Harbour Masters - safe harbour & restructuring blog

Welcome to Harbour Masters, where we offer insights and updates on the expertise and guidance available for the Directors of companies in need of advice in the face of stiff trade winds. Our updates focus on the critical business topics of restructuring, turnaround, and the availability of the new 'Safe Harbour' provisions, all designed to help companies renew, restructure, and rebuild. 

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Potential implications for creditors

03-Oct-2017 10:24:00 / by Stefan Dopking

There is no restriction on a creditor to start recovery action against the company and director (if a personal guarantee was provided). This might include applying for the winding up of the company during safe harbour. As part of the restructure plan, the company shall be required to manage creditor claims to avoid such recovery actions.

While there is no requirement to inform creditors a company is entering safe harbour, if creditors are made aware, they may be concerned about future trading with the company. Creditors may reduce credit limits or require trading terms be on a cash on delivery (COD) basis.

It also raises the question of whether there is an obligation to advise creditors and other stakeholders that the company is entering into safe harbour. If the safe harbour process succeeds, creditors will not be aggrieved. Yet if the safe harbour process fails and results in further loss for the creditors, there is no doubt creditors will be concerned that they were unable to make informed decisions.

Creditors with concerns over a company entering safe harbour may be more inclined to commence recovery action sooner to protect their position. As with any restructure, the company will need to effectively manage its creditors.

It may be unavoidable that suppliers, creditors and financiers look to update their credit terms to include a provision that the company is required to inform them if it looks to rely upon safe harbour.

Topics: Safe Harbour, Creditors

Stefan Dopking

Written by Stefan Dopking

Stefan has over 30 years’ experience in corporate recovery and insolvency including valuable insights as a Senior Executive at the Australian Securities and Investments Commission (“ASIC”), where he was responsible for the organisation’s national insolvency and audit teams. With a focus on corporate receiverships, business reviews and financial health assessments for directors and lenders, Stefan is known for mediating outcomes in difficult appointments.