The new plan, revealed on Thursday night, will involve hedge funds, led by Anchorage Capital swapping the debt they are owed by Slater and Gordon into a 95 per cent ownership of the company. That process is expected to be finalised in mid-November.

The consortium will also provide an additional $50 million of funding and get sole ownership of Slater and Gordon's troubled UK business.

The deal also involves the embattled law firm agreeing to settle a class action with aggrieved shareholders.

The move came as Slater and Gordon unveiled a massive full year loss of $547 million, including a $350 million impairment in the value of its disastrous UK business, restructuring costs and continued poor performance in its key personal injuries business.

"Today is a significant day for the firm. The announcements mark a turning point and set in motion a strong plan that will deliver a new board, a focused business strategy and a very strong capital structure," said Slate & Gordon's new chief executive Hayden Stephens.

This shift of control to the Anchorage Capital consortium will trigger a board spill with chairman John Skippen and Andrew Grech, who was previously the chief executive, both departing as directors. Chief financial officer Bryce Houghton will also leave.

The new board will be led by James MacKenzie, a former director of rival class action giant Maurice Blackburn, who has been helping Anchorage's search for a new board.

Mr MacKenzie is a well-known company director who also has strong roots in the labour movement and he is known to have a strong affinity with the clients the law firm represents.

These connections will be needed following a recent exodus of senior talent which has fuelled concerns the firm could lose key union clients.

The board refresh is part of a plan the new owners hope will reset the company to restore its reputation after a destructive debt-fuelled acquisition binge culminating in the disastrous $1.3 billion acquisition of Quindell's professional services division in Britain in early 2015.

Before the Quindell acquisition, Slater and Gordon's shares hit a high of $8 a share, valuing the business at $2.8 billion, compared with $28 million today.

It is expected the company will look to further cost-cutting as it focuses the business on building its class action pipeline.

The results show the size of that task as the financial performance of the flagship Australian business continued to deteriorate. It posted a $67 million loss in the last financial year as fees continued to decline and it suffered an adverse movement of work in progress and payments to former owners. Its UK business lost $98.5 million, compared with a previous loss of $64.5 million.

The results show the company continues to bleed cash, suffering a negative net operating cashflow of $39 million for the year to June 30.

The consortium of lenders has agreed to inject an additional $50 million into an existing $40 million working capital facility set up in May. Of the $50 million, $25 million will be directed to the Australian business and $25 million to the UK business.

Slater and Gordon told the market back in February it had to rely on "the support of its lenders to continue as a going concern".

Since then a class action was lobbed by its shareholders and an investigation commenced by the corporate regulator into accounting irregularities.

The regulator found no wrongdoing and the class action is now in the final stages of settlement and the company hopes to finalise its debt for equity swap in mid-November.

The swap will dilute the ownership of existing shareholders of the company to about 5 per cent.

But Slater and Gordon will remain a listed entity, with Anchorage committing to remain a shareholder for at least three years.

The restructure will exclude the UK business, which will be spun off into a separate company wholly owned by the senior lenders.

Sources said the arrangement would leave Slater and Gordon with an appropriate capital structure and strong balance sheet to enable it to begin the turn-around process.

It will also develop a strategy to grow its personal injury practices in Queensland, NSW and Victoria, improve its relationships with the union movement, better leverage third party relationships to build referral networks and invest in internal systems and processes

To stem the flurry of departures of high profile lawyers, a new management incentive plan will be introduced, facilitating the equivalent of 10 per cent of the company's fully diluted share capital to be available over time.