In 2017, new Safe Harbour legislation passed allowing directors of companies in financial distress to access Safe Harbour protection from personal liability for insolvent trading while implementing a turnaround strategy for their business.
What is Safe Harbour protection for directors?
The Safe Harbour rules give directors breathing space to turnaround their business without the fear of being pursued for an insolvent trading claim and to avoid prematurely placing their company into external administration. It encourages businesses to work through financial difficulties by putting in place a restructuring plan that is likely to lead to a better outcome than a formal insolvency appointment.
Generally, there are early warning signs that businesses experience that would trigger the need for Safe Harbour protections. These may include:
- cash flow difficulties
- breaches of finance covenants
- ATO demands
- loss of key customers/suppliers
- market disruption
- legal disputes
- working capital constraints
- inability to access capital
- solvency concerns.
Turnaround direction & support
The Grant Thornton's restructuring advisory team can assist by:
- providing advice on the requirements for Safe Harbour protection
- bringing expertise and insights to identify turnaround options
- developing and implementing a restructuring plan
- providing directors with access to appropriately qualified advisors specifically focused on the needs of the business
- ongoing monitoring and reporting to stakeholders.
We bring market-leading restructuring capability and expertise combined with a full service advisory firm with regional and global reach. Our team can provide advice on the practical considerations and legal requirements for Safe Harbour protection, as well as guide a company through the entire process of developing and implementing a restructuring plan.
Choosing an appropriately qualified advisor
Directors appointing an advisor to assist in developing a restructuring plan are responsible for ensuring that adviser is appropriately qualified. Considerations for an 'appropriately qualified entity' include:
- possessing minimum educational qualifications and being subject to continuing professional development (CPD) whether by law or by membership of a professional association
- possessing appropriate professional indemnity insurance
- being bound by a code of conduct or similar professional standards
- relevance to the nature, size and complexity of the business, as well as specific industry expertise
- the advisor’s independence and good standing.
Our restructuring advisory partners meet these requirements.
Our approach to Safe Harbour advisory
Our Safe Harbour advisory offering is tailored specifically to the needs of each business. We can:
- provide an immediate financial viability assessment
- assist with preparation of a short term financial forecast
- advise on the requirements for Safe Harbour protection
- undertake stakeholder engagement and management
- assist with developing and implementing an appropriate turnaround plan, including:
- reviewing, developing and monitoring forecasts
- identifying, reviewing & assessing milestones and KPIs
- working capital optimisation to free up cash in the business
- performance improvement advisory
- contingency planning for a formal restructure.
