THE CORPORATIONS LAW

CHAPTER 5 - EXTERNAL ADMINISTRATION

PART 5.3A - ADMINISTRATION OF A COMPANY'S AFFAIRS WITH A VIEW TO EXECUTING A DEED OF COMPANY ARRANGEMENT

Division 6 - Protection of company's property during administration

SECTION 440J   ADMINISTRATION NOT TO TRIGGER LIABILITY OF DIRECTOR OR RELATIVE UNDER GUARANTEE OF COMPANY'S LIABILITY  

440J(1)  [Guarantees unenforceable]  

During the administration of a company:

(a)  a guarantee of a liability of the company cannot be enforced, as against:

(i) a director of the company who is a natural person; or

(ii) a spouse, de facto spouse or relative of such a director; and

(b)  without limiting paragraph (a), a proceeding in relation to such a guarantee cannot be begun against such a director, spouse, de facto spouse or relative;

except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

440J(2)  [Sec 1323]  

While subsection (1) prevents a person ( ``the creditor'' ) from:

(a)  enforcing as against another person ( ``the guarantor'' ) a guarantee of a liability of a company; or

(b)  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:

(c)  a civil proceeding against the guarantor had begun under this Law; and

(d)  the creditor were the only person of a kind referred to in that section as an aggrieved person.

Note:

Under section 1323 the Court can make a range of orders to ensure that a person can meet the person's liabilities.

440J(3)  [Effect of sec 1323]  

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.

440J(4)  [Definitions]  

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.