Individual or Company Sued for Debts
A company or an individual may be sued for non-payment of debts. This may involve expensive litigation
If the cost of litigation is considered unaffordable and may bring the business to its knees, there are solutions.
In the case of an individual; he or she can arrange for the appointment of a Trustee under Part 10 of the Bankruptcy Act (which is not Bankruptcy, but an arrangement to avoid one)
In the case of a company, Directors can apply for an Administrator to be appointed. (which is not a Liquidation, but an arrangement to avoid one)
The result is that all claims will be frozen (including the claim the subject of the litigation) during the period of the appointment and assuming that the business is otherwise solvent or otherwise salvageable it can be allowed to trade on.
This will preclude a creditor from commencing litigation while an Administrator is appointed.
The dispute between the parties can be handled by the Trustee or the Administrator administratively, that is to say, a lot less expensively.
Formal stabilizing arrangements with all the creditors can be made at the same time.