In search of a Corporate Rescue Culture: A review of the Australian Part 5.3A Legislation

In the context of the financial turmoil following the recent global financial crisis and the threat of a global double dip recession at our doorstep, the importance of a strong rescue framework in Australia has never been more relevant. The current dynamic economic environment has inevitably focused the spotlight on the current Part 5.3A Voluntary Administration legislation as the mechanism responsible for facilitating the survival and restructure of distressed Australian companies. With the rapid decline in the use of Voluntary Administration since the introduction of the Corporations Amendment (Insolvency) Act 2007 (Cth), this relegation of the corporate rehabilitation framework poses significant challenges to the advancement of a corporate ‘rescue-based’ culture in Australia. With only one in four distressed companies using the Voluntary Administration procedure in 2009, the diminishing prevalence and use of the Voluntary Administration procedure against the backdrop of increasing Australian insolvency trends has led many to advocate that the current Australian rescue regime is not sufficiently ‘rescue focused’. These criticisms surround the inability of the existing Voluntary Administration framework to facilitate the restructuring of companies as a matter of course. A review of literature in the restructuring field indicates a substantial body of information that identifies the following fundamental barriers to successful restructuring in Australia.