Safe Harbour Process
Safe Harbour under section 588GA of the Corporations Act 2001 was introduced in September 2017. It’s purpose is to protect directors from insolvent trading personal liability should the company fail.
Starting the Safe Harbour Process
The Safe Harbour process commences when a director takes a ‘course of action‘ that is reasonably likely to result in a better outcome. When utilising the safe harbour, directors can expect to be protected from personal liability from debts incurred directly or indirectly with pursuing the better outcome.
Remember, Remember, the 25th of September: COVID Safe Harbour Ends…
On 25 September 2020, the Government’s automatic ‘COVID safe harbour‘ ends. This means that directors that may have been trading their company insolvent now risk becoming personally liable for the debts incurred by the company.
Knowing that it might take 2-3 months for you to commence the 2017 Safe Harbour process, the time for you to act is NOW.
Every company director should take advantage of the 2017 Safe Harbour if they wish to continue trading their company beyond September.
But Eddie, can’t I just apply for Safe Harbour?
This is a question I am sometimes asked by people who are thinking about 2017 Safe Harbour provisions. They often don’t realise that becoming compliant with the Safe Harbour legislation is a process that must be followed.
Safe Harbour isn’t a matter of putting in an application to a body like ASIC or the ATO. It is a defined sequence of steps that helps you to turn your company around.
You could argue that the terminology doesn’t help. However, all you have to do is seek advice from an ‘appropriately qualified entity’. TurnAbout AU is an ‘appropriately qualified entity‘ under s588GA of the Corporations Act 2001. We guide directors through difficult times and ensure they are able to turn their businesses around without breaking any rules.
What safe harbour does is allow you to prove (in a court) that you did everything you could that you rationally believed was going to result in a better outcome for your company. It is the directors who have an evidential burden for proving that the Safe Harbour process was followed correctly. Make sure you do not take advice from a firm that does not have specialist insolvency, restructuring and turnaround qualifications, professional indemnity insurance and significant experience.
In a sense, directors have to act in a way that complies with the Safe Harbour criteria. And this behaviour is what gives you the safe harbour protections. Give yourself the best chance by speaking with our expert Safe Harbour specialists.
If you’re working in Survival Mode, you can’t afford to wait any longer
As I write this, it’s already mid-June 2020 and the COVID Safe Harbour moratorium expires in three month’s time. You’ve got very little time to get your house in order.
So if you are in survival mode, and you’re happy that you are protected from insolvent trading right now, know that this moratorium is going to end for you on 25 September.
It’s time for you to take stock of the immediate (and potential) risks and do whatever you can to ensure that you’re in the best position possible.
For example, we can’t know for certain that there won’t be more business closures. We can’t know for certain that we won’t face regulatory changes in relation to health.
What we do know is that the recovery period from this year’s COVID crisis is going to be longer than anticipated.
Here is what you must do right now:
Firstly, focus on your numbers. You have to have a very strong knowledge of your financials. Without it, you can’t make a clear decision about whether any turnaround project is going to work.
Secondly, develop a plan of actions that you believe will save your company. And then, start working your plan. Pro tip: You are better off changing tactics, rather than rewriting your strategic plan.
Thirdly, gain appropriately qualified advice. Having ‘outside eyes’ look over your financials, and assess the plan that you’ve developed, is sound advice at the best of times. But in a time of crisis, when your personal liability hangs in the balance, it’s critical. A good advisor will be able to test your plans against the worst possible outcomes, because they’ll know what all the options may be (whereas you may not).
Pick up the phone and call TurnAbout AU now for a confidential conversation
The sooner that you do this, the more likely it is that you will be able to take advantage of the Safe Harbour provisions and commence the Safe Harbour Process. And if you can do that, then you won’t have to worry about the looming date of the 25th of September: You will be able to continue working to save your family business.