Current trading conditions are unprecedented; COVID-19 restrictions have played havoc with business revenue in all sectors. We have no certainty about when restrictions will end and trading conditions improve, or what impact a possible easing and tightening of restrictions could have on businesses.
In March 2020, to avoid mass insolvencies, the Federal Government put in place temporary relief from insolvent trading penalties. In September 2020, this relief was further extended up to 31 December 2020; however, it is unlikely that extensions will be ongoing.
Safe harbour legislation is an early intervention framework that directors can use to turnaround their business; however, without a prior focus on a business turnaround plan, most directors are unaware of the benefits offered by the safe harbour framework.
Safe Harbour legislation is designed as an early intervention framework that directors can use to turnaround their business, although without a prior focus on a business turnaround plan, most directors are unaware of the benefits offered by the Safe Harbour framework.
Are you safe harbour ready if you need it?
The safe harbour framework may be your best protection in 2021, and now is the time that directors need to prepare this framework to give their businesses the best chance of successfully navigating a transition through the uncertain COVID trading conditions and avoid personal liability.
It can take months to properly prepare an effective safe harbour framework. Beginning your preparation in January 2021 could be too late to provide effective protection, so it is important to act now.
Remember, utilizing safe harbour protection is not a sign of insolvency, it is a positive action to address challenges and put in place a plan to turnaround your business. As well, it is a set of guiding principles that a director can point to, to show they were acting under the safe harbour framework with the aim of defending personal liability from an insolvent trading claim if it arises in the future.
Act now whilst you have time
Business turnarounds involve solving complex problems with various stakeholders including creditors, suppliers, lenders, lessors and customers.
The earlier you act, the more time (and options) you have will have to address these challenges and give your business that best possible chance of executing a successful turnaround.
All of these challenges require time – but with a turnaround plan under the safe harbour framework – you can have better visibility of your business’ financials and an understanding of your runway to execute a turnaround. You can also transition your focus away from worrying about the solvency of your business and towards a focus on executing your safe harbour turnaround plan.
Please contact us to discuss how your business could benefit from early implementation of a safe harbour framework.