An Introduction to Safe Harbour

Safe harbour provisions were introduced into the Corporations Act 2001 (the Act) in 2017 as a means of protecting those directors making legitimate efforts to turn their company around from financial distress.

Under the Act, directors are required to behave according to strict statutory obligations. Breaching these can expose them to personal liability for debts incurred trading whilst insolvent, as well as other damages for breaching their duties as a company director.

Taking advantage of safe harbour provisions can safeguard directors against insolvent trading and allow them to stay in control of their business during periods of distress. This provides space and privacy for directors to work with an advisor and develop a concrete plan to recover the business whilst preserving goodwill and public reputation.


Is It Right for You?

Safe harbour is available when a director suspects their company is – or is likely to become – insolvent, and they develop at least one course of action that is reasonably likely to result in a “better outcome” than if the company was put into liquidation or voluntary administration.

To gain access to the safe harbour defence, there are important steps that must be taken to demonstrate to a court that a better outcome is being achieved. In this regard, directors must:

  1. Be well informed about the company’s financial position and performance;
  2. Take steps to prevent misconduct by employees and officers of the company;
  3. Take steps to ensure the company maintained quality financial records;
  4. Obtain advice from an appropriately qualified adviser;
  5. Develop or implement a plan for restructuring the company to improve its financial position.



Protections cease if these actions are not followed through or if they are not actioned within a “reasonable period”. A business may not be eligible if overdue employee entitlements are outstanding if they are in breach of lodgement requirements with the ATO, or if they breach certain obligations to assist an external administrator if appointed. Most importantly, a safe harbour will only be viable if advice is sought early in the process of the financial pressure being identified.


Where to Get Advice on Safe Harbour?

A safe harbour is a great option for some, but every business facing financial distress has its unique concerns. These personal needs may affect whether Safe Harbour is right for you and your business. This may be because your business does not meet the eligibility criteria, or perhaps there are more cost-effective options available to you outside of the safe harbour regime.


Our Approach

Our specialist advisors work closely with clients to assess their individual needs. Our partners provide expert advice on whether your business can be compliant with the strict legislative demands of safe harbour and make you aware of all the options available to you and your company. If safe harbour is right for you, we also provide ongoing support to companies throughout the process of accessing Safe Harbour process, managing issues as they arise.

If you would like more information on accessing Safe Harbour, contact Liam Bellamy, our National Lead in Turnaround and Restructuring.



This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to RRI Advisory’s clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.