Insolvency Reforms in Australia Would Benefit From US-Style Bankruptcy Options

Australian insolvency and restructuring experts say that reforms announced on Monday designed to help struggling companies at risk of collapse would benefit from adopting US-style bankruptcy options, the Australian Financial Review reported. Treasurer Josh Frydenberg announced steps to overhaul insolvency laws, including a strengthening of schemes of arrangement to better support the so-called debtor-in-possession model for large companies. “As Australia’s economy rebuilds, it’s important that as many businesses as possible have the opportunity to turn around, restructure and survive,” Mr Frydenberg said. The proposed reforms would introduce a moratorium on creditor action, which is currently only available through a court order, while schemes are being negotiated. “This would protect a company from claims being brought while it’s pursuing a scheme,” Ashurst insolvency partner Alinta Kemeny said. Ms Kemeny said the current schemes of arrangement framework already allowed for a debtor-in-possession model, but a costly court-driven process meant it was primarily used only by large corporations. The Ashurst partner, who specialises in such schemes, said taking elements from the US debtor-in-possession Chapter 11 model would be a way to make the process more attractive and usable. Read more.