The ‘Safe Harbour’ provisions were enacted in September 2017 and provide directors with an exception from a personal insolvent trading liability where they are developing courses of action which are reasonably likely to lead to a better outcome for the company than the immediate appointment of an external administrator.
The new provisions are designed to foster a more entrepreneurial approach from directors in an effort to overcome the Corporations Act insolvent trading provisions.
In determining whether a course of action is reasonably likely to achieve a better outcome, the provisions make reference to:
- A director being properly informed of the company’s financial position
- A director taking appropriate steps to prevent any misconduct by officers or employees of the company that could adversely affect the company’s ability to pay all of its debts
- Maintenance of appropriate financial records appropriate to the size and nature of the company
- Receipt of advice from an appropriately qualified entity (for example, an insolvency practitioner) who was given sufficient information to give appropriate advice
- Development or implementation of a plan for restructuring the company to improve its financial position
Certain matters must be done in order to rely in the Safe Harbour provisions, including:
- Payment of all employee entitlements as and when they fall due
- Compliance with all lodgement obligations required by taxation laws
At HLB Mann Judd Insolvency WA, we are equipped to take on a Safe Harbour engagement for you or your client.
If you require further information regarding Safe Harbour, please make contact with our office.