• Shadow Directors: Lenders and Mortgagees Cautioned

    Shadow Directors – lenders and mortgagees cautioned about the pitfalls of working too closely with defaulting borrowers to achieve a return of capital and interest.

    Given the post GFC economic climate, many creditors are pursuing recovery procedures outside the standard legal process after an event of default has arisen. So called “workouts” are one example, where creditors exercise considerable control over the debtor company in default. This gives rise to the possibility of the creditors involved in a “workout” or restructure of a defaulting company being held liable if the workout fails and the company is liquidated. The case of Buzzle Operations Pty Ltd (in liquidation) v Apple Computer Australia Pty Ltd [2011] NSWCA 109 dealt with this issue.

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