Safe Harbour

Did you know in certain circumstances directors can be protected from insolvent trading?

Whilst Section 588(G)(2) of the Corporations Act 2001 (the Act) ordinarily provides that directors will be personally liable for debts that are incurred whilst they are a director if certain conditions are met, safe harbour provisions in Section 588GA of the Act effectively provide directors with a form of defence or exception in certain circumstances.

Early intervention is key because in general terms as soon as you suspect your company may be approaching financial difficulty the better the level of protection.

A “better outcome” test is an important consideration in the safe harbour provisions and Jones Partners can help you determine whether this option may be viable for your business. Critical in this assessment will be evaluating the ability of the business to comply with the safeguard areas of employee and tax reporting obligations.

Benefits:

• Protection for directors against personal liability;
• Gives the business the time to put in place and effect a turnaround strategy; and
• Is not as much of a distraction compared to Voluntary Administration.