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.