Although Business Safe Harbour can offer companies like yours a way out of financial distress, it isn’t suitable for every circumstance. If you’re a director and you suspect your company is heading toward insolvent trading, Safe Harbour may be a suitable road to pursue.
However, under Australian law, your company must meet certain Safe Harbour eligibility criteria. This is vital to understand as, if you can’t meet certain stipulations, as a director, you may not be able to claim protections from personal liability.
In this expert guide, we’ll explore the various rules and regulations you need to know and if your company meets the requirements.
The Safe Harbour Eligibility Criteria to Meet
To be eligible for Safe Harbour, a director must demonstrate that they’re taking immediate
action to address company debt. We cover these in the step-by-step points below, but be aware The Corporations Act 2001 is the Act legislating this matter under Australian law.
1. Check Tax and Employee Entitlements
Safe Harbour provisions financial advice begins with your recordkeeping. Books and records compliance is a crucial step in this process. As a director, it’s mandatory to meet your legal requirements relating to:
- Employee entitlements (including superannuation)
- Tax lodgement obligations
These should be made in full and on time, as Safe Harbour doesn’t come at the expense of employee rights or public revenue. If you haven’t met these obligations, then the chances of claiming Safe Harbour are limited.
2. Development of a Restructuring Plan
The insolvency laws are laid out under the Corporations Act 588GA. Safe Harbour can protect a company director from personal liability in the event of financial distress.
It provides a more extended timeframe for a director to resolve the company’s debt struggles. This is through a business restructuring to address weaknesses in your operations. This is mandatory, as a director you must develop a plan of action that sets your company up for a better outcome than external administration.
In your best interests, you need to be able to demonstrate you, the director:
- Informed yourself properly of the financial situation.
- Took steps to prevent misconduct by management or staff members.
- Took appropriate steps to maintain proper financial records.
- Gained advice from legal experts.
- Developed and implemented a restructuring plan.
Seeking expert advice is a vital step during financial distress, not least to meet the eligibility criteria of Safe Harbour. While discussing your situation with legal experts, you can also gain insights into how to go about implementing a restructuring plan. Read our guide to how restructuring can keep your business afloat for further details on this process.
3. Cooperation With External Administrators
Despite your best efforts, your company may still need to enter either voluntary administration or business liquidation. If this happens, you must cooperate with the administrator.
This means providing company books and records, or any other relevant information, upon request. Otherwise, you may lose your Safe Harbour protection.
Stop Insolvency Now! Claim a Free Safe Harbour Consultation
At Corporate Lifeline, we can offer you a free consultation on Safe Harbour eligibility. Speak to our expert team for transparent advice. We’ve helped hundreds of directors just like you—call us today for instant support.
