Wed 13 Sep 2017
Reforms that will create a ‘safe harbour’ for company directors passed the Senate on Monday 11 September.
Due to an amendment from the Opposition inserting a two-year review period into the legislation, it will go back to the Lower House for formal approval today but this should be procedural.
The passage through the Senate is the culmination of years of work by the AICD criticising the unnecessary strictness of the former regime, which stifled the ability of directors to take sensible measures to turn around distressed companies.
What Company Directors Need to Know:
- Directors of companies in financial distress will soon be able to rely on the safe harbour protection if they start developing one or more courses of action that are ‘reasonably likely’ to lead to a ‘better outcome for the company than the immediate appointment of an administrator or liquidator.
- The Safe Harbour will be conditional upon the company meeting employee entitlements and tax reporting obligations, and directors fulfilling existing statutory obligations to provide assistance in the event of administration or liquidation.
- The legislation also will introduce a stay provision which affects the enforceability of “ipso facto” clauses during an administration or scheme of arrangement.
For more on the legislation, read the AICD’s explainer article here.