Changes to the Australian Insolvency regime continue to progress through the legislature as part of the Treasury Laws Amendment (2017 Enterprise Incentives No.2) Bill 2017. The amendments are intended to allow companies and directors protections whilst they informally restructure, rather than requiring potentially premature entry into formal insolvency proceedings. It is hoped this will increase the turn-around prospects of those companies.
The Bill introduces 'safe harbour' provisions to reassure and empower company directors to restructure providing their course of action is reasonably likely to lead to a better outcome for the company and creditors. It also prevents 'ipso facto' clauses from being enforced whilst a company is restructuring or in administration. These clauses terminate a contract on a specific event, often including restructuring, and the loss of key contracts is a considerable factor in companies being unsuccessful in being turned around.