The safe harbour regime and continuous disclosure: Where is the line in the sand?

  • The safe harbour regime does not affect the obligation of a listed company to comply with its continuous disclosure obligations under the ASX Listing Rules.
  • There is no explicit requirement to make a positive declaration for safe harbour to apply.
  • The extent to which a listed company’s reliance on safe harbour should be disclosed must be assessed objectively on a case-by-case basis.

Illustrative business man contemplating walking over hand drawn bridge

The recently enacted safe harbour legislation1 provides protection to company directors and officers from a claim for insolvent trading where they develop a course of action that is reasonably likely to result in a 'better outcome' for a company. A 'better outcome' means an outcome that is better for the company than the immediate appointment of an administrator or liquidator, although questions might arise about what is meant by 'the company' in this context.2

The rationale underpinning the new legislation is to encourage directors to take proactive steps to restructure companies including fully exploring other options and alternatives to appointing an insolvency practitioner. Without safe harbour protection, directors may act prematurely and even when there is the possibility of a turnaround.

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