Staying compliant with Safe Harbour
2 mins reading time
What are the warning signs of non-compliance with the Safe Harbour requirements?
Directors need to make sure that they continue to qualify for Safe Harbour at all times – otherwise they risk losing protection without realising that they have done so.
In practice that means two things:
Firstly, being aware that you need to check in on your restructuring plan and update it if there are significant changes in your business or the environment it operates in.
Secondly, making sure that your restructuring plan hard-wires in a review of your compliance with the key compliance factors on a weekly, fortnightly, or monthly basis.
Qualifying for Safe Harbour is not a one-off test that once met protects you forever after. Directors need to make sure that they qualify at all times. For example: if circumstances change so that the plan is out-dated, and it is not updated, or it no longer leads to a better outcome for the company and its creditors as a whole; someone commits a fraud on the company; insufficient information is provided to the appropriate entity to provide advice; in adequate financial records are kept; fail to keep abreast of their company’s financial position; failure to comply with tax reporting. Then directors lose the Safe Harbour protection. That means that is essential for directors to periodically check that all of requirements have been met.
What do directors need to do to qualify for Safe Harbour?
The Safe Harbour legislation sets out the key factors that the Court must take into account in whether directors have qualified for Safe Harbour. Did they:
- Pursue a course of action “reasonably likely to lead to a better outcome for the company and its creditors as a whole”?
- Take appropriate steps to prevent misconduct that could affect the company’s ability to pay all its debts?
- Take appropriate steps to ensure that the company is keeping appropriate financial records?
- Obtain appropriate advice from an appropriately qualified person holding enough information to give appropriate advice?
- Properly inform themselves of their company’s financial position?
- Develop and implement a plan for restructuring the company to improve its obligations to lodge tax lodgements.
Appropriate Entities are skilled and experienced in turnarounds and meeting legislative requirements, but there are tools to assist them in meeting such. For example the checklists and guidance www.safeharbournet.com.au provides its members.
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Staying compliant with Safe Harbour
What are the warning signs of non-compliance with the Safe Harbour requirements?
Directors need to make sure that they continue to qualify for Safe Harbour at all times – otherwise they risk losing protection without realising that they have done so.
In practice that means two things:
Firstly, being aware that you need to check in on your restructuring plan and update it if there are significant changes in your business or the environment it operates in.
Secondly, making sure that your restructuring plan hard-wires in a review of your compliance with the key compliance factors on a weekly, fortnightly, or monthly basis.
Qualifying for Safe Harbour is not a one-off test that once met protects you forever after. Directors need to make sure that they qualify at all times. For example: if circumstances change so that the plan is out-dated, and it is not updated, or it no longer leads to a better outcome for the company and its creditors as a whole; someone commits a fraud on the company; insufficient information is provided to the appropriate entity to provide advice; in adequate financial records are kept; fail to keep abreast of their company’s financial position; failure to comply with tax reporting. Then directors lose the Safe Harbour protection. That means that is essential for directors to periodically check that all of requirements have been met.
What do directors need to do to qualify for Safe Harbour?
The Safe Harbour legislation sets out the key factors that the Court must take into account in whether directors have qualified for Safe Harbour. Did they:
- Pursue a course of action “reasonably likely to lead to a better outcome for the company and its creditors as a whole”?
- Take appropriate steps to prevent misconduct that could affect the company’s ability to pay all its debts?
- Take appropriate steps to ensure that the company is keeping appropriate financial records?
- Obtain appropriate advice from an appropriately qualified person holding enough information to give appropriate advice?
- Properly inform themselves of their company’s financial position?
- Develop and implement a plan for restructuring the company to improve its obligations to lodge tax lodgements.
Appropriate Entities are skilled and experienced in turnarounds and meeting legislative requirements, but there are tools to assist them in meeting such. For example the checklists and guidance www.safeharbournet.com.au provides its members.