Australia – Safe Harbour – Are You Ready To Navigate The Waters?

 

5 October, 2017

 

 

Navigating Safe Harbour: Are You Ready To Navigate The Waters?​

 

If the answer is "yes": fantastic – embrace the reform.  If it is "maybe": then you should consider our checklist of the top ten "to do" items for insolvency practitioners and turnaround advisers. 

 

Safe Harbour checklist

 

Please click on the image to enlarge.

 

Top ten "to do" items

 

1. Get your letter of engagement right – particularly liability carve-outs. For example, you should exclude liability in relation to continuous disclosure advice to a listed company.
2. Conduct staff training at all levels – particularly surrounding what Safe Harbour provides to Companies, when does Safe Harbour protection commence and cease to apply, the threshold issues meeting employee entitlements and complying with the taxation reporting obligations, the approach to the "better outcome" test and the assessment of business restructuring plans.
3. Qualify yourself and the team.   The Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth) does not define what an 'appropriately qualified entity' is, nor does it prescribe particular qualifications that an adviser must possess.  You should document both the firm's and the particular individuals' qualifications together with their experience.  Tailor each team to each particular engagement.
4. Establish your own Safe Harbour checklist and internal risk management protocols.  There is no ‘one size fits all’ approach.
5. Determine your approach to the better outcome test.  Have regard to your practice in relation to 439A reports.  You should consider additional factors.
6. Make sure that you have appropriate levels of professional indemnity insurance.
7. Monitor the plan for restructuring the company.  It is incumbent on directors and their Safe Harbour advisers to exercise ongoing diligence throughout the turnaround phase, as carrying on a course of action beyond the point at which it is reasonably likely to lead to a better outcome will lose the protection of Safe Harbour.
8. For larger matters have a quality assurance partner.  Advisers can end up emotionally invested in a restructuring.  Periodic 'sanity checks' are advisable.
9. Ensure that you have conflict management protocols to ensure Safe Harbour engagements are highlighted in your firm’s conflict search.  Administrators and liquidators must be independent.  It's difficult to envisage circumstances where a Safe Harbour adviser would be able to subsequently accept a formal insolvency appointment.  Clearly, at a minimum, a perceived conflict of interest would likely exist given that the administrator or liquidator would be required to critically analyse the course of action taken as a result of either their or their firm's advice.
10. Keep detailed records, particularly for key decisions and the basis thereof; an advisory firm’s advice on better outcome is likely to be considered by a subsequently appointed liquidator or voluntary administrator if the turnaround does not succeed.  Records, as always, are critical.

 

For further information please contact:

 

Michael Sloan, Partner, Ashurst

michael.sloan@ashurst.com