Legal Services

At Barrett Walker, a review involves listening to you and obtaining an understanding of your corporate history and objectives, an analysis of financial history, cash flow needs, setting priorities,  and identifying stakeholder priorities, in order to understand your situation. Workouts involve a relentless focus on costs and liquidity which as a consequence may result in new arrangements with stakeholders including creditors.

A standstill agreement is an agreement or series of agreements between a company and its major creditors where a creditor agrees not to take enforcement steps but rather quarantine existing debt for a limited period to enable the company to get back to profitability and in turn, become cash flow positive. Often this will involve the creditors continuing to supply the company – perhaps on a number 2 account that may have restricted trading terms.

This mechanism is a private arrangement between a company and some or all of its creditors by way of a deed where the creditors’ claims are compromised at less than 100 cents in the $. The benefit to the company is that it can reduce its overall debt load in the hope of becoming profitable and cash flow positive and for creditors, it may provide a certain sum of money from a third-party source that would not otherwise be available. Where there has been a long and profitable commercial arrangement between the parties this approach can re-enliven that relationship for a profitable trading relationship into the future.

A ‘safe harbour’ is another corporate restructuring strategy that entails company directors detailing a plan to steer the company away from liquidation. It may protect directors from insolvent trading claims. This form of restructuring is supported by company law legislation.

SMEs in financial difficulty will be able to seek protection from creditors using the Small Business Restructuring process. These laws are a break from the usual “creditor in possession” model that has been the hallmark of Australian insolvency law to a “debtor in possession” model which is akin to the US style of restructuring near insolvent or insolvent companies.

In short, the directors appoint a Small Business Restructuring Practitioner (SBRP), prepare a restructuring plan which is certified by the SBRP, and then that plan is put to creditors. If approved by creditors the company implements the plan. The SBRP then deals with the claims of creditors and pays out any dividend.

Barrett Walker advises on VAs.  This is a legislative mechanism which gives an insolvent or near insolvent company the opportunity to be independently assessed and to negotiate a plan acceptable to creditors in the hopes of achieving a future for the business.

A deed of company agreement is the outcome of a successful VA which avoids the often time consuming and the end of the game process of a formal liquidation.