Safe Harbour Legislation and Navigating the Corporate Turnaround Process

Having recently had the privilege of attending Shaw Gidley’s seminar on the new Safe Harbour legislation, here’s a few of the key points that PBL got out of what was an excellent presentation.

On 18 September 2017 a major reform to Australia’s insolvency laws was passed through Parliament and given Royal Assent, meaning that Australia finally offers protection for directors from insolvent trading where appropriate actions are taken.

The recent changes now provide a carve out mechanism from the current insolvent trading regime, allowing directors to continue to operate an insolvent (or suspected insolvent) company, without risk of being personally held liable.

To put it simply, you can now avoid being penalized personally for suspected insolvent trading provided you meet the criteria of the turnaround process.

There are several eligibility criteria that must be met in order to garner this protection:

  1. You must conduct a review of the company’s solvency, and the director must seek advice as required without also incurring new debts. This step must be clearly documented;
  1. Secondly, you must engage ‘appropriately qualified entities’, assess your eligibility and consider standstill agreements, and again, you must document your attempts at engaging qualified entities for advice;
  1. Implement a business strategy that is focused on stabilisation and cash management, as well as formulating a turnaround plan for which the advisors approve, and think will provide a better outcome;
  1. Conduct regular meetings to monitor the plans progress as well as continue to maintain financial records and compliance with all director’s duties and tax reporting/employee entitlements; and
  1. Finally, assess whether the company is solvent or whether formal insolvency appointment is required, and understand that Safe Harbour protection ceases when the turnaround plan stops being likely to lead to a better outcome.

Remember, the key takeaway is to note that if it is not documented, then it did not happen. Each of these stages must be clearly documented in order to ensure that the criteria are met. For further information on the Safe Harbour protections and whether or not your business is in need of a turnaround plan, please contact Shaw Gidley Insolvency Reconstruction.

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Authored by

Raea Khan

Director Lawyer

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Raea Khan Circle
Director Lawyer
Raea Khan

Raea is Managing Director and Principal Lawyer for PBl Law Group. Raea assists clients with major projects, property developments, construction and strata law.

He has worked in Western Australia and Queensland assisting with expansion projects in the energy and resource sector and now predominately advises clients in Strata and Community Association matters.

He is a member of the Australian College of Strata Lawyers where majority of his work is advising developers and owners corporations with dispute related minor and major defects, strata governance and common property litigation. He is proficient at leading negotiations and meetings.

Raea has a particular interest in the commercial aspect of any dispute and always tries to weigh up the risk, reward and benefit of legal proceedings at each different stage.

Raea enjoys all forms of competitive sport, including Crossfit and actively participates in Triathlons, representing Australia as an age group athlete. He was a member of Red Head Surf Lifesaving club.

  • Strata Law
  • Construction & Major Projects
  • Commercial and Business Law
  • Planning & Environment Law