Does anyone know the answer to this? If a company has a judgement order made against it (ie it owes a sum of money) in either arbitration or the courts, how is that order made enforceable? What is to stop that company going into liquidation or going bankrupt so that it doesn't have to pay up? Is there something that can be done during proceedings to freeze the company's assets so that it doesn't start preparing things to shut up shop?
Judgement order
- Thread starter property_girl
- Start date
Starting enforcement proceedings is the short answer. Bankruptcy and liquidation - there is not much an individual creditor can generally do about that - but it also might not be a bad thing either.
Anyway there's no one size fits all answer - it depends on the amounts, the company, the situation and about a 100 other variables I'm afraid.
Anyway there's no one size fits all answer - it depends on the amounts, the company, the situation and about a 100 other variables I'm afraid.
It is up to the judgment creditor to enforce it. This should be easily done with a statutory demand. Issue a statutory demand and they have 3 choices:
1. pay
2. try to set it aside
3. do nothing.
They can only set it aside if it is drafted incorrectly.
If they do nothing then they are presumed to be insolvent. You can then go back to and get an Administrator appointed over the company. Then all assets will be frozen. You may also be able to attack a director if they are trading while insolvent.
Other than that if the company has no assets then you cannot get anything. If a company does have assets you may be able to get an order to seize those assets.
What you should have done is got an order for security of costs - a sum of money to be placed in court so that your legal fees are covered if they are wound up and have no assets.
Thanks guys. Yes, my lawyer is doing what you suggest Terry and ensuring that he will get his costs. My concern is that, once this person sees that things are going pear-shaped for him during proceedings, he moves all his assets or shuts up his business before an order is even handed down. Then the judgement order is useless and I am unable to recover the money owing. Is that right?
How much are we talking?
But will you see anything? Or is your lawyer going to take everything in costs?
Transfers to defeat creditors could be attacked under 3 different acts, at least. There is a lot under the corporations act regarding this. see ss 468A, 588FA amd surrounding sections./
Of course the Directors must ask the question - Is the company capable of paying its debts ?? The judgement order may be grounds to seek liquidation. If not the Directors may be personally liable for continued debts by insolvent trading.
Seeking liqn isn't that simple it must be said. Liquidators don't work for free. Normally someone must meet their fee before they will act. So to asset protect Directors they may need to meet those fees. If co has assets they may take on engagement and strip what they can and pay themselves first. Liquidators may even sell business assets etc to the former Dirs for a pittance. Asa creditor you will be invited to meetings. Liquidators must consider asset stripped before liquidation. Perhaps you fund a friendly liquidator ?? That can be overruled too.
Acting before a decision to liquidate is a individual issue and needs legal advice if you use that route. No point seeking orders to find it goes pear shaped. Waste of $$. What assets are in the entity ?? That's the tough one.
Seeking liqn isn't that simple it must be said. Liquidators don't work for free. Normally someone must meet their fee before they will act. So to asset protect Directors they may need to meet those fees. If co has assets they may take on engagement and strip what they can and pay themselves first. Liquidators may even sell business assets etc to the former Dirs for a pittance. Asa creditor you will be invited to meetings. Liquidators must consider asset stripped before liquidation. Perhaps you fund a friendly liquidator ?? That can be overruled too.
Acting before a decision to liquidate is a individual issue and needs legal advice if you use that route. No point seeking orders to find it goes pear shaped. Waste of $$. What assets are in the entity ?? That's the tough one.
I suppose my question is this: can the (sole) director of a small company (say under $1m)--in the middle of court proceedings and realising he may soon become a debtor--syphon money from the company resulting in the company having no assets with which to pay its debt? What is to stop him doing that?
I understand that the company can be issued a statutory demand but have no assets. If they continue to practise, they are insolvent. I can then seek liquidation. Is a director at any time personally responsible for the debts of his company?
It seems like a lot of time, effort and money chasing something that I have little likelihood of getting.
I understand that the company can be issued a statutory demand but have no assets. If they continue to practise, they are insolvent. I can then seek liquidation. Is a director at any time personally responsible for the debts of his company?
It seems like a lot of time, effort and money chasing something that I have little likelihood of getting.
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yes. nothing really to stop.
There are several ways a director can be liable for the debts of the company - but generally they are not.
Thank you. It's as I thought.
