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In an ever-evolving environment, it’s crucial for businesses and those who advise them to be adept in turnaround strategies. The COVID-19 pandemic, coupled with its subsequent high inflationary environment, has posed a significant threat to companies who wish to trade profitably, and many still feel the effects today.
Staying ahead of corporate protection laws in Australia is crucial to ensure a business remains stable and viable. One such law that has garnered much attention in recent years is the 588GA Safe Harbour Provisions Law.
In this article, we look into the specifics of this law, how it benefits businesses and their directors, and how to determine if a company is eligible. Additionally, we explore an upcoming webinar hosted by Olvera Advisors, which promises invaluable insights into the Safe Harbour Provisions in 2024 and how they can be leveraged.
What is the 588GA Safe Harbour Provisions Law?
Introduced by the government in September 2017, section 588GA of the Corporations Act 2001 essentially provides a safe harbour for companies who wish to settle their debts while they continue to trade.
Under the 588GA Safe Harbour Provision, company directors are offered protection from personal liability in the event of insolvent trading – if they can demonstrate that they have started developing one or more courses of action that are ‘reasonably likely to lead to a better outcome for the company.’
Meanwhile, a ‘better outcome’ is defined in the Act as ‘an outcome that’s better for the company than the immediate appointment of an administrator, or liquidator, of the company.’
Safe Harbour Provisions was developed to encourage more proactivity by company directors facing financial distress. Under normal circumstances, directors who incur debt while they are insolvent or suspected insolvent can face serious consequences such as penalties and even criminal charges. However, this new law allows them to remain trading and settle their debts without those worries.
How does Safe Harbour 588GA benefit businesses and directors?
Safe Harbour provides a lifeline for business recovery by offering directors a chance to restructure without the fear of personal liability. By focusing on early intervention and fostering accountability, Safe Harbour examines how directors can get out of debt while maximising returns for creditors.
Here are some of the other major advantages of the 588GA Safe Harbour Law:
- Safe Harbour arrangements are informal arrangements that are done in private, and do not have to be disclosed publicly
- Companies can retain a positive brand image to suppliers, customers, and all stakeholders
- Company directors can be supported by turnaround efforts and avoid liquidation
- The board of directors remains in control of the company while Safe Harbour efforts are being made.
Safe Harbour Provisions generally have a proven track record of successful turnaround. According to research, 78% of Australian companies who sought Safe Harbour were successful in avoiding insolvency frameworks altogether.
Many businesses who choose to settle their debt informally through Safe Harbour have seen the benefits of continous trading in the long term.
Is my company eligible for the Safe Harbour Provisions in Section 588GA?
The Safe Harbour 588GA law applies to any director of a company that’s subjected to the insolvency provisions of the Corporations Act – including not-for-profits. Businesses are also eligible for Safe Harbour Provisions if:
- Employee entitlements are paid up to date
- The company has updated and lodged all tax reporting
A restructuring practitioner would be able to assess a company’s eligibility and offer solutions for utilising Safe Harbour provisions successfully.
Join Olvera Advisors Webinar: Unlock the Power of Safe Harbour in 2024
Safe Harbour laws can be challenging to navigate, as all parties must be familiar with the concept of ‘better outcome.’ They should also understand the documentation and steps needed to successfully turn around the business.
To understand and leverage Safe Harbour provisions effectively and unlock possibilities, join Olvera Advisors for a free comprehensive webinar: Unlock the Power of Safe Harbour in 2024.
This informational webinar offers expert insights on utilising the 588GA Safe Harbour law in restructuring and turnaround. Featuring in-depth discussion, legal applications, and use cases, participants will learn both the foundations and practical applications of Safe Harbour.
Who should attend?
The Unlock the Power of Safe Harbour in 2024 webinar is specifically designed for:
- Accountants
- Lawyers
- Business owners
- Company directors
- Any professionals wanting to learn more about Safe Harbour laws.
The webinar is proudly hosted by speakers from Australia’s leading restructuring and turnaround firms. With decades of experience in restructuring across multiple sectors, they bring a wealth of insider knowledge on Safe Harbour laws in the context of Australia today.
Unlock the Power of Safe Harbour in 2024 webinar promises to be Olvera Advisor’s most insightful webinar yet. For details and registration, click on the banner below.
Olvera Advisors helps businesses stay ahead in a dynamic business environment with bespoke restructuring solutions. Explore our blog for more insights on navigating the financial complexities of restructuring.
