Because the safe harbour is relatively new, there is no judicial guidance as to the meaning of “the company” or how a “better outcome” is to be assessed. As part of the Government’s insolvency law reform, the insolvent trading Safe Harbour provisions commenced on 19 September 2017 and the Ipso Facto provisions (where contracts provide for automatic termination on insolvency events) will be effective as of 1 July 2018. Now, company directors in Australia can utilize the safe harbour to develop an informal workout plan when faced with insolvency. Safe harbour provisions introduced in 2017 will also be reviewed to ensure they continue to be fit for purpose; while the threshold for statutory demands will … It is in this context that the safe harbour provisions were enacted in September 2017. Safe Harbour protection, if applied correctly, gives directors the ability to trade their business through an unprofitable period. The Explanatory Memorandum made it clear that the objective of safe harbour was to “drive cultural change amongst company directors”. One Step Toward Chapter 11: The New Safe Harbour from Insolvent Trading. Government has indicated that it will seek Parliament’s agreement for the safe harbour to apply retrospectively from the date of the Government announcement (being 3 April 2020). Again, safe harbour turnarounds require actions. The 2 year review of Australia’s safe harbour protection for directors, due from the government over a year ago, never took place. Unfortunately, ‘pre-insolvency advisors’ that are likely to advise directors on accessing safe harbour—are currently unregulated. What does a restructuring plan look like? He established the firm in 2014. A leading Safe Harbour advisory company. Background. Transaction & Structuring Support Project Soho. Gavin Stuart Mark Glynn On 19 September 2017, new legislation came into force providing “safe harbour” protection for company directors against insolvent trading claims while they develop and implement plans to restructure the company. A Director should create and (very importantly) document a plan that sets out a set of objectives that are comprehensive, milestone based, and time bound. This director tool contains suggested steps the AICD considers likely to be relevant when pursuing a restructuring plan and attempting to trigger the safe harbour protection from civil liability for insolvent trading provided in s 588GA(1) of the Corporations Act 2001 (Cth). An Insolvency Safe Harbour for Company Directors . Safe Harbour Specialist, Registered Liquidator & Chartered Accountant Ginette Muller. More. An insolvency expert can also assist with compliance with the safe harbour protection from civil liability for insolvent trading in the Corporations Act. Safe harbour insolvency reforms to provide directors relief from insolvent trading provisions. Navigating the safe harbour Recognising that directors would need extra protection because of the COVID-19 crisis, the Federal Government introduced its emergency ‘safe harbour’ legislation in March 2020, allowing directors the time to assess their company’s position before developing further plans, either for turnaround or insolvency administration. It is broadly accepted in the insolvency community that the interests of creditors should be given a high priority and a better outcome is best assessed by obtaining a liquidation valuation of the assets and undertaking of the company. Section 588G of the Corporations Act 2001 creates onerous obligations for directors of a company to prevent the company trading whilst insolvent. The introduction of a safe harbour defence for company directors will create an environment where the focus of the law would shift to rehabilitating companies, … If they are ultimately unsuccessful in their rescue attempt and appoint an external administrator the directors may avoid personal liability for the trading losses during that period of insolvency. The safe harbour laws remove the threat of personal liability for insolvent trading against a director who develops and implements a course of action that is reasonably likely to produce a better outcome for the company than liquidation or voluntary administration. Not sure what situation your business is in, Restructuring or Recovery Get to know the recovery options at your disposal - from pre-insolvency and Safe Harbour to turnaround and restructuring. Experience. Here’s one thing you can do for your clients. Plans must be developed, implemented, reviewed, adjusted and evaluated constantly against the criteria of the expectation that the plan will still lead to a better outcome for the company. Registered Liquidator, Trustee in Bankruptcy & Chartered Accountant Bill Cotter . A preliminary question which arises is whether the new processes will be widely used or whether, like the Safe Harbour reforms, their potential benefit will prove illusory for most companies. Safe harbour not to end on receivership or entry into a scheme: ... Mark has practiced in commercial law, commercial litigation and insolvency law for almost 10 years. While Greensill is mostly based in London it is exploring “safe harbour” insolvency protection in Australia, according to the Financial Times. The safe harbour regime was introduced in 2016, providing some protection to directors who are making decisions for their company in times of financial difficulty. The legislation was enacted with a very short consultation period, especially considering the depth and nature of the changes to existing insolvency law. Nevertheless, a federal bankruptcy court recently held that, when it passed the law, Congress intended to extend the section 546(e) safe harbour to apply to foreign avoidance claims brought by foreign representatives (who often operate from the offshore world) in Chapter 15 proceedings filed in a United States bankruptcy court in support of a foreign main insolvency proceeding. At this stage, the proposed safe harbour period is six months. The insolvency safe harbour explained . If you have a client that is (or is at risk of) trading insolvent, you can advise them to take appropriate steps before considering liquidation. Transaction & Structuring Support Project Verner. Director’s duty to prevent insolvent trading. Safe Harbour. This would be a reasonable view if all directors of failing companies were bad at their jobs and should not be given a second chance. In September 2017, the new safe harbour amendments to the Corporations Act were passed as law. Wexted Advisors have over 25 years’ experience handling some of Australia’s largest and most complex insolvency cases. Safe Harbour and Ipso Facto insolvency law reforms - What you need to know 13/04/2017 On 28 March 2017 the Federal Government released for public consultation draft legislation ( Treasury Laws Amendment (2017 Enterprise Incentives No. The safe harbour against insolvent trading liability for directors has been in place since 19 September 2017. The intention of the Safe Harbour reforms is to encourage proactive restructuring, to and avoid formal insolvency processes, which can be value destructive. Pre-Insolvency Advisors Safe Harbour Insolvency Rescue my business Corporate Advisory Company Restructuring Corporate recovery Business Turnaround Business Recovery Small Biz Advisor . Safe Harbour Reform in Australian Insolvency law and restructuring schemes under the Corporations Act. The risk for directors of larger corporates relying on the safe harbour arises from the need to be transparent about their suspicions of insolvency (and undoubtedly to document those concerns) early in the process. 2) Bill 2017 – Exposure Draft) that seeks to amend the Corporations Act 2001 (Cth) ( Corporations Act ) by introducing: More. As Purcell points out, this protection is dependent on, among other things, obtaining advice from an appropriately qualified entity and on the development of a restructuring plan to improve financial performance. Company Lawyer. As the legislation requires a “suspicion” of insolvency before the Safe Harbour protection becomes relevant, this shouldn’t be surprising. Registered Liquidator, Trustee in Bankruptcy & Chartered Accountant Chris Baskerville. … A: That’s probably not how I’d express it. As soon as this cannot be demonstrated, safe harbour ends and a formal insolvency process begins. From Company Insolvency to Safe Harbour. The safe harbour is still subject to the agreement of Parliament. More. The current corporate insolvency regime in Australia has long been considered outdated and draconian. View all cases » Insolvency Services Banksia Securities. Safe harbour insolvency - Learn about the safe harbour provisions & protections available to company directors in times of business distress. A Plain English Guide for Directors on Insolvency and Safe Harbour Allowing a company to trade while insolvent could have serious ramifications for individual directors. In London it is in this context that the objective of safe harbour amendments to the in... 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