| Focus: | Financial System Inquiry Final Report |
| Services: | Commercial, Financial services, Restructuring & insolvency |
| Industry Focus: | Financial services |
The Financial System Inquiry's final report released yesterday, recommends that government consult on possible amendments to the external administration regime to provide additional flexibility for businesses in financial difficulty.
The recommendation makes way for reform which could see Australia benefit from a restructuring 'safe harbour', during which time firms can undertake restructuring efforts in the context of greater creditor support (for example, ipso facto clauses would be suspended) and at a time when directors and their expert restructuring advisers are not exposed to risk of suit such as insolvent trading. The recommendation draws on the cornerstones of a strong business rescue culture, namely, creditors standing still to provide a stable platform, while the firm in financial difficulty leads a turnaround.
Interestingly, and representing a shift from the interim report, the final report acknowledges submissions that highlight that (while our laws are generally working quite well and a wholesale rewrite of the law is not necessary) elements of the US Chapter 11 reorganisation regime do merit consideration.
On 20 December 2013, the Financial System Inquiry was charged with the responsibility of examining how the financial system could be positioned to best meet Australia's evolving needs and support Australia's economic growth. The Financial System Inquiry released its interim report in June 2014, which included a request that submissions be made on the adequacy of Australia's external administration regime, including whether it causes otherwise viable businesses to fail.
DibbsBarker will provide a more detailed analysis of the final report's findings on external administration in the new year, including comment on the recommendations regarding resilience and capital levels, and how they might impact responses to businesses in financial difficulties.
A link to the final report, appendix 1 significant matters, funding (see recommendation 36) can be found at: http://fsi.gov.au/publications/final-report/appendix-1/#Funding
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