Hello to everyone gathered in Melbourne for the Turnaround Management Association’s National Conference.
Unfortunately I can’t be there in person today, but I didn’t want to miss an opportunity speak to you all.
Of course, the turnaround profession plays an important role in preserving and revitalising corporate value.
What’s more, a strong turnaround culture — supported by an appropriate legislative framework — is a win-win for companies, employees and creditors. That is something the TMA understands well.
TMA’s members — across many professions — provide a raft of expertise for entities in financial distress.
Recent actions by the Turnbull Government cement the role played by skilled turnaround advisers.
We believe a robust but flexible corporate restructuring regime is a vital to the interests of the economy as a whole.
The fact is, even successful businesses can face financial challenges.
Overcoming challenges allows lessons to be learnt; improvements to be made.
That is the mindset we need, and the cultural shift we must encourage in our economy.
Every business faces its own challenges.
And we need laws that are flexible enough to be applied in a wide array of circumstances.
So let me — very briefly — update you on two of the Government’s actions in this area– safe harbour and ipso facto measures.
Safe harbour and ipso facto
We announced these measures as part of the National Science and Innovation Agenda.
I know the TMA has a keen interest in both of these measures.
They both encourage Australians to back themselves and take calculated risks.
The Government believes Australia’s current insolvent trading laws put too much focus on stigmatising and penalising failure.
In many cases laws push directors to prematurely enter a formal insolvency — even where the company may be viable in the longer term.
With that in mind, the Government’s proposed safe harbour will support directors to restructure the business and continue operating for the overall benefit of the company and its stakeholders.
This would – mind you – only apply where restructure is ‘reasonably likely’ to lead to a better outcome than immediately appointing an administrator or liquidator.
Obtaining advice from an ‘appropriately qualified entity’ is one factor that can inform whether an action is reasonably likely to improve outcomes.
The law allows flexibility in who can serve as a restructuring adviser — and, as such, TMA Australia and its members will no doubt play an important role under the new provision.
There are of course protections to prevent misuse of the safe harbour — it will only be available for diligent directors who are meeting their other obligations.
As you know, ipso facto clauses allow one party to terminate or modify the operation of a contract for specified events, including insolvency.
This is regardless of the businesses’ continued performance of its contract obligations.
Under the Government’s proposal such clauses will become unenforceable where they are triggered by a company’s financial position or entering a formal restructure.
This will protect businesses’ value, and increase the likelihood of a successful restructure, investment into or the sale of a business.
So, clearly, these are good and necessary reforms that I hope to see commence soon.
And I thank the TMA for its continued support for the reforms — your technical and practical expertise has been of great assistance.
So, to finish, let me thank you for the opportunity to update you today.
The Government has been working hard to forge a new approach to enterprise and corporate restructuring.
And, as I have said, a strong turnaround profession will be vital in the pursuit.
I do hope you, as an industry, embrace these reforms.
Enjoy the conference.