In September 2017 the Treasury Laws Amendment Bill was passed to provide an exception to the insolvent trading regime. The Bill provides directors scope to develop a strategy that is reasonably likely to provide a better outcome for the company than appointing an administrator or liquidator. The ‘Safe Harbour’ protects directors from insolvent trading liability arising from debts incurred whilst enacting this course of action.
To be eligible for Safe Harbour protection, the company must satisfy these eligibility criteria:
- Taxation obligations – the company’s tax reporting obligations are up to date;
- Employee entitlements – all obligations to employees, including superannuation, must be paid when they fall due; and
- Maintain adequate books and records – the company must have up to date records such that the directors can be properly informed of the financial position of the company.
If the eligibility criteria are met, the directors must be satisfied they have developed or are developing a turnaround plan that is:
- Comprehensive, milestone-based and time-bound in its objectives; and
- Likely to lead to a better outcome than the immediate appointment of an administrator or liquidator.
To give yourself the best chance of relying on Safe Harbour protection, it is important to act as soon as possible and to properly document any initiatives taken to develop a turnaround plan. In addition to the formal criteria, it is important that directors:
- Remain informed of the company’s financial position;
- Take appropriate action to prevent misconduct by officers and employees of the company; and
- Obtain appropriate legal and commercial advice from experienced restructuring professionals to determine the suitability and eligibility of Safe Harbour.
Our Safe Harbour advisory services
Hiring an experienced, independent insolvency practitioner is the most suitable starting point for any course of action. Wexted Advisors works with directors and their advisors to provide Safe Harbour advice as part of a broader restructuring solution designed to address the better-outcome test.
We have market leading experience advising directors of publicly listed companies and private SMEs. We work alongside directors to:
- Ensure the eligibility criteria is met. In instances where the company is unable to satisfy the criteria, we work alongside management to ensure employee and taxation obligations are met and that all appropriate books and records are maintained;
- Develop and refine a turnaround plan. Our experienced restructuring professionals help Directors and their management create a course of action if needed. We use our extensive experience to:
- Continually communicate with key stakeholders to ensure the business can continue to operate in a stable environment;
- Engage with staff at appropriate levels to learn about the business and foster belief in the turnaround plan; and
- Create a plan that will satisfy the better outcome requirement.
- Implement a course of action likely to lead to a better outcome. Our strengths lie in working with management to implement and update the turnaround plan. Our service includes:
- Holding regular meetings to monitor progress;
- Ensuring continual compliance with all statutory obligations;
- Updating objectives and deadlines as suitable; and
- Documenting everything, so that the directors we advise have the peace of mind that they can rely on Safe Harbour protections.
Wexted Advisors provide
INDEPENDENT & SPECIALISED
services to clients facing business challenges or confronting transactions or situations.
We provide our clients with efficient, independent assistance across a range of transactions and deals.