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The Laws of Zambia

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REPUBLIC OF ZAMBIA

THE PREFERENTIAL CLAIMS IN BANKRUPTCY ACT

CHAPTER 83 OF THE LAWS OF ZAMBIA

CHAPTER 83 THE PREFERENTIAL CLAIMS IN BANKRUPTCY ACT

THE PREFERENTIAL CLAIMS IN BANKRUPTCY ACT

ARRANGEMENT OF SECTIONS

Section

1. Title

2. Priority debts

3. Discharge of debts

4. Distress for rent

5. Application of Act to a deceased insolvent

CHAPTER 83

PREFERENTIAL CLAIMS IN BANKRUPTCY Act No. 9 of 1995

The Laws of Zambia

Copyright Ministry of Legal Affairs, Government of the Republic of Zambia

An Act to make provision with respect to preferential payments in bankruptcy; to
give effect to the International Labour Conference Convention 173 Concerning
the Protection of Workers' Claims in the event of the Insolvency of their
Employer, Adopted by the Conference at its Seventy-ninth Session, at Geneva,
on 23rd June, 1992, to which Zambia is a State Party; and to provide for
matters connected with or incidential to the foregoing.

[28th April, 1995]

1. This Act may be cited as the Preferential Claims in Bankruptcy Act. Short title

2. (1) Subject to this Act, in a bankruptcy there shall be paid in priority to all other
unsecured debts-

Priority debts

(a) all amounts due by way of wages or salary (whether or not earned wholly or
in part by way of commission) accruing to any employee within the period of
three months before the date of the receiving order;

(b) all amounts due in respect of leave accruing to any employee within the
period of two years before the date of the receiving order;

(c) all amounts due in respect of any paid absence (not being leave) accruing
to any employee within the period of three months before the date of the
receiving order;

(d) recruitment expenses or other amounts reimbursable under any contract of
employment;

(e) an amount equal to three months' wages or salary, by way of severance
pay, to each employee;

(f) all amounts due in respect of workers' compensation under any written law
relating to workers' compensation accrued before the date of the receiving
order;

(g) any tax, duty or rate payable by the bankrupt in respect of any period prior
to the date of the receiving order whether or not payment has become due
after that date;

(h) all Government rents not more than five years in areas due to the
Government on the date of the receiving order; and

(i) all rates from the bankrupt to a local authority having become due and
payable within the period of three years before the date of the receiving
order.

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Copyright Ministry of Legal Affairs, Government of the Republic of Zambia

(2) Debts having priority shall rank as follows:

(a) firstly, the debts referred to in paragraphs (a) to (f), inclusive of subsection
(1);

(b) secondly, the debts referred to in paragraphs (g) and (h) of subsection (1);
and

(c) thirdly, the debts referred to in paragraph (i) of subsection (1).

(3) Debts having the same priority shall rank equally between themselves, and shall
be paid in full, unless the property of the bankrupt is insufficient to meet them, in which
case they shall abate in equal proportions between themselves.

(4) Where a payment has been made to any employee of the bankrupt on account
of wages or salary out of money advanced by a person for that purpose, the person by
whom the money was advanced shall, in the event of a bankruptcy, 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 event of a
bankruptcy 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.

(5) Where the bankrupt is, under a contract of insurance entered into before the
commencement of the bankruptcy, insured against liability to third parties, then, if any
such liability is incurred by the bankrupt (either before or after the date of the receiving
order) and an amount in respect of that liability is or has been received by the bankrupt or
trustee in bankruptcy, from the insurer, the amount shall, after deducting any expenses of,
or incidental to, getting the amount, be paid by the trustee in bankruptcy 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 undischarged in priority to all payments in
respect of the debts referred to in subsection (1).

(6) Notwithstanding anything in subsection (1)-

(a) paragraph (a) of that subsection shall not apply in relation to bankruptcy
where the bankrupt has entered into a contract with an insurer in respect of
any liability under any law relating to workmen's compensation; and

(b) where a bankrupt has given security for the payment or repayment of any
amount to which paragraph (f), (g), or (h) of that subsection relates, that
paragraph shall apply only in relation to the balance of any such amount
remaining due after deducting therefrom the net amount realised from the
security.

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Copyright Ministry of Legal Affairs, Government of the Republic of Zambia

(7) Where, in any bankruptcy-

(a) assets have been recovered under an indemnity for costs of litigation given
by certain creditors;

(b) assets have been protected or preserved by the payment of moneys or the
giving of indemnity by creditors; or

(c) 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 risk run by them in so doing.

(8) Subject to this Act, all debts proved in the bankruptcy or death shall be paid pari
passu.

3. Subject to the retention of such sums as may be necessary for the cost of
administration or otherwise, the foregoing debts shall be discharged forthwith so far as the
property of the debtor is sufficient to meet them.

Discharge of debts

4. In the event of a landlord or other person distraining or having distrained on any
goods or effects of a bankrupt within three months next before the date of the receiving
order, the debts to which priority is given by this Act shall be a first charge on the goods or
effects so distrained on or the proceeds of the sale thereof:

Distress for rent

Provided that, in respect of any money paid under any such charge, the landlord or
other person shall have the same rights of priority as the person to whom such payment is
made.

5. This Act shall apply in the case of a deceased person who dies insolvent,
whether or not an order has been made in respect of the deceased's estate in terms of the
Bankruptcy Act, as if he were a bankrupt and as if the date of his death were substituted
for the date of the receiving order;

Application of Act to a
deceased insolvent
Cap. 82

Provided that the proper funeral and testamentary expenses incurred by the legal
personal representative of the deceased person in and about that person's estate,
together with the costs of the administration of the deceased person's estate, shall have
priority over all other debts and shall rank equally between themselves.