Commonwealth Consolidated Acts

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Administration not to trigger liability of director or relative under guarantee of company's liability

             (1)  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.

             (2)  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.

             (3)  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.

             (4)  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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