Voluntary Arrangements and the "Clean Slate" Mess

Debtor companies in Australia may execute voluntary arrangements with their creditors when they are in, or near, insolvency. This regime is based on an English forerunner. At present, all unsecured creditors may have their rights against the debtor company extinguished by such voluntary arrangements leaving the company with a "clean slate". However, the article points to three distinct instances of prima facie unfairness that may flow from the involvement of certain creditors in corporate voluntary arrangements, and asks why the English and Australian regimes are so wide-reaching. Neither the reports that spawned them, nor the justifications for the broad scope of other insolvency processes (namely, liquidation and bankruptcy), provide a satisfactory answer. Accordingly, it is contended that this aspect of corporate voluntary arrangements is under-theorised, and that presently the net of these regimes may be cast too wide.