Slater and Gordon boss Andrew Grech has quit and the board of the beseiged law firm will be cleaned out under a debt restructuring deal that passes almost full ownership of the company to its lenders.
Lenders holding three quarters of Slater and Gordon's debt, led by private equity firm Anchorage Capital, will own 95 per cent of the company's shares under the recapitalisation deal announced on Thursday.
After months of negotiations with lenders, the current board has unanimously supported the deal that will oust them, and have pledged to vote all shares they control in support of the new arrangement.
The recapitalisation deal is contingent on shareholder approval and the settlement of a class action brought by rival law firm, Maurice Blackburn, representing thousands of shareholders.
Also among conditions for approval are an independent expert finding the law firm will remain solvent and that the deal is either "fair and reasonable" or "not fair but reasonable" to shareholders.
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"The recapitalisation is intended to provide the Company with a sustainable level of senior secured debt and a stable platform for its future operations in both Australia and the UK," the company said in a statement to the Australian Securities Exchange.
The lenders will set up loan facilities worth $35 million, with some existing debt placed in a $30 million facility and a new, $5 million facility established.
Existing shareholders will control just five per cent of the company after the recapitalisation, which will later be diluted to four per cent by the issue of new shares to lenders in the $5 million facility.
Managing director Mr Grech has quit his role immediately but will remain on the board, with all directors to resign as new board members are appointed.
Chief executive Hayden Stephens will continue to lead the company in Australia, while Ken Fowlie will remain in his position as UK CEO.
Slater and Gordon said it would continue mediation proceedings for the Maurice Blackburn-led class action and provide an update in coming days.
Maurice Blackburn brought the class action in October, 2016, representing thousands of Slater and Gordon shareholders making claims over disclosure of financial information between March 2015 and February 2016.
ACA Lawyers is also investigating a potential class action, while Slater and Gordon is facing separate legal action brought against it by organisation Babscay, which is acting on behalf of shareholders who acquired an interest in Slater and Gordon shares between August 24, 2012, and November 19, 2015.
Slater and Gordon's market value has fallen from $2.8 billion in April 2015, to less than $31 million after a disastrous $1.2 billion acquisition of Quindell's professional services division in the UK.
Its shares, which hit a high of $7.08 on March 31, 2015, were today trading at 8.9 cents at 1540 AEST, a drop of almost 99 per cent.
