On 2 August 2021 the Australian Treasury published a consultation paper about helping companies restructure by improving Australian creditors' schemes of arrangement (Consultation Paper). On 10 September 2021, MinterEllison submitted a response to the Consultation Paper (MinterEllison Submissions).

The MinterEllison Submissions address the questions and issues raised in the Consultation Paper in detail, and other improvements to creditors' schemes that could be made.

View the full MinterEllison Submissions

Summary of MinterEllison Submissions

In MinterEllison's view, there are improvements to Australian creditors' schemes that should be considered by the Government. These include an interim automatic moratorium, priority for rescue or debtor in possession finance, cross-class cram downs and pre-pack schemes.

Many of these proposed changes would more closely align the position in Australia with that which prevails in equivalent jurisdictions, such as the United Kingdom and Singapore.

Australia has robust restructuring and insolvency laws. To continue attracting international capital, changes should always be considered so they keep pace with the developing expectations of what is emerging as a global restructuring market.

However, any specific change needs to be considered in a holistic context of the existing and somewhat unique aspects of Australian law, such as:

• the ipso facto stay and its exceptions;
• the unfair preference provisions and the directors' indemnity in favour of the Commissioner of Taxation in respect of voidable transactions; and
• liability for insolvent trading and access to the insolvent trading safe harbour protection for directors.

Consideration also needs to be given to the consequences for stakeholders of an attempted or failed restructure by way of creditors' scheme.

Next steps

All these matters warrant meaningful engagement between the Government and interested parties by way of further consultation with Treasury or through a Parliamentary inquiry prior to any draft legislation being released.

We will provide further updates on the next steps in the consultation process as and when additional details are made available.