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Insights from Mining Services for Chief Restructuring Officers, (TMA Perth Event, 15 October)

At a TMA event in Perth on 15 October, Mark Mentha and Scott Langdon from 333 Group reflected on their experience gained from helping mining service companies, and their insights into the challenges facing CROs in the mining services sector.

Among the challenges that Mr Mentha and Mr Langdon faced was the significant imbalance in a typical engineering contract between the principal, the contractor and the subcontractors, which can lead to the subcontractors being unable to negotiate commercial terms effectively, and the subcontractors having limited recourse directly to the principal. The contract terms effectively transfer risk to parties, who do not have the capacity to accept that risk.

Mr Langdon noted that when the subcontractor is distressed, the risk taken by Directors and Officers, including CROs, could reduce the subcontractor’s ability to obtain the best advice, compromising the turnaround initiative.

Mr Mentha said that the legislative framework (insolvent trading and business judgement rules) create tension between acting in the best interests of the company, or the company’s stakeholders, and insolvent trading

Mr Mentha and Mr Langdon referred to the legal framework in other jurisdictions, noting that legislative change would be needed in Australia to create a safe environment for directors, officers and advisers to turnaround distressed businesses.

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