Employment law
The company closes or goes bankrupt: are wages guaranteed?
In Koulikoro, the looms of the Filature Bélédougou stopped on a Monday in March. Three months’ wages are overdue, customers have stopped paying, the bank wants its loan back and the Treasury its taxes. The 90 employees wonder whether they will ever see their money. The director thinks bankruptcy releases him from everything. A double mistake: wages rank ahead of almost all other creditors, and closure does not erase the dismissal rules.
1. What exactly are we talking about?
Filature Bélédougou is a fictitious company with 90 employees: its name and situation are used purely as an example.
When a company can no longer pay its debts, its creditors compete for what is left. A preferential creditor is one the law ranks ahead of the others when assets are shared out. The Labour Code places employees at the front of this line.
Why? Because wages support the employee and their family. Employees have no bank guarantee and no way of spreading their risk: the law offsets this vulnerability with payment priority.
“When the company falls, wages are paid first.”
2. Employees’ preferential rights: who comes first
| Employee’s claim | Protection | Legal basis |
|---|---|---|
| Wages for the last twelve months | Preferential right over the employer’s movable and immovableproperty | Labour Code, L.113 |
| Paid leave allowances | Preferential right for the two years after the right wasacquired | Labour Code, L.114 |
| Wages, bonuses, commissions, all types of allowances, damages | Rank ahead of all other preferential claims, including theTreasury’s | Labour Code, L.115 |
The decisive rule is article L.115: claims for wages, bonuses, commissions, various benefits, all types of allowances and, where applicable, damages rank ahead of all other preferential claims, including that of the Treasury (Labour Code, article L.115). Contributions owed to INPS enjoy, in bankruptcy or judicial liquidation, the same preferential right as wages (Social Security Code, article 200).
Example. Suppose the sale of the mill’s assets raises 40,000,000 XOF, against 25,000,000 XOF of wage claims and 20,000,000 XOF of unpaid taxes (fictitious amounts, excluding creditors holding specific security):
Employees are paid first: 25,000,000 XOF, i.e. 100% of their claims Left for the Treasury: 40,000,000 − 25,000,000 = 15,000,000 XOF, i.e. 75% of its claim
In Mali, the restructuring and liquidation of businesses are governed by the OHADA Uniform Act organising collective proceedings for the clearing of debts, revised in 2015, which prevails over national law. It creates a category of “super-preferential wages”: pay owed for the twelve months preceding the opening of proceedings, but only up to the unattachable portion of wages set by each State (article 1-3). In Mali, that portion follows from the attachable fractions set by Decree No. 96-178/P-RM (article D.123-2).
These super-preferential wages are paid within ten days of the opening decision, if the available funds allow (article 96). When the price of the assets is distributed, they come immediately after legal costs, and for movable assets after preservation costs (articles 166 and 167). The rest of the wage claim keeps a general preferential right, ranked ahead of social security and tax claims, but after creditors holding security, such as a bank holding a mortgage (Uniform Act organising securities, article 180; articles 166 and 167 cited above).
The most common mistake
Paying the bank or the tax authorities first “to avoid trouble”, leaving wages in arrears. The Code does exactly the opposite: wages come first.
What you need to do
- Draw up the exact list of wages, leave and allowances owed to each employee.
- Hand this list to the trustee or liquidator as soon as they are appointed.
- Never pay another preferential creditor before the employees.
3. Closing does not exempt you from the dismissal rules
Closure of the business, particularly in bankruptcy or judicial liquidation, does not release the employer from the dismissal rules: informing the labour inspector, notice, pay in lieu of notice and severance pay (Labour Code, article L.57, referring to articles L.40, L.41, L.42 and L.53).
Severance pay is in fact due even when the contract ends through force majeure, after one year of continuous service (article L.53). For dismissal on economic grounds, the special tax-free payment of one month’s gross salary is added (article L.48).
If a restructuring plan is considered in collective proceedings, the trustee or administrator may dismiss on economic grounds while complying with the rules of article L.48 on the order of dismissals, consultation of delegates, informing the inspector and the special payment (article L.49).
Finally, wages and allowances must be paid as soon as the work ends (Labour Code, article L.103), and each employee receives their work certificate (article L.61). See also Company sold or merged: what happens to employment contracts? and Economic dismissal.
What you need to do
- Inform the labour inspector of each dismissal, by registered letter stating the reason.
- Calculate notice, severance pay and the special payment for each employee.
- Give each employee their work certificate on the day they leave.
4. Before closing: suspend rather than terminate
When the difficulty looks temporary, the Code offers an intermediate option: technical or economic lay-off. The employer may suspend the contracts of all or part of the workforce, after seeking the opinion of the staff delegates or the union committee and informing the Regional Labour Director in advance (Labour Code, article L.35).
The suspension may not exceed three months, extended to six months at most in a serious health crisis. Beyond that, or if the employee refuses the proposed conditions, any termination is attributable to the employer. During this period, the employer may not hire, except in unaffected sectors (same article). See Technical and economic lay-off.
The most common mistake
Letting wages build up “until things pick up again”, without deciding anything. Arrears add up, remain claimable for three years (article L.118), and the final closure erases none of them.
What you need to do
- Consult the delegates and inform the Regional Director before any economic lay-off.
- Set a precise period, three months at most outside a health crisis.
A closer look: no wage guarantee fund in Mali
In France, a guarantee scheme funded by employers, the AGS, advances to employees the sums a bankrupt company cannot pay. Much of the content in circulation mentions it. Neither the Labour Code, nor the Social Security Code, nor the OHADA Uniform Acts provide for such a fund: employees’ protection rests on their preferential rights, and therefore on what is left in the company.
Hence the importance of acting early. There is one useful exception: temporary employment agencies must provide a financial guarantee covering, in case of default, payment of wages and social security contributions (Decree No. 96-178/P-RM, article D.313-9, amended in 2022). On the remedies of an unpaid employee outside bankruptcy, see Unpaid wages: the employee’s remedies, the employer’s risks.
Key takeaways in 6 points
- Pay wages before the Treasury and other preferential creditors; in bankruptcy, their unattachable portion comes even before the bank.
- Treat INPS contributions as ranking with wages in bankruptcy.
- Apply the dismissal rules even on closure or liquidation.
- Pay severance pay, and the special payment for economic dismissal.
- Consider technical or economic lay-off, three months at most, before closing.
- Do not count on a guarantee fund: no Malian or OHADA text provides one.