Safe harbour: A realignment of interests

  • The new legislation emphasises that continuous improvement should not give way to concerns as to personal liability.
  • The objective of the legal reforms is to encourage innovation and informed risk-taking by directors, even if that might involve the incurring of fresh debt while their company is insolvent.
  • This article outlines five practical steps for directors of companies faced with financial distress.

 Business person holding lantern with lighthouse in the background

It’s still too early to declare if a cultural change amongst company directors has emerged from the safe harbour reform. What is becoming prevalent though is a ‘re-alignment of interests,’ as directors see themselves less distracted by personal exposure in hard times, enabling them to focus their attention on remediation measures. 

When Parliament finally gave a green light to wide-raging reforms to Australia’s insolvency laws in September 2017, a paradigm shift for directors was in sight. It has been widely agreed that, for directors and creditor’s alike, Australia’s insolvent regime had been failing.

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