Legal innovation and the rescue of corporate groups: The Arrium voluntary administration

The rescue and reorganisation of large corporate groups has become a significant challenge for national insolvency law systems that have largely been focused upon the rescue or restructuring of single companies. This has seen international efforts to rework established legal mechanisms to cope with problems created by corporate groups with a large number of subsidiary companies, especially in the context of cross-border insolvency. Innovation has been evident in regard to internationally active corporate groups after the failure of such group entities during the global financial crisis. Innovation has also occurred in regard to corporate groups whose subsidiaries are primarily located within one country. This article discusses one such rescue involving Arrium, a strategically important Australian steel company, with many Australian subsidiaries in its group and with stakeholders at the national, state and local government levels. The Arrium Group was placed into voluntary administration and eventually sold to the British company GFG Alliance. Using identical deeds of company arrangement for the 94 companies in the group, the Arrium administrators were able to hold parallel meetings of each company to approve the proposed DOCAs. Many companies in this group had provided cross guarantees and had shared directors. With the approval of creditors, the use of holding DOCAs (in the forms of transaction DOCAs and a distribution DOCA) avoided the need to seek court approval to amend the convening period under s 439A of the Corporations Act 2001 (Cth) and thereby gave the administrators more time to make the group more attractive for its eventual sale. The use of the holding DOCA mechanism provided many advantages that facilitated the eventual sale of this politically sensitive and strategically important corporate group. The Arrium voluntary administration offers some valuable lessons regarding the restructuring of large corporate groups with multiple subsidiaries.