Australian insolvency law has two features which are widely recognised as making it harder to save and restructure businesses in financial difficulty. Voluntary administration is a formal mechanism designed to assist in reconstruction. But if a company enters administration, the company's suppliers and counterparties can terminate contracts, or threaten to do so, prejudicing the prospect of saving the business. As a result, directors often want to restructure informally. But if they do, they face potential personal liability under a draconian insolvency trading regime, which was partly designed as a big stick to encourage directors to grasp the carrot of putting the company into voluntary administration. Click here for more.
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