Thousands of out-of-pocket Slater and Gordon shareholders' will split a $36.5 million settlement - just a fraction of the total value shed by the once high-flying law firm.
"The settlement was the best outcome from a terrible situation for shareholders, given the diabolical alternative which meant likely insolvency for Slater and Gordon," class action lawyers Maurice Blackburn said.
The Maurice Blackburn claim - one of three potential class actions against Slater and Gordon - had originally sought $250 million, arguing the ASX-listed firm misrepresented to the market, and failed to disclose in a timely way, a range of information about its financial performance and prospects in 2015 and 2016.
The in-principle agreement to settle will involve no admission of liability from Slater and Gordon, and "will also resolve any and all potential shareholder claims against the company and its directors and officers", Slater and Gordon said on Tuesday.
Insurance will cover $32.5 million of the settlement, and the company's new lenders, led by majority debt holder Anchorage Capital, will contribute another $4 million.
Slater and Gordon's current level of secured debt "significantly exceeds" the value of its assets and, as secured creditors, the new owners of Slater and Gordon's debt hold ultimate control of those assets, Maurice Blackburn said.
In light of Slater and Gordon's "unexpectedly low" insurance and the fact that Slater and Gordon's court costs come out of the same policy, the proposed settlement stops any further erosion of the available funds and returns as much of what remains as possible, Maurice Blackburn national head of class actions Andrew Watson said.
Slater and Gordon was subject of a second class action, and a third proposed class action, also related to its market disclosures.
The company's market value fell from $2.8 billion in April 2015 to a low of just $25 million in March 2017, after a disastrous $1.2 billion acquisition of Quindell's professional services division in the UK.
The settlement agreement remains subject to the completion of legal documentation and approval by the Federal Court.
Slater and Gordon said its proposed restructure is conditional on the settlement being approved.
Shares in Slater and Gordon gained 0.7 cents, or 9.5 per cent, to 8.1 cents.
