Restructuring not to trigger liability of director or relative under guarantee of company’s liability
(1) During the restructuring 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.
Sourced from the Federal Register of Legislation at 17 May 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au. Verify the current text against the official source before relying on it.
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