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The safe harbour provisions give directors breathing room to restructure. Boss Lawyers helps you implement safe harbour protection properly — so it actually works when you need it.
The safe harbour provisions under section 588GA of the Corporations Act 2001 (Cth) are one of the most important protections available to directors of companies in financial difficulty. When properly invoked, safe harbour shields directors from personal liability for insolvent trading while they develop and implement a restructuring plan.
At Boss Lawyers, we regularly advise directors on how to invoke and maintain safe harbour protection. We understand that safe harbour is not a simple checkbox exercise — it requires genuine engagement with the company’s financial difficulties and a properly documented course of action.
If your company is in financial difficulty and you are considering restructuring, safe harbour may protect you while you work through your options. But it must be done properly. Get advice early.
Safe harbour is a defence to insolvent trading introduced by the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017. It is set out in section 588GA of the Corporations Act.
The safe harbour provisions recognise that sometimes the best outcome for a company, its creditors, and employees is achieved by allowing directors to continue trading while they develop a restructuring plan — rather than immediately appointing an administrator or liquidator.
Under safe harbour, a director is not liable for insolvent trading in respect of debts incurred in the ordinary course of business after the director starts developing one or more courses of action that are reasonably likely to lead to a better outcome for the company than the immediate appointment of an administrator or liquidator.
The protection applies from the time the director starts taking the relevant course of action, provided certain preconditions are met.
To qualify for safe harbour protection, a director must satisfy several requirements:
The director must be developing, or have developed, one or more courses of action that are reasonably likely to lead to a better outcome for the company than if the company were to enter administration or liquidation. This does not require certainty — the test is whether the course of action is “reasonably likely” to produce a better outcome.
The better outcome must be assessed by comparison to the outcome that would be achieved through immediate administration or liquidation. A better outcome could include the company being rescued, a better return for creditors, preservation of employee jobs, or a combination of these.
The safe harbour protection does not apply if, at the time the debt is incurred:
These preconditions are strict. A company that is not paying its employees or lodging its tax returns cannot access safe harbour, regardless of the quality of its restructuring plan.
Safe harbour protection is available to all directors of a company, including:
Each director must independently satisfy the requirements. Safe harbour is assessed on a director-by-director basis — one director may qualify while another does not, depending on their individual actions and knowledge.
Importantly, safe harbour is a defence, not a safe conduct pass. It is assessed after the fact, typically in the context of an insolvent trading claim brought by a liquidator. This means directors must ensure they can demonstrate compliance with the requirements if challenged.
To invoke safe harbour effectively, directors must take concrete steps. The Corporations Act provides a non-exhaustive list of factors the Court may consider when assessing whether a course of action was reasonably likely to lead to a better outcome (section 588GA(2)):
In practical terms, this means directors should:
Documentation is the foundation of a successful safe harbour defence. If a director cannot demonstrate what they did and why, the defence will fail.
Key documentation includes:
We recommend that directors create a safe harbour file from the outset, containing all relevant documentation. This file should be maintained throughout the restructuring process and kept securely.
Safe harbour protection is not absolute. It can fail if:
If safe harbour fails, the director is exposed to full insolvent trading liability from the date the company became insolvent. This is why it is critical to implement safe harbour properly from the start and to monitor compliance on an ongoing basis.
Directors should also have a clear exit strategy — if the restructuring plan is not working, the director should be prepared to appoint an administrator under voluntary administration rather than continuing to trade in the hope that things will improve.
If you are a director of a company in financial difficulty and you want to explore safe harbour, here are the key steps:
For more information about our insolvency services, contact Boss Lawyers on 1300 267 711.
Safe harbour is a powerful protection, but only when properly implemented. Too many directors treat it as an afterthought — something to raise after the fact when facing an insolvent trading claim. That approach rarely succeeds.
At Boss Lawyers, we help directors implement safe harbour from the outset. We work with you to develop a genuine restructuring plan, ensure the preconditions are met, and create the documentation trail that will support your defence if challenged.
We also work with your accountants and other advisers to ensure everyone is aligned and the restructuring plan is realistic and achievable.
Safe harbour requires a lawyer who understands both the legal requirements and the commercial realities of restructuring a distressed business. At Boss Lawyers, we bring over 22 years of combined experience to every safe harbour engagement.
We do not just tick boxes. We help you develop a genuine plan, meet the preconditions, and create the evidence you need. If safe harbour is later challenged, we defend it with the same rigour and commitment.
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For experienced safe harbour advice in Brisbane
As soon as you become aware that the company may be insolvent or approaching insolvency. Safe harbour protection begins when you start developing a course of action. The earlier you start, the more debts are potentially protected.
No. Safe harbour is confidential. You do not need to notify creditors, ASIC, or the Court that you are relying on safe harbour. The information about the course of action is protected from disclosure and is inadmissible in certain proceedings (section 588GA(3)).
Each director must independently satisfy the requirements. One director may qualify while another does not. Each director should obtain their own legal advice about their personal position and take their own steps to comply with the safe harbour requirements.
Safe harbour does not require the restructuring plan to succeed. The test is whether the course of action was reasonably likely to lead to a better outcome at the time it was being pursued. If the plan was genuine and well-founded but ultimately failed, the safe harbour defence may still be available.
No. Safe harbour only protects against insolvent trading liability under section 588G. It does not protect against other director duties, such as the duty to act in good faith, the duty of care and diligence, or criminal offences. Directors must continue to comply with all their other obligations.
If you need experienced legal guidance regarding safe harbour and director protection, contact Boss Lawyers today. Call us on 1300 267 711 or complete the enquiry form above.
Boss Lawyers Pty Ltd — Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
