The new Safe Harbour Legislation is designed to:
“ drive cultural change amongst company directors by encouraging them to keep control of their company, engage early with possible insolvency and take reasonable risks to facilitate the company’s recovery instead of simply placing the company prematurely into voluntary administration or liquidation.”
The emphasis is therefore on finding solutions to produce positive outcomes.
Additionally Safe Harbour is a form of protection for Directors against Insolvent Trading Claims and is implemented outside of Formal Insolvency Arrangements (i.e. the appointment of a Liquidator, Administrator or Receiver).
A Better Outcome for the Company
Safe Harbour commences when the Directors implement a restructuring plan that is likely to be a better outcome for the company than an immediate formal insolvency.
In addition, for Safe Harbour to apply, the Directors must:
Maintain proper books and records
Adhere to tax reporting obligations
Pay employee entitlements
It is also important to note that Safe Harbour protection does not apply to insolvent trading incurred prior to the commencement of Safe Harbour. This is an incentive for Directors to seek early help.
The Directors are also encouraged to engage a properly qualified adviser to assist in carrying out the restructuring plan. Our business Greatworth Advisory only undertakes informal assignments. Greatworth Advisory offers a range of skills to solve critical problems, improve profitability, return cash flow to positive, all with the purpose to rescue businesses.
Whilst safe harbour does offer benefits to the Directors, it is not of without risks. To find out if Safe Harbour is the right option for you or if a Formal Insolvency Arrangement such as Voluntary Administration is more appropriate to effect a Business Rescue, please contact Bruce Mulvaney & Co to arrange a meeting.