The Safe Habour laws came into effect in 2017. However, if you are still unsure about how they may help you, or if you are concerned about the liquidity and solvency of your company, then our experts at Australian Company Liquidations are here to help.
The Corporations Act 2001 (Cth) states that it is the director’s duty to prevent the company from incurring further debts once the company is insolvent. A company is considered to be insolvent when it cannot pay back its debts as and when they fall due. If the director does not prevent the company from incurring further debts and they remain unpaid, the director can be held personally liable for the debts if the company is later placed into liquidation.
The safe harbour laws may protect company directors from a claim for insolvent trading if a suitable safe harbour plan is put into place by an approved professional. The plan must provide for a better outcome for their company, compared to the immediate appointment of an administrator or a liquidator.
Safe harbour will end if any of the following occurs:
- The director stops taking the course of action as outlined in the plan;
- The course of action stops being reasonably likely to lead to a better outcome for the company; or
- After starting to develop a course of action, the director fails to take the course of action within a reasonable period after that time.
You should seek professional advice immediately if you are concerned about the solvency of the company to which you are appointed. Contact Australian Company Liquidations 24 hours a day / 7 days a week on 1800 731 155. We offer free and impartial company liquidation advice.