Vantage makes submission to government on its review of safe harbour
Treasury is currently reviewing the safe harbour protection afforded to directors of financially struggling companies under section 588GA Corp Act.
As one of the country’s leading providers of safe harbour expert advice, Vantage has made a submission setting out practical insights into its use and recommendations on how it can be improved.
- Since it was first introduced in September 2017, the safe harbour has proven to be an important tool in the restructuring landscape to support companies working through financial difficulties.
- In Vantage’s experience, when used as a turnaround framework, safe harbour is delivering successful results. It is guiding directors in the behaviours required of them when faced with financial distress, namely:
- have a plan;
- developed and implemented with the assistance of an expert;
- founded upon good quality financial information – importantly, including forecasts that project the outcome of those planned initiatives;
- focused on improving the company’s position.
- The flexibility and confidentiality of the framework are key features in encouraging and facilitating directors’ use of the safe harbour.
- It is Vantage’s experience that the mandatory tax and employee compliance section is working – it is capturing directors who intentionally permit their companies to seriously and serially fail to lodge tax returns and pay super, and companies that are not viable.
- Unfortunately, however, it is also inadvertently capturing the honest director, for example in relation to technical or trivial matters. Although there is relief for such directors as a discretionary court matter, it is Vantage’s view that the better way to support directors is to amend the text. Vantage would like to see the mandatory compliance section varied to provide a specific list of tax reporting requirements, a limited timeframe and to expressly exclude technical and trivial matters.
- Given its success in helping save companies and jobs, Vantage is keen to see increased awareness of safe harbour as a turnaround tool. With the weight of practical experience now under our belt, and in the current economic climate, there is an opportunity for government agencies such as ASIC and the ATO to join with industry bodies and professionals, to deepen directors’ understanding of safe harbour.
- As part of that endeavour, Vantage looks forward to sharing regular updates over the coming months, highlighting the dos and don’ts of safe harbour, and how financiers, lawyers and accountants can use it to encourage their clients to seek help earlier.
Vantage is a boutique domestic business consulting firm, focused on building stronger and more resilient businesses to improve the rate of success. In its 16 years, Vantage has turned around circa 170 businesses and achieved an 85% turnaround success rate. We assist clients across the spectrum, whether SME mid-market large corporate or institutional, all benefiting from safe harbour.