Insolvency (Part 3): How to Legally Restructure a Business Through Pre-Pack Transactions

Velocity Legal

No items found.

Listen

Key Insights

Pre-pack transactions can rescue value, but process matters. A pre-pack transaction may help restructure a distressed business, but it is not risk-free. The episode focuses on how these transactions need to be approached lawfully, particularly where directors and advisers are trying to manage insolvency risk while preserving the value of the business.
Illegal phoenixing risk must be front of mind. The line between a lawful restructure and illegal phoenixing can become critical in distressed business situations. Directors and advisers need to understand how a proposed restructure may be viewed if the process is misused or creditor interests are not properly considered.
Creditor interests and director liability cannot be ignored. A restructure that focuses only on saving the business can create serious problems if creditor interests are not properly considered. The episode highlights why advisers need to think carefully about director exposure, regulatory consequences and the practical steps required to manage insolvency risk.

Listen

Pre-pack transactions can be a powerful restructuring tool, but they need to be handled carefully.

In the final instalment of this Explain That insolvency series, Andrew Henshaw is joined by Demian Walton to discuss pre-pack insolvency transactions, how they can be used in a lawful corporate restructure, and the risks that arise if the process is misused.

The episode explores the difference between a legitimate business rescue strategy and conduct that may attract legal or regulatory scrutiny, including concerns about illegal phoenixing, director liability and creditor interests.

The discussion covers:

what pre-pack insolvency transactions are;
how pre-pack transactions can be used to restructure a distressed business;
what makes a corporate restructure lawful;
how directors and advisers can steer clear of illegal phoenixing;
recent Corporations Act amendments relevant to pre-pack transactions;
the legal and regulatory risks if a restructure is misused;
director liability risks during business distress;
the importance of protecting creditor interests; and
practical guidance for advisers supporting clients through financial distress.

Following Part 1 on solvency risk and Part 2 on formal insolvency pathways, this episode looks at how distressed businesses may be restructured through pre-pack transactions where the process is handled lawfully and carefully.

A practical discussion for accountants, lawyers, advisers, directors and business owners dealing with insolvency risk, business restructuring or financial distress.

For advice on insolvency, business restructuring, director exposure, creditor interests or pre-pack transaction risk, contact Velocity Legal’s Insolvency team.

This podcast in no way constitutes legal advice. It is general in nature and is the opinion of the author only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this podcast.

Move your business forward with Explain That. Reduce your risk, and seize opportunity.

Join 'Explain That', where Australian professionals get monthly insights from Velocity Legal.

Thank you! You are now subscribed.

Oops! Something went wrong. Please fill in the required fields and try again.