You cannot file for it, resolve to enter it, or announce it. The protection comes from what your board actually does while it turns the business around, and whether that can still be evidenced two years later.
Most firms treat safe harbour as just a defence strategy for insolvent trading. Olvera Advisors treats safe harbour as part of a governance programme to deliver a better outcome through turnaround.
Safe harbour is a statutory protection for company directors. Under section 588GA of the Corporations Act 2001 (Cth), in force since 19 September 2017, a director is not personally liable for debts the company incurs while insolvent, provided those debts are connected to a course of action that was reasonably likely to lead to a better outcome for the company than the immediate appointment of an administrator or liquidator.
It exists because the threat of personal liability used to push directors into administration at the first sign of trouble, often destroying value that a well-run turnaround could have saved. Safe harbour gives the board room to try.
The room comes with conditions. Two are hard: employee entitlements, including superannuation, must be paid when due, and tax lodgements must be kept up to date. Beyond those, the question is whether directors kept themselves informed, kept proper financial records, took advice from an appropriately qualified adviser, and developed and acted on the plan within a reasonable period.
If the company later fails, the director must point to evidence of the plan and show the debts were connected to it. The liquidator must then prove the plan was not reasonably likely to succeed at the time. The protection is only ever as strong as the record behind it, which is why we run safe harbour as a governance programme rather than treat it as a legal label.
| Where the protection comes from |
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A course of action Developed and taken because, at the time, it was reasonably likely to lead to a better outcome than immediate administration or liquidation. |
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Acted on within a reasonable period Judged on your size and circumstances. Drift is one of the most common ways the protection is lost. |
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Employees and the ATO kept current Entitlements and superannuation paid when due; tax lodgements substantially compliant. |
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Records that hold up Financial records maintained and monitored, and decisions documented as they are made. |
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Debts connected to the plan Cover extends to debts incurred directly or indirectly in connection with the course of action. |
| What it is not |
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Not an appointment Nothing is filed and no external party takes control. The board keeps running the company. |
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Not a state you enter A company is never “in safe harbour”. The protection is personal to each director and is only ever tested afterwards. |
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Not a board resolution Resolving to adopt it creates nothing. The Board resolves the plan, the steps create the protection. |
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Not cover for pre-existing debt Debts incurred before active steps began, or unconnected to the plan, sit outside. |
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Not a shield for everything else Criminal liability, ATO director penalty notices, work health and safety, environmental exposure, personal guarantees and every other director duty continue to apply. |
Most serious safe harbour engagements need two kinds of advisors. A lawyer advises you on whether the protection is available and on your duties, and holds privilege. A restructuring adviser builds the liquidation base case and the better outcome case, tests the plan, and monitors it through delivery. Olvera Advisors is the second of these, engaged through your lawyers.
We are the financial and operational half of the team working with your lawyers; we build the base case, the better outcome analysis and the monitoring and help you build the restructuring plan through our SICS programme.
Most directors meet safe harbour late, under pressure, looking for protection they hoped they would never need. By then the question is not whether the protection exists, it is whether the last six months of decisions can be evidenced. We work the other way around, so the record is built as the turnaround runs. We treat safe harbour as a governance programme focused on delivering a better outcome.
SICS is Olvera Advisors’ own turnaround methodology, and it runs underneath every safe harbour engagement. The six governance gates decide whether the plan still beats liquidation. SICS makes sure the plan being evidenced is a plan that is actually being delivered.
The programme takes its name from its four streams — Stabilisation, Information, Communication and Strategy — which run in parallel from the first week rather than one after another. Each stream has its own owner, its own outputs and its own set of practice tools, so progress can be measured stream by stream and reported to the board on one page.
| Stream | Focus | What it involves |
|---|---|---|
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Stream 1 |
Stabilisation and resourcing
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A cash management team, a rolling 13-week cash flow with burn-rate analysis, tighter payment controls, and quick cash generation. Liquidity does not wait for the diagnostic.
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Stream 2 |
Information and analytics
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Diagnostic review, market and competitive analysis, financial analysis and a business issues matrix that tests whether the current strategy can deal with what the business is facing.
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Stream 3 |
Communication and stakeholder management
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Stakeholder influence mapping, a disclosure matrix approved by the board, and a sequence for who learns what and when. Nothing goes out by reflex.
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Stream 4 |
Strategy and execution
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Action plans with owners and a critical path, benefits tracked against a baseline, contingency plans, and the financial modelling behind the better outcome case.
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| Control | What is tested |
|---|---|
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Employee entitlements |
Wages, leave, PAYG withholding and superannuation paid by the due date, for the prior twelve months and continuing.
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Tax reporting |
Returns, notices and statements lodged under taxation laws, with substantial compliance maintained and no pattern of failures.
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Financial records |
Records kept and monitored to a standard appropriate to the size of the company, with a periodic close that actually closes.
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Conduct |
Delegations respected, payment controls operating, related-party dealings and asset transfers reviewed.
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Safety and environment |
Not a safe harbour threshold — a director exposure. Statutory inspections, monitoring, training and safety-critical maintenance are placed on a never-cut list and exempted from cash rationing, because cost pressure is exactly how those liabilities are created.
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Damien Hodgkinson leads Olvera Advisors Hospitality Advisory Practice with over 30 years of experience in the sector.
He is currently a Director of Best Restaurants Australia and the founder of Linchpin Hospitality, working with lenders and operators to maintain and reestablish control after the administration of Public Lifestyle Management.
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