What Are Safe Harbour Laws?
The Safe Harbour legislation was passed on Tuesday 12th September 2017 allowing company directors to trade while their company solvency is still questionable. The legislation does not remove insolvent trading laws but once a director enters a ‘safe harbour’, they are no longer personally liable if they to produce a better outcome for the company and creditors. In other words, the new legislation is a licence to be insolvent whilst inside the harbour.
There has been criticism that the laws cause directors to limit personal liability by prematurely seeking the appointment of a voluntary administrator in circumstances where a company is still viable. This goes against the original purpose of the voluntary administration regime.
The safe harbour cannot be used by a director where the company failed to maintain proper books and records, failed to pay employee entitlements when they fell due or failed to file documents as required by taxation laws. The safe harbour does not apply where such failure was not in compliance with these general requirements, or there was more than one failure in the preceding 12 months. As a director, they will still be liable for a breach of directors’ duties or failing to comply with any applicable continuous disclosure obligations.
The operation of the safe harbour laws will change the way that directors handle a company’s solvency issues. These changes will encourage directors to think about how they can attempt to restructure or turnaround the company without the concern of being held personally liable for company debts incurred at or after this time.
Seek professional advice
You should seek professional advice immediately if your company is heading towards voluntary or involuntary company liquidation. Contact the 24/7 CRS Insolvency Services toll free hotline on 1800 210 073 to receive free and impartial company liquidation advice today.