“A director’s personal responsibility for debts incurred whilst a company is insolvent is a stress-inducing, angst-filled concept for directors of financially distressed companies,” Genevieve writes. “The “safe harbour” provisions, introduced in 2017, were intended to operate as a carve-out to the insolvent trading prohibition, to encourage directors to be innovative and entrepreneurial in pursuing turnaround options for their companies (rather than focusing on their own personal liability).”
In conducting the review, alongside fellow panel members Stephen Parbery from Phelps-Kroll and Leanne Chesser from KordaMentha, Genevieve says a sound sample of stakeholders, including directors, professional advisers and representative organisations, including the AICD, engaged in the consultations. She summarises the key findings as follows:
- Some of the terminology used in the relevant legislative provisions should be simplified and/or clarified, so as to allow for greater ease of interpretation.
- Greater education is needed among both directors and professional advisers as to how the safe harbour regime can be utilised to assist in company turnarounds and restructures.
- A holistic review of the broader insolvency laws would be helpful to ensure that Australia’s insolvency regime is fit for purpose.
Whilst the government has only ‘noted’ this particular recommendation, Genevieve writes that it remains an ongoing discussion point across the industry - “in other words – watch this space!”.
To read Genevieve’s article on the AICD website, click here.