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Assessing Solvency For Financially Distressed Companies, James Routledge, Ray Mcnamara
Assessing Solvency For Financially Distressed Companies, James Routledge, Ray Mcnamara
James Routledge
This article reviews past and recent authorities that have addressed the definition and application of the solvency test in s 95A of the Corporations Act 2001 (Cth). The discussion highlights that, when faced with financial distress, company directors need to carefully consider the solvency implications of their decisions. To generate cash to pay debts as they become due, directors may attempt to realise company assets, obtain additional secured or unsecured debt finance or reorganise the timing of payments with creditors. The discussion of relevant cases shows that the solvency implications associated with realisation of assets, use of assets as security …
The Effect Of Changing Firm Characteristics On Capacity To Restructure, James Routledge, David Gadenne
The Effect Of Changing Firm Characteristics On Capacity To Restructure, James Routledge, David Gadenne
James Routledge
This paper examines whether changes in financial characteristics over the time prior to a firm entering insolvency administration will affect its reorganisation prospects. Prior research shows that an insolvent firm’s ability to rectify the mismatch between currently available liquid assets and current financial obligations is critical to the reorganisation outcome. Accordingly, a multivariate analysis of financial characteristics which reflect the firm’s ability to address this mismatch is presented. The results show that changes in operating performance and liquidity prior to a firm entering insolvency administration have a bearing on administration outcomes.