Debtor-in-possession vs creditor-in-possession insolvency models

DOES THE REFORM STRIKE THE RIGHT BALANCE?

Australia has traditionally had what is called a 'creditor-in-possession' style insolvency model. That's because all our insolvency regimes take control of the company away from the owners and give that control to the creditors through appointing an independent external administrator. The thinking being that we shouldn't leave company control in the hands of the very parties that got the company into its financial problems.

The proposed small business restructure moves away from that to a 'debtor-in-possession' style of arrangement. You will commonly hear references to Chapter 11 bankruptcy in the United States of America as a popular debtor-in-possession model. The United States is not the only jurisdiction with a debtor-in-possession style model. Around the world, insolvency laws are evolving to incorporate more forgiving debt relief and restructure arrangements. In 2017, Singapore introduced new restructuring laws,