A company that is insolvent or facing insolvency can seek protection from its creditors in the Circuit Court or High Court, depending on the size of the company. During the protection period, creditors cannot seek to recover debts owed to them by the company or assets held by the company. This protection also extends to guarantors of a company’s liabilities, who cannot be pursued under their guarantees for so long as the company is under court protection.

In a recent case involving a company that owned and operated a nursing home (Melbourne Health Care Limited), the Examiner was unable to formulate proposals for a Scheme of Arrangement within the 100 days allowed to do so. At a late stage of the process it became apparent that the preferred investor could not satisfy its lender’s conditions precedent to draw down the financed element of the investment within the period of protection. As a result, the examiner applied to the High Court for directions.

A company that is insolvent or facing insolvency can seek protection from its creditors in the Circuit Court or High Court, depending on the size of the company. During the protection period, creditors cannot seek to recover debts owed to them by the company or assets held by the company. This protection also extends to guarantors of a company’s liabilities, who cannot be pursued under their guarantees for so long as the company is under court protection.

Introduction

A creditor who has a monetary judgment against a debtor (“the judgment debtor”) can obtain an order from the Court directing that an identified third-party (“the garnishee”) who owes money to the judgment debtor instead pay the money it owes to the judgment creditor, in full/ partial discharge of the judgment debt.