Safe Harbour in Practice

Safe harbour has become a mainstream restructuring tool — but its protections are contingent on strict compliance with the statutory preconditions.

Introduced in 2017, the safe harbour provisions in section 588GA allow directors to pursue a course of action reasonably likely to lead to a better outcome than immediate administration or liquidation, without exposure to insolvent trading liability.

In practice, safe harbour works best as a structured framework — with a documented plan, regular financial monitoring and disciplined engagement with stakeholders. It is not a way to avoid difficult decisions, but rather a protected environment within which to make them.

The most common failure mode is a lack of documentation. Directors need contemporaneous records demonstrating that the course of action was reasonably likely to produce a better outcome, and that ongoing monitoring supported that conclusion.

Our safe harbour engagements typically run for three to nine months, with regular touch-points between the board, management and the adviser. Where the plan succeeds, the outcome is usually a restructured, recapitalised business. Where it does not, the documentation supports an orderly transition to formal insolvency.

This publication provides general information only and does not constitute legal, tax or financial advice. Readers should obtain specific advice before acting on any information contained in this article.