ABSTRACT
Where sums have been advanced to pay remuneration or holiday pay which would otherwise have been preferential payments, that loan becomes a preferential debt.49 The Cork Committee observed50 that the subrogated and preferential claims of banks and others who had advanced money for the purpose of paying wages were of far greater significance than the claims by the employees. Prior to 1986, this right of subrogation only existed in relation to corporate insolvency. The Committee was satisfied that the difference in treatment as between bankruptcy and liquidation could not be supported, but was divided as to whether this right of subrogation should be retained at all, acknowledging the argument that it sometimes encouraged banks to continue to support non-viable businesses. The majority of the Committee were persuaded by the argument that the banks might refuse to make the necessary loans were they to be denied this preferential status and that this might lead to the closure of viable businesses which might otherwise have continued trading. It did suggest that any repayments by the insolvent during the four month period should be set against the money advanced to pay the wages rather than against earlier advances; this suggestion was not accepted.
