In this article, Scott Atkins and Dr Kai Luck consider how the extraordinary government fiscal and stimulus measures introduced in response to COVID-19 may provide an incentive for so-called zombie companies—those that were facing endemic operational and liquidity issues pre-crisis and that have no realistic prospect of successful trade in the long-term—to continue on for the next 6 to 12 months, preventing the recycling of important capital needed to reinvest in the innovative new business ventures that will drive economic recovery and eventual growth.
This concern is also manifesting in other countries across the world—indeed, in the US, the expectation is that as soon as the CARES Act relief ends, US Bankruptcy Courts will be inundated with new insolvency filings, with the current fiscal and stimulus measures simply holding up the capital turnover process.
Visit nortonrosefulbright.com to read the full article, The new pandemic: Zombie companies will eat Australia’s COVID-19 economic recovery.