheme under the law relating to income tax;
sixthly, all remuneration payable to any employee in respect of vacation leave, or in the case of his death to any other person in his right, accrued in respect of any period before, on or after the commencement of the winding up; and
seventhly, the amount of all tax or rates assessed and due under any written law before the commencement of the winding up or assessed at any time before the time fixed for the proving of debts has expired.
The amount payable under subsection (1)(c) and (d) shall not exceed an amount that is equivalent to 5 months’ salary whether for time or piecework in respect of services rendered by the employee to the company or
company
“company” means a company incorporated or registered under the Companies Act;
$7,500, whichever is the lesser.
The Minister may, by order published in the Gazette, amend subsection (2) by varying the amount specified in that subsection as the maximum amount payable under subsection (1)(c) and (d).
For the purposes of —
subsection (1)(c) and (d) —
“employee” means a person who has entered into or works under a contract of service with an employer and includes a subcontractor of labour;
“wages or salary” is deemed to include —
all arrears of money due to a subcontractor of labour;
any amount payable to an employee on account of wages or salary during a period of notice of termination of employment or in lieu of notice of such termination, as the case may be, whether such amount becomes payable before, on or after the commencement of the winding up; and
Insolvency
any amount payable to an employee, on termination of his employment, as a gratuity under any contract of employment, or under any award or agreement that regulates conditions of employment whether such amount becomes payable before, on or after the commencement of the winding up;
subsection (1)(d) —
“ex gratia payment” means the amount payable to an employee on the winding up of a company or on the termination of his service by his employer on the ground of redundancy or by reason of any reorganisation of the employer, profession, business, trade or work, and “the amount payable to an employee” for these purposes means the amount stipulated in any contract of employment, award or agreement, as the case may be;
“retrenchment benefit” means the amount payable to an employee on the winding up of a company or on the termination of his service by his employer on the ground of redundancy or by reason of any reorganisation of the employer, profession, business, trade or work, and “the amount payable to an employee” for these purposes means the amount stipulated in any contract of employment, award or agreement, as the case may be, or if no amount is stipulated therein, such amount as is stipulated by the Commissioner of Labour.
The debts in each class, specified in subsection (1), shall rank in the order therein specified but as between debts of the same class shall rank equally between themselves, and shall be paid in full, unless the property of the company is insufficient to meet them, in which case they shall abate in equal proportions between themselves.
property
“property”, in relation to a company, includes money, goods, things in action and every description of property, whether real or personal, and whether in Brunei Darussalam or elsewhere, and also obligations and every description of interest whether present or future or vested or contingent arising out of, or incidental to, property.
Where any payment has been made to any employee of the company on account of wages, salary or vacation leave out of money advanced by a person for that purpose, the person by whom the money was advanced shall, in a winding up, have a right of priority in respect of the money so advanced and paid, up to the amount by which the sum in respect of which the employee would have been entitled to priority in the winding up has been diminished by reason of the payment, and shall have the same right of priority in respect of that amount as the employee would have had if the payment had not been made.
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insolvency
“insolvency”, in relation to a company, includes the approval of a voluntary arrangement or the appointment of a judicial manager;
So far as the assets of the company available for payment of general creditors are insufficient to meet any preferential debts specified in subsection (1)(a), (b), (c), (d), (e) and (f) and any amount payable in priority by virtue of subsection (6), those debts shall have priority over the claims of the debenture holders under any floating charge created by the company
floating charge
“floating charge” means a charge which, as created, was a floating charge, and includes a floating charge within the Companies Act;
(which charge, as created, was a floating charge), and shall be paid accordingly out of any property comprised in or subject to that charge.
Where the company is under a contract of insurance (entered into before the commencement of the winding up) insured against liability to third parties, then if —
any such liability is incurred by the company (before or after the commencement of the winding up); and
an amount in respect of that liability is or has been received by the company or the liquidator from the insurer, the amount shall, after deducting any expenses of or incidental to getting in such amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability or any part of that liability remaining not discharged in priority to all payments in respect of the debts referred to in subsection (1).
If the liability of the insurer to the company is less than the liability of the company to the third party, nothing in subsection (8) shall limit the rights of the third party in respect of the balance.
Notwithstanding anything in subsection (1), where a company has given security for the payment or repayment of any amount to which subsection (1)(g) relates, that subsection applies only in relation to the balance of any such amount remaining due after deducting from the net amount realised from such security.
security
“security” means any mortgage, charge, lien or other security interests;
Where in any winding up, assets have been recovered under an indemnity for costs of litigation given by certain creditors, or have been protected or preserved by the payment of moneys or the giving of indemnity by creditors, or where expenses in relation to which a creditor has indemnified a liquidator have been recovered, the Court may make such order as it thinks just with respect to the distribution of those assets and the amount of those expenses so recovered with a view to giving those creditors an advantage over others in consideration of the risks run by them in so doing.
Court
“Court”, in relation to a company, means a court having jurisdiction to wind up the company;
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Effect on other transactions
Terms defined in s 3
company
Defined · s 3“company” means a company incorporated or registered under the Companies Act;
Court
Defined · s 3“Court”, in relation to a company, means a court having jurisdiction to wind up the company;
floating charge
Defined · s 3“floating charge” means a charge which, as created, was a floating charge, and includes a floating charge within the Companies Act;
insolvency
Defined · s 3“insolvency”, in relation to a company, includes the approval of a voluntary arrangement or the appointment of a judicial manager;
property
Defined · s 3“property”, in relation to a company, includes money, goods, things in action and every description of property, whether real or personal, and whether in Brunei Darussalam or elsewhere, and also obligations and every description of interest whether present or future or vested or contingent arising out of, or incidental to, property.
security
Defined · s 3“security” means any mortgage, charge, lien or other security interests;
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