Quote:
Originally Posted by Pizza
Not even close. How the hell did you arrive at this arbitrary number?
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I actually bothered to
read the bankruptcy and insolvency act, where that arbitrary number is provided by law...
Spoiler!
Quote:
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Originally Posted by Bankruptcy and Insolvency Act
(1.3) No proposal in respect of an employer shall be approved
by the court unless
(a) it provides for payment to the employees and former
employees, immediately after court approval of
the proposal, of amounts at least equal to the amounts
that they would be qualified to receive under paragraph
136(1)(d) if the employer became bankrupt on
the date of the filing of the notice of intention, or proposal
if no notice of intention was filed, as well as
wages, salaries, commissions or compensation for services
rendered after that date and before the court approval
of the proposal, together with, in the case of
travelling salespersons, disbursements properly incurred
by them in and about the bankrupt’s business
during the same period; and
(b) the court is satisfied that the employer can and
will make the payments as required under paragraph
(a).
[...]
136 (1) Subject to the rights of secured creditors, the
proceeds realized from the property of a bankrupt shall
be applied in priority of payment as follows: [...]
(d) the amount of any wages, salaries, commissions,
compensation or disbursements referred to in sections
81.3 and 81.4 that was not paid;
[...]
81.3 (1) The claim of a clerk, servant, travelling salesperson,
labourer or worker who is owed wages, salaries,
commissions or compensation by a bankrupt for services
rendered during the period beginning on the day that is
six months before the date of the initial bankruptcy event
and ending on the date of the bankruptcy is secured, as of
the date of the bankruptcy, to the extent of $2,000 — less
any amount paid for those services by the trustee or by a
receiver — by security on the bankrupt’s current assets
on the date of the bankruptcy.
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tl;dr, There's a super priority for employment standards act claims of unpaid wages up to $2000 per worker. That gets paid out before any other creditor, including the secured creditors. After the secured creditors (other than non-arm's length secured creditors), any remaining wages over and above $2000 per employee get paid out next.
I understand people's immediate ethical intuitions here. I just think that people are brushing away important facts about the reality of how corporate structures work, not just technically but from a public policy perspective. We want people to be able to keep separate entities separate, and not have liabilities cross among them, because it's good for everyone to incentivize people to start (and investors to invest in) multiple businesses.
If you want the good, you have to take the bad, and when a business goes bankrupt there's not much good and a whole lot of bad to go around.