Lawyers Weekly, page-49

Gekko, you and I are going to disagree over this as i see this from a different perspective to you. I do however recognise your point. Allow me though to illustrate mine:
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Presently
If the CA gets up (irrespective of time frame) or ASIC returns an adverse finding, none of this affects the SFA position. It is already secured and sits in priority to all but statutory based priority claims - employee claims, SGC payments, other secured creditors. Any fines imposed by ASIC would be considered as unsecured claims. Same thing regarding any court awarded CA claim. The banks therefore would still be free to appoint, call in, demand changes, etc. That is, all the usual things that a secured creditor can already do. Shareholders however can do nothing about it. They would sit further back in the line behind both the CA award and any ASIC penalties. Remember, there is no rhyme or reason as to why any CA award would be limited just to the amount of any indemnity policy. That's just what the board and management are hoping for. Same thing, if ASIC were to report adversely, the corresponding risk would be on whether or not the D&O policy would then be voided. Not likely, but there is always a risk of this occurring. Again, however, none of this would matter to the banks who would still be standing at the head of the queue.

Future with DFE
Now, if a DFE occurs, then to the extent of that DFE, the banks will have given up their secured ranking and instead would now rank equally with all shareholders (remember, there are no preferred shareholders here). Run then the same scenario and what happens is that both the CA award and ASIC would stand higher up in the queue ahead of the former secured banks. In these circumstances, there would be nothing that the banks could do about it having been relegated to being shareholders. SGH would then be left with having to deal directly with CA award and with ASIC. Depending on just how the finances were then sitting, it could well be that SGH would address from its own resources, tap shareholders for extra resources, or go to the major shareholders (being essentially the banks) and saying in effect - "you've taken the DFE but now you need to kick in more".

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Perhaps none of this will occur, but regardless of their prospects, the banks will want to know that they will not be called on for anything more, if they were to convert under a DFE. That is, with these issues remaining outstanding, the banks, if they were to surrender /lose their status as secured lenders (at the head of the queue), they will want to know that they are not then going to be at risk of losing anything more, in the future.

But then again, what would I know. According to Success, I work as a partner in a competitor firm. Both wrong. I own several practices. I don't do PIL (once, a long time ago, >10 years, but it only ever caused grief, loss and complaint, and the cases, they dragged on and on and on).

I'm forensic in my approach having crafted this through years spent in accounting, practising economics, finance and investment, working as a lawyer, working in the privatisation environment, in multi-national roles and in listed companies, and of course owning my own practices. I don't do "movements in WIP" in order to artificially inflate revenue (or bring it forward from the future to the present in order to shore up the present). That's for partners in partnerships, not incorporated or listed practices. In practice terms, I have far more in common with dealing daily in business structuring, reconstruction, acquisition, exit and succession, family and business planning, due diligence, finance, commercial and corporate, governance and compliance, and liquidation and insolvency /business re-negotiations.

To me, any risk of SGH failing will (if it occurs) be widely felt throughout the profession. Already the integrity, trust and viability concerns are out there, with tightening bank conditions, reviews, reporting requirements and /or intrusions already happening, the regulators getting tougher, more intrusive and more nervous than they have ever been, the integrity of the profession being called into question (it's already happening out there, except that Slater + Gordon are still being worshiped like gods), and creditors (both trade and legal) generally tightening their trading conditions across the board.


So, yes, I will continue to use SGH's own based information as a source of analysis, assessment, interpretation or comment. And I will continue to back it up (unlike some). Today, you have backed up your argument and I have put my counter argument. The reality therefore is likely to fall somewhere in between our respective positions. Arguably, it's all about how, or to what extent, one assesses the risk equation, and from which perspective. Anyway, back now to my day job. Counsel is about to call.