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Safe harbour advice for directors

Posted Wednesday 16 April, 2020

By Justin Marschke & Ben Shaw

Safe harbour advice

Tucker & Cowen Solicitors are expert restructuring advisors.

We guide companies and boards through periods of financial distress, helping them to protect their businesses and themselves.

What is Safe Harbour?

Safe Harbour is a range of reforms brought about to encourage businesses in distress to restructure and survive, where that distress might otherwise have resulted in a formal insolvency appointment (administrators or liquidators).

The “Safe Harbour” is the protection the Corporations Act gives directors from liability for “insolvent trading” – personal liability for debts incurred by a company where there is reason to suspect a company might be insolvent.

The reforms give directors the flexibility to focus on developing and implementing a plan to return a viable business in distress to profitability.

Holding companies (for example, a parent company holding 50% or more shares in a subsidiary) can also attract insolvent trading liability, and also have access to Safe Harbour.

Tucker & Cowen Solicitors are experienced in advising boards and holding companies as to the steps required to ensure Safe Harbour protection is obtained, and maintained.

How can we help?

Tucker & Cowen Solicitors will work with your accountants and other professional advisors to advise you on your eligibility for Safe Harbour protection.

Safe Harbour advice We can advise individual directors, the board or holding companies:

  • whether the criteria for Safe Harbour set out in the Corporations Act 2001 (Cth) have been met
  • the steps required to obtain and maintain Safe Harbour protection

This advice will include some or all of the below.

Turnaround plan
  • Assist you (if necessary) to select a suitable professional to develop a course of action likely to lead to a better outcome for the company than administration or liquidation (“Turnaround Plan”)
  • Assist you (if necessary) to select an appropriately qualified advisor to assess the Turnaround Plan and work with that advisor to determine whether the plan will achieve a better outcome
  • Advise as to whether the Turnaround Plan is consistent with the directors’ duties under the Corporations Act
  • Work with your accountants and other professional advisors to monitor, and adjust as necessary, the Turnaround Plan to ensure Safe Harbour protection is maintained
Eligibility criteria
  • Work with your accountant to ascertain whether the company’s tax lodgements are up to date
  • Work with your accountant to ascertain whether the companies employee entitlements are up to date
  • Conduct a full review of the company’s employee entitlements (for example, assessing whether relevant industrial awards are being complied with)
Holding companies
  • Provide independent advice to a holding company as to whether each director has the benefit of Safe Harbour protection
  • Advise as to action required to establish the holding company has taken reasonable steps necessary to ensure each director has Safe Harbour protection
COVID-19
  • Advise as to whether particular debts are being incurred in the ordinary course of business so as to meet the new COVID-19 criteria

Contact us if you would like some help

If you could use a hand, we are here to help. We are prepared to continue to provide and maintain our consistently high level of professional service through the worst of this crisis. Just contact one of our Principals as usual by landline, mobile or email.

Richard Cowen Lawyer Brisbane Richard Cowen
Principal

+61 7 3210 3510

David Schwarz Lawyer Brisbane David Schwarz
Principal

+61 7 3210 3506

Justin Marschke Lawyer Brisbane Justin Marschke
Principal

+61 7 3210 3542

Note: This document contains only a general summary of the legal principles relevant to its subject matter and is not intended to be used or relied upon as legal advice. The application of the legal principles discussed may vary depending upon the particular circumstances. Tucker & Cowen Solicitors take no responsibility for any loss suffered as a result of a person relying on this paper.