In an opinion article published in today’s edition of the Australian Financial Review, lead restructuring partner Leon Zwier argues the case for serious reform of Australia’s restructuring regime in the face of “Cyclone Trump” induced economic volatility. As one of the country’s pre-eminent lawyers in the field, Leon reasons that our current restructuring laws too often favour putting viable businesses under - while reforms in 2017 took us part of the way, he says the time is right to adjust the regime to be “more rehabilitative than punitive, more restorative than value destructive”.
In cases of dishonesty or incompetence, it is appropriate that liquidators, receivers, or administrators take control of a business, he says, but not otherwise.
“Schemes of arrangement are the alternative to insolvency administrations. They are generally a solvent regime that facilitates a restructure while the board and management remain in control or continuous possession of the company. They are also flexible, allowing companies to deliver survival-focused outcomes such as debt-for-equity swaps, balance sheet restructures and debt restructuring.
“Anything that can be done by contract can be done by scheme.”
Despite the advantages offered by schemes, Leon explains why the salvation is underused, and outlines targeted law reform to prepare Australia better for the “choppy waters ahead”.
“Restructuring law is capitalism’s way of assessing how, and in what shape, unwell, injured or overleveraged companies might get back in the race for the benefit of all its stakeholders. Australia’s legal framework can be amended to help more of them not only do it but do it without relinquishing possession to outsiders.”
