In the event of bankruptcy or insolvency, where the assets of the bankrupt or insolvent enterprise are often not sufficient to meet its corresponding liabilities, the interests of one group must inevitably give way to another. This conflict of priorities is resolved by the scheme of distribution expounded in the federally enacted Bankruptcy and Insolvency Act. While this scheme recognizes and indeed includes as an enumerated priority unpaid employee wages, more often than not, such claims are left unrealized. Attempts to remedy the wage-protection problem have focused on a number of potential mechanisms. One of the most controversial is directors' liability for unpaid wages in bankruptcy. On February 22, 1996 a Senate Banking Committee, in considering various issues relating to corporate governance in general, heard the submission of Donald MacDonald, Canada's former Minister of Finance and a director on a number of corporate boards. In his submission, he voiced his concern over legislation which holds directors liable for unpaid employee wages. A better response to the problem, he argued, would be to amend the Bankruptcy and Insolvency Act "to give employees who are owed back wages a higher claim against the remaining assets of a company." Other critics of directors' liability provisions in the area of unpaid wages have suggested that a pool of funds should be held and administered to accommodate the interests of employees in bankruptcy situations. This comment will attempt to assess the merits of each of these claims, and, following a review of the benefits and drawbacks, submit a proposal which more effectively addresses the objectives at the root of the problem.
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Rafik Bawa, "Bearing the Burden of Unpaid Wages - Directors' Liability in the Context of Wage Protection" (1997) 6 Dal J Leg Stud 239.