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Understanding Safe Harbour Protection for Directors
Navigating financial difficulties can be one of the most challenging aspects of running a business. Directors often face the daunting prospect of personal liability if their company becomes insolvent. However, Australia’s Safe Harbour provisions offer a vital lifeline, allowing directors to steer their companies through troubled waters while protecting themselves from the risk of insolvent trading.
What is Safe Harbour?
Safe Harbour is a legislative provision under the Corporations Act 2001 that provides directors with protection from personal liability during insolvency, as long as they are actively taking steps to improve the company’s financial situation. This framework is designed to encourage directors to explore restructuring and turnaround strategies without the immediate threat of personal risk.
If you’re concerned about your company’s financial health and want to learn more about how Safe Harbour could help, contact RSM today. Our experienced team is here to provide the guidance and support you need to protect your company and yourself during challenging times.
Frequently asked questions
- Keep your books and records in order
- Provide employee entitlements, including superannuation
- Keep tax records up to date
- Seek advice from a qualified restructuring advisor
- Devise and document a restructuring plan resulting in a better outcome than an immediate liquidation
- Comply with the plan
If you take these actions, you (as the director) may be protected against legal claims of insolvent trading.
Keep in mind that you cannot claim safe harbour for debts incurred before you have taken these actions.
When a company is in financial trouble, it often feels easier to ignore it or hope that it will all go away.
As a director, you may:
- Avoid phone calls
- Make promises you can’t keep
- Feel out of control
- Make irrational decisions
- Suffer stress or depression
Safe harbour is an opportunity to recognise what is happening, stop and evaluate the situation, and develop a turnaround plan.
What that plan looks like depends on your company’s unique situation.
But it offers you the chance to be proactive at a time when many directors are simply reacting to the whirlwind of events that usually follow the realisation of impending insolvency.
The ultimate outcome of a restructuring plan is to return your company (or part of it) to solvency and help you deal with creditor claims. Occasionally, it may result in an orderly wind-down of the company and liquidation.
Client testimonials
Our case studies highlight the successful restructuring and recovery strategies we've implemented for various businesses facing financial challenges.
Each case study showcases our tailored approach to navigating complex situations, from insolvency to voluntary administration, demonstrating how we've helped clients stabilise, restructure, and achieve sustainable growth.
Explore these real-world examples to see how our expertise can guide businesses through difficult times and create viable pathways for the future.
How can RSM help with safe harbour?
AS CERTIFIED ACCOUNTANTS AND EXPERIENCED BUSINESS ADVISORS, WE CAN:
- Explain safe harbour and how it works
- Evaluate your company’s situation
- Offer advice on challenges and opportunities
- Help you create a sound restructuring plan
- Keep you accountable
If your business does go into liquidation, you can use these measures as a defence against a liquidator’s claim that you allowed the company to incur debts while it was insolvent.
SAFE HARBOUR PROTECTION EXPERTS AT RSM
Contact our safe harbour experts
We are here to help with honest, professional and tailored advice. To speak with a safe harbour expert at RSM, please fill out the form below.
