Are you an Australian business owner who is drowning in debt and in need of assistance in dealing with numerous creditors threatening to file lawsuits against you or put your business into involuntary insolvency proceedings? An automatic stay may provide some relief.
The Corporations Law allows a business that has filed for corporate voluntary insolvency administration to enjoy a stay against existing or threatened lawsuits by creditors seeking to recover money from a corporate debtor or to enforce claims against the debtor’s property. This automatic stay provision is a part of the corporate voluntary administration proceedings portion of insolvency law. Therefore, to enjoy the protections of the stay, a business must affirmatively decide to pursue insolvency proceedings of its own accord rather than being forced into an involuntary liquidation proceeding by the business’s creditors.
The stay provision operates to bar creditors from filing or pursuing ongoing legal proceedings to collect on a debt or dispose of or attempt to seize the debtor’s property while a business is involved in ongoing insolvency proceedings. The stay is meant to give a debtor some breathing room from creditors to allow the debtor to put its finances back in order and emerge from voluntary insolvency administration on more solid financial footing.
There are some limited exceptions to the stay, such as when a single creditor holds a charge over all, or substantially all of your business’s debts, and that creditor objects to a restructuring of your business’s debts and instead chooses to file involuntary liquidation proceedings against your company. Other exceptions to the automatic stay include if the creditor is able to obtain written permission of either the administrator of the business or leave of the Court.
Nevertheless, the automatic stay is a very powerful tool that a corporate debtor can use during voluntary insolvency administration that can assist it in the process of getting its finances in order and emerging from insolvency as a stronger going concern.
If your business is facing existing lawsuits over unpaid debts or you have creditors threatening your business with lawsuits for unpaid debts or to seize your business’s property, then a consultation with PMF Legal's experienced insolvency lawyers will help you to determine the best course of action for your business.