As previosuly reported, the 'Safe Harbour' law reform aims to create a cultural change among company directors.
It encourages Directors to retain control of their company, engage early with appropriate professional advisers and take considered, reasonable risks to facilitate the company’s recovery rather than prematurely deciding on a formal appointment.
Passage to the Senate
On 1 June 2017, the Government introduced the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 (“the Bill”) into the House of Representatives. The Bill proposed amendments to the Corporations Act 2001 (Cth).
The House of Representatives passed the Bill on 22 June 2017 and the reforms were introduced introduced into the Senate. The Senate referred the provisions of the Bill to the Senate Economics Legislation Committee (“the Committee”) for inquiry and report by 8 August 2017.
The Committee received written submissions from relevant stakeholders and interested parties. The majority of submissions were broadly supportive of the Bill and encouraged its progress through the Parliament.
Some key comments were:
- Australia’s current insolvency law offered disincentives and impediments to effective restructuring. It also had unintended consequences for Australian businesses, communities, and the economy as a whole;
- the reforms will promote innovation, entrepreneurship and measured risk-taking by companies and directors. They’ll give companies facing financial difficulties reasonable prospects of turnaround, saving jobs and value;
- the reforms would ‘provide appropriate balance’ between supporting businesses to work through temporary difficulties and protection of rights for those transacting with them; and
- the reforms will reduce the incidence of directors prematurely entering into a formal insolvency process.
The next stop for the proposed legislation is the Second Reading, where any amendmenst will be made by the Senate.