Latest trends in insolvency

Written on the 13 March 2014

Latest trends in insolvency

Q and A: Mark Schneider

New Henry Davis York partner discusses the latest trends in insolvency law.

RESTRUCTURING and insolvency specialist Mark Schneider was appointed as Henry Davis York's first home-grown Queensland partner in the Brisbane office in January this year.

Schneider joins the partnership as part of the firm’s growing restructuring and insolvency practice in the River City; which came online after HDY set a vision to be a tier 1 law firm practising nationally in its two sectors of focus: financial services and government.

HDY's clients include the big four Australian banks, global investment banks, insolvency and accounting firms, fund managers, superannuation funds, and regulatory bodies.

Schneider talks to Brisbane Legal about the latest trends from his area of practice.

What is your view on general business conditions?

The business environment is still fairly flat: every week there are reports of different parts of the economy picking up, while others are suffering more. From my perspective in the Queensland insolvency market, we are seeing the retail and agribusiness sectors face significant pressure and we will probably see that continue in Queensland for the next 12-24 months. Elsewhere, the manufacturing industry, particularly, automotive manufacturing, will face increasing pressure with the withdrawal of major manufacturers in coming years.

Are you anticipating legislative changes in your area?

We are still in the relatively early days of a new Commonwealth Government, so we are monitoring what changes are likely to be implemented. The insolvency profession is already quite highly regulated and it is an area that attracts a lot of attention in times of economic downturn.

Last year the government circulated a draft Insolvency Law Reform Bill which aims to modernise and harmonise regulation within the industry. Issues addressed by the draft bill include the standardisation of registration requirements and processes for insolvency practitioners across both corporate and individual insolvency regimes; a logical step to streamline administrative processes.
We are also eagerly watching the Financial Services Inquiry headed by David Murray. The terms of reference are very broad, but the inquiry will no doubt touch on regulation, particularly from an international competitiveness viewpoint, and customer fees, which is a contentious issue that has very much been in the media and the courts recently. Another issue I expect we will hear more about given some of the more prominent recent corporate collapses is the regulation of the financial planning industry.

What mistakes do you see businesses making?

Not getting good advice early is one common mistake and I am not just talking about legal and accounting advice; a common issue that arises if you look at the larger corporate collapses through recent history is that failed companies had inadequate audit functions involved. For example, in some instances a business will outgrow its original advisors who cannot cope with the scale of the audit task or in other cases businesses fail to detect complicated but objectionable business practices.

Where do you see your market heading?

It will really depend on whether the general and international economic conditions start to improve. If things keep tracking how they are at the moment, there will be more opportunity for insolvency related work in the retail space, as the traditional bricks and mortar stores are constantly under attack from online offerings and we are also starting to see the more established online retailers coming under attack from other online offerings.

For us in Queensland, unfortunately we are likely to continue to see insolvencies grow in the rural and agribusiness sector, which is dependent not just on economic conditions, but also the weather conditions, which they have no control over.

In the states with a  larger manufacturing presence, particularly those with a heavy concentration of auto manufacturers given the recent developments in that industry, there will be a lot of opportunity for insolvency advice for those affected manufacturers and their suppliers who may find themselves needing to re-evaluate their businesses.

What kind of work do you do once you are called in?

It will depend on who my client is in a given matter as we act for banks and financiers, secured and unsecured creditors, insolvency practitioners, debtors and sometimes directors.

Typically, I am instructed to advice banks and financiers about their security position and realisation or enforcement strategy. This often extends to advising on formal insolvency appointments and I also advise the insolvency practitioner - a liquidator, administrator, receiver or investigative accountant on any legal issue that may arise in the course of their appointment. For debtors or directors, our role will be to provide advice about their duties and obligations and strategies for satisfying those obligations, which may involve restructuring, refinancing, business or asset sales or formal insolvency appointments. 

We also advise on dispute resolution and litigation if issues cannot be resolved by negotiation.

How did you get into law and decide upon restructuring and insolvency as your specialty?

I did well in a debate in primary school and that piqued my interest in the law as a profession - I went through the rest of school and university with a focus on becoming a commercial lawyer. After university I did a year as a Judge's Associate and that reaffirmed my interest in litigation and from there I joined the corporate insolvency team in a large firm's litigation department. 

I spent three years in London at the height of the GFC and it was an exciting time to be an insolvency lawyer, not least because your biggest client might be the next to go under. It was an exciting time working on the collapse of Icelandic banks where well-known multi-millionaires were frantically trying to get their money back and advising rich English football club owners whose clubs were teetering on the precipice of administration.

Insolvency is diverse and challenging - you are constantly working with different businesses and industries; you are always learning about different commercial business issues and there is a lot of law to get across quite quickly in emotionally charged situations. So the pressure keeps me on my toes - and there are frequent negotiations and court appearances where those debating skills come in handy.

 

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