An avenue for protecting company directors

Are you looking to implement a financial or operational restructure, but are concerned about the risk of personal liability for insolvent trading as a company director?

Insolvent trading liability can have serious implications for directors, potentially impacting their personal assets and professional standing. However, it's important to know that there are strategies available to mitigate this risk while you seek to implement a better outcome than liquidation.

Our expertise lies in guiding directors and companies through these challenges, offering tailored solutions and support to navigate the complexities of Safe Harbour provisions. With our assistance, you can confidently manage financial difficulties while safeguarding your personal liability.

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What is Safe Harbour?

Safe Harbour is a legal provision within the Corporations Act that offers protection to company directors from personal liability for insolvent trading if certain conditions are satisfied.

It allows directors to continue trading while the company is insolvent if they are pursuing a course of action (restructuring plan) that is reasonably likely to lead to a better outcome for the company than immediate administration or liquidation.

Safe Harbour aims to encourage directors to responsibly take proactive steps to restructure the company's affairs, thereby increasing the likelihood of preserving value for stakeholders and avoiding the unnecessary collapse of viable businesses.

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What is insolvent trading?

Insolvent trading refers to a situation where a company continues to incur debts when it is unable to pay its debts as they fall due, or when its liabilities exceed its assets. In essence, it occurs when a company trades while insolvent.

In Australia, directors have a duty to prevent insolvent trading, meaning they must take reasonable steps to ensure the company does not incur debts it cannot repay. If directors fail to fulfil this duty and allow the company to continue trading while insolvent, they may be held personally liable for the debts incurred during that period. Insolvent trading can lead to serious legal and financial consequences for the company and its directors.

Benefits of Safe Harbour


It provides directors with a degree of protection from personal liability, enabling them to explore restructuring options without the fear of legal repercussions.


Safe Harbour allows companies to continue trading and potentially recover from financial distress by providing directors with the flexibility to implement turnaround strategies.


Safe Harbour can preserve value for stakeholders, including employees, creditors, and shareholders, by facilitating the company's survival and avoiding the unnecessary collapse of viable businesses. Additionally, it fosters transparency and encourages directors to communicate openly with stakeholders about the company's financial situation and restructuring plans.


Safe Harbour is a confidential process, preserving value and reputations.

Eligibility criteria for Safe Harbour

To qualify for Safe Harbour protection, several key legal criteria must be satisfied:

  • Payment of employee entitlements, including superannuation contributions as and when they fall due.
  • Timely lodgement of all required returns, notices, and documents as per taxation laws.
  • Demonstrated understanding of the company's financial position.
  • Implementation of measures to prevent misconduct within the company.
  • Maintenance of accurate and appropriate financial records.
  • Seeking advice from an appropriately qualified advisor.
  • Development of at least one' course of action' that has a reasonable expectation of providing a better outcome for the Company.
  • Incurrence of debts directly related to the pursued courses of action.
  • Adherence to a reasonable timeframe for implementing restructuring efforts.

Safe Harbour process

Safe Harbour scenarios

Although Safe Harbour can be utilised in several scenarios and is specific to your circumstances, some recent examples where the protections were utilised are as follows.

  • During the sale of business or business unit, aimed at paying down debt and alleviating financial distress.
  • Throughout a crucial capital raising process (either through shareholder equity or debt financing).
  • While negotiating disputes with the Australian Taxation Office.
  • During a period of manufacturing scale-up to enhance revenue and performance.
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