The following section is hereby substituted for section 38 of the Insolvency Act,
AI-assisted research summary: If an employer is sequestrated, employees’ service contracts are suspended, and a trustee or liquidator can terminate them only after the required consultation steps.
1. The following section is hereby substituted for section 38 of the Insolvency Act, 1936 (hereafter referred to as the principal Act): “Effect of sequestration on contract of service 38. (1) The contracts of service of employees whose employer has been sequestrated are suspended with effect from the date of the granting of a sequestration order. (2) Without limiting subsection (I), during the period of suspension of a contract of service referred to in subsection (1)- ( a ) an employee whose contract is suspended is not required to render services in terms of the contract and is not entitled to any remuneration in terms of the contract; and (b) no employment benefit accrues to an employee in terms of the contract of service which is suspended. (3) An employee whose contract of service is suspended is entitled to unemployment benefits i n terms of section 35 of the Unemployment Insurance Act, 1966 (Act No. 30 of 1966), from the date of such suspension, subject to the provisions of that Act. (4) A trustee appointed in terms of section 56, or a liquidator appointed in terms o f section 375 of the Companies Act, 1973 (Act No. 61 of 1973), o r a liquidator who, i n t e r m of section 73 of the Close Corporations Act, 1984 (Act No. 69 of 1983). remains in office after the first meeting and a co-liquidator, if any, appointed by the Master may terminatc the contracts of service of employees, subject to subsections (5) and (7). (5) Atrustee may not tertninate a contract of service unless the trustee has consulted with- (a) any person with \bhom the insolvent employer was required t o consult, immediately before the sequestration, in terms agreement defined in section 213 of the Labour Relations Act, 1995 (Act No. 66 of 1995); of a collective 4 No. 24026 GAZETTE, GOVERNMENT 6 NOVEMBER 2002 ____ Act No. 33,2002 INSOI>VVENCY AMENDMENT ACT, 2002 ( 6 ) (i) a workplace forum defined in section 213 of the Labour Relations Act, 1995; and (ii) any registered trade union whose members are likely affected by the termination of the contract of service, to be if there is no such collective agreement that existed immediately prior to the sequestration; 5 (c) a registered trade union representing employees whose contracts of service were suspended in terms of subsection (1) and who are likely to be affected by the termination of the contract of service, if there is no such workplace forum; or (d) the employees whose contracts of service were suspendcd in terms of subsection (1) and who are likely to be affected by the termination of the contract of service or their representatives nominated for that purpose, if there is no such trade union. 10 (6) The consultation referred to in subsection (5) must be- aimed at 15 reaching consensus on appropriate measures to save or rescue the whole or part of the business of the insolvent employer- (a) by the sale of the whole or part of the business of the insolvent employer; or (b) by a transfer as contemplated in section 197A of the Labour Relations 20 Act, 1995; or (c) by a scheme or compromise referred to in section 31 I of the Companies Act, 1973; or (d) in any other manner. (7) If any party referred to in subsection (5) wishes to make proposals (6), that party must concerning any matter contemplated in subsection submit written proposals to the trustee or liquidator within 21 days of the appointment of the trustee in terms of section 56, or the appointment of the liquidator in terms of section 375 of the Companies Act, 1973, or the appointment of a co-liquidator in terms of section 74 of the Close Corporations Act, 1984, or if a co-liquidator is not appointed, the date of the the trustee or liquidator and an conclusion of the first meeting, unless employee agree otherwise. (8) A creditor of the insolvent employer may, with the consent of the 25 30 trustee, participate in any consultation contemplated in this section. 35 (9) Unless the trustee or liquidator and an employee have agreed on continued employment of the employee in view of measures contemplated in subsection (6), all suspended contracts of service shall terminate 45 days after- (a) the date of the appointment of a trustee in terms of section 56; or (b) the date of the appointment of a liquidator in terms of section 375 of the Companies Act. 1973; or (c) the date of the appointment of a co-liquidator in t e r m of section 74 of is not the Close Corporations appointed, the date of the conclusion of the first meeting. Act, 1984, or if a co-liquitlator (10) An employee whose contract of service has been- terminated in terms of subsection (4) or (9), (a) suspended in terms of subsection (1); or (6) is entitled to claim compensation from the insolvent estate of his or her former employer for loss suffered by reason of the suspen5ion or termination of a contract of service prior to its expiration. c (11) An employee whose contract of service terminates 01- has been terminated in terms of this section is entitled to claim se~er:lnce benefits from the estate of the insolvent cmulover in accordance with section 41 of the Basic Conditions o f Employment Act: 1997 (Act No. 75 of I997).". I . 40 45 5 0 55 Amendment of section 98A of Act 23 of 1936 l - paragr-aph (iv) of subsection (1)(u) of the l'ollowing subparagraph: