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Safe Harbour
Introduced in 2017, the intention of safe harbour is to provide company directors with protection from personal liability for insolvent trading if the company and its directors are genuinely attempting to restructure.
Safe harbour is designed to encourage directors to seek restructuring advice early and thereby increase the chances of saving financially distressed companies, rather than closing them down prematurely to avoid personal liability.
When companies enter safe harbour, they appoint a liquidator as a safe harbour expert who works with the directors to formulate a plan for the business’ restructure that ultimately saves the business and provides a better return to creditors than in a liquidation. When the restructuring plan is implemented, directors will have protection from insolvent trading laws provided the directors adhere to the restructuring plan.
It is also crucial that the safe harbour process is sufficiently documented, as this is key to directors showing they had the right to personal liability protection. That is why it is crucial to engage an expert in the field, like MaC Insolvency.
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To be eligible for safe harbour, a director must ensure that the company has:
- Complied with its obligations to maintain adequate books and records.
- Paid employee entitlements when due (including superannuation).
- Kept up to date with its tax lodgement obligations.
If you would like to learn more or wish to discuss whether you may be eligible for safe harbour protection, please contact the team at MaC Insolvency for a free consultation.