Safe Harbour: A port and temporary respite for all in the storm
TMA Australia welcomes the Federal Government’s implementation of emergency measures to give temporary relief for directors from any personal liability for trading while insolvent.
The Government announced today that the Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the Coronavirus.
“… To make sure that companies have confidence to continue to trade through the Coronavirus health crisis with the aim of returning to viability when the crisis has passed, directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This will relieve the director of personal liability that would otherwise be associated with the insolvent trading. It will apply for six months…”.
Members of the TMA Board along with Business leaders lobbied government to promote the temporary easing of the insolvent trading measures and we are pleased to see government act decisively in this respect. We continue to advocate other key initiatives.
The TMA recognises these changes remove a roadblock, but businesses still need to restructure and employ turnaround techniques. Standstills, refinancing, cost outs and operating model redesigns etc will still be required. The relief is not a panacea. Safe harbour is in many ways reflective of the best restructuring practices the TMA advocates – namely realising that there is an issue, identifying options, having a plan, engaging TMA advisors and implementing the plan.
It may be seen as an opportunity for pre insolvency Phoenix proponents. However, directors’ duties are not relieved. We remain vigilant and continue to call out any such activity for what it is and remind our membership of our TMA values, strong ethics and guidelines.
The TMA believes the environment warrants an emergency response from Government including providing clear and simple messaging to the directors of viable businesses to focus on a plan to survive rather than an irrevocable plan to formalise insolvency options or liquidate. The immediate priority must be to keep the economy and businesses going.
This is in effect a port in the storm and a safe harbour for all.
More detail and what this means at a practical level to follow in due course as this business critical development unfolds.
on behalf of the TMA Australia Board