Safe Harbour: the 10 steps

Safe Harbour: the 10 steps

Safe Harbour provides protection from insolvent trading liability for honest and diligent Directors who identify that their company is or may become insolvent but who attempt to restructure and trade out of their difficulties. To seek protection of the Safe Harbour, a Director needs to be able to prove their actions were “reasonably likely” to result in a better outcome for the company and its creditors, than placing the company straight into Administration or Liquidation. What constitutes “reasonably likely” will vary from company to company.

If the company is ultimately wound up, the Director would be protected from liability for insolvent trading under Section 588G of the Corporations Act if the below criteria are met.


1. Seek professional advice early from an appropriately qualified advisor.

2. Ensure employee entitlements are paid as they fall due.

3. Ensure the company has maintained adequate books and records.

4. Acting honestly and in good faith, develop a course of action that is likely to lead to a better outcome for the company than an immediate winding up or administration.

5. Take prompt and proactive action to implement the course of action.

6. Take steps to prevent misconduct by officers and employees.

7. Comply with taxation reporting requirements.

8. Keep informed about the company’s financial position.

9. Continually monitor the course of action developed and make adjustments as required to ensure it continues to be “reasonably likely” that the course of action will provide a better outcome.

10. Ensure debts being incurred are in connection with the course of action being implemented.

Seeking advice early is crucial to ensuring the safe harbour criteria is satisfied. Our team are experienced turnaround and insolvency advisors with a focus on the best outcome for all stakeholders of a company in financial difficulty. Contact us today on 1300 747 577.

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