Safe Harbour – A simplified approach to turning around your business while protecting directors from personal liability for insolvent trading.
In September 2017, the Federal Government introduced new laws to encourage directors to turn around distressed businesses and protect them throughout the process.
A proactive approach is the key to a successful turnaround and directors should seek professional advice early to ensure they are protected. In order to qualify for the protection of safe harbour, there are a number of criteria that must be met.
- Understanding the financial position of the Company – to qualify for safe harbour the company’s books and records are required to be maintained and provide an accurate representation of the Company’s financial position consistent with the size and nature of the company. Directors are required to have a clear understanding of the financial position of the Company.
- Employee and Statutory Obligations – All employee obligations, including superannuation, must be paid as and when they fall due. In addition, all tax reporting requirements must be adhered to, including lodgement of BAS, IAS and returns;
- Better Outcome – The course of action developed must be reasonably likely to result in a better outcome for the company when compared to the immediate appointment of an external administrator;
- Expert Advice – The Director must have obtained advice on the turnaround course of action from an appropriately qualified entity. While there is no definition of a qualified entity within the legislation, we believe the advisor should possess appropriate qualifications, expertise and demonstrable experience in turnaround and insolvency and be a professional member of a turnaround accrediting organisation such as ARITA or TMA.