CORPORATIONS ACT 2001

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 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 or relative;

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

440J(2)   [ Section 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 Act; 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 s 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.


 

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