Key Points:
It's unclear that safe harbours by themselves will provide genuine opportunities for restructuring distressed businesses.
The Productivity Commission's upcoming report on corporate insolvency will address two burning issues: ipso facto clauses and how to encourage directors to save financially-stressed companies.
Ipso facto clauses allow creditors to break a contract if the other side suffers an insolvency event. If that results in a company being starved of supplies or customers, the chances of successfully restructuring its debts are greatly reduced.
There is much support for abolishing or restricting the use of ipso facto clauses. Conversely, there are two reasons why such a change might not be enacted or, if enacted, might be ineffective: the principle that the law should be slow to interfere with freely-negotiated contracts, and the possibility that clever drafters might write contracts that achieve the same effect as ipso facto clauses,
