Restructuring not to trigger liability of director or relative under guarantee of company’s liability
453W Restructuring not to trigger liability of director or relative under guarantee of company’s liability
During the restructuring of a company:
a guarantee of a liability of the company cannot be enforced, as against:
a director of the company who is a natural person; or
a spouse or relative of such a director; and
without limiting paragraph (a), a proceeding in relation to such a guarantee cannot be begun against such a director, spouse or relative;
except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
While subsection (1) prevents a person (the creditor) from:
enforcing as against another person (the guarantor) a guarantee of a liability of a company; or
beginning a proceeding against another person (the guarantor) in relation to such a guarantee;
section 1323 applies in relation to the creditor and the guarantor as if:
a civil proceeding against the guarantor had begun under this Act; and
the creditor were the only person of a kind referred to in that section as an aggrieved person.
Under section 1323, the Court can make a range of orders to ensure that a person can meet the person’s liabilities.
The effect that section 1323 has because of a particular application of subsection (2) is additional to, and does not prejudice, the effect the section otherwise has.
In this section:
guarantee, in relation to a liability of a company, includes a relevant agreement (as defined in section 9) because of which a person other than the company has incurred, or may incur, whether jointly with the company or otherwise, a liability in respect of the liability of the company.
liability means a debt, liability or other obligation.
This Act’s bill:Explanatory memorandumSecond reading speech
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