The ‘Safe Harbour’ Reform of Directors’ Insolvent Trading Liability in Australia: Insolvency Professionals’ Views

Abstract

Directors of Australian companies are subject to a duty to prevent their company trading whilst it is insolvent. The duty is controversial. Over a period of at least ten years, a series of reforms have been proposed, leading up to the introduction, in 2017, of a safe harbour for directors where directors undertake a restructure of the company outside of external administration. There are important questions relating to the safe harbour reform. To assist in answering these questions, the authors undertook a survey of insolvency professionals. The authors had three main goals in undertaking the survey – to obtain insight into the experience of practitioners with the safe harbour reform, to obtain the views of these practitioners on whether the reform has achieved its objectives, and to obtain their views on whether any changes should be made to the safe harbour provisions in light of the independent review of the reform that the Government is required to commission.

Keywords: Insolvent trading; directors' duties; corporate restructuring