Your preferred office location:
  1. Home
  2. /
  3. HHG Articles
  4. /
  5. ‘Safe Harbour’ Laws: New Hope for Companies and Directors?
13 Dec 2017

Current insolvent trading laws stigmatise corporate failure. They effectively force directors to sacrifice companies in order to safeguard themselves against prosecution and impede businesses from trading out of difficult financial situations. The result is not only harmful to companies and individual directors in this situation, it impacts at all levels of the supply chain in every industry across the entire economy, and can be a restraint on growth and employment.

On 12 September 2017, both houses of the Parliament of Australia passed the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill (Bill). The Bill promotes a culture of entrepreneurship and innovation through the introduction of:

  •  a ‘safe harbour’ which allows directors to incur company debts which would normally trigger a breach of current insolvent trading laws; and
  • an automatic ‘stay’ on ipso facto clauses which allows companies entering a formal restructure to continue trading.

Safe Harbour

The ‘safe harbour’ provision protects directors from contravening section 588G of the Corporations Act 2001 (Cth) (Corporations Act) where a director who suspects the company is insolvent takes a ‘course of action’ that is ‘reasonably likely’ to lead to a ‘better outcome’ for the company and its creditors whilst incurring debt.

‘Course of Action’: Minimum Requirements

In considering the director’s course of action, the Court will examine whether the director:

  • ensured proper record keeping;
  • prevented misconduct;
  • remained informed about the company’s financial position;
  • obtained appropriate advice from a qualified entity including a lawyer; and/or
  • developed or implemented a plan for restructuring the company to improve its financial position.

These criteria are non-exhaustive; each decision will be made on an objective case-by-case basis with the aim of preventing directors from pursuing fanciful strategies.

Under the Bill a director’s course of action must provide for employee entitlements and lodgement of necessary taxation documents.

‘Better Outcome’

The ‘outcome’ of the director’s chosen course of action must be ‘better’ than if the company were subject to external interventions such as entering into liquidation, administration or a scheme of receivership.


The ‘safe harbour’ will begin protecting the director from the period that the director begins taking the course of action to achieve the ‘better outcome’, to when:

a) the course of action has ceased or is no longer reasonably likely to achieve a better outcome; or

b) the company becomes a Chapter 5 Body Corporate.

Ipso Facto Clauses

Ipso Facto clauses are contractual provisions that give a party the right to terminate or vary a contract on the occurrence of, for example, an insolvency event irrespective of continued payment or performance of the contract. The Bill provides that ipso facto clauses are automatically ‘stayed’ for a specified period of time if they are enforced on the basis that the company has entered into a:

  • voluntary administration – section 451E; or
  • proposed scheme of arrangement – section 415D.

For the purposes of commercial efficiency and certainty, a stay will not apply to:

  • rights arising under contacts entered into before the enactment of the Bill; or
  • certain kinds of contracts including those associated with specified financial products or made after the compromise, arrangement or voluntary administration.

HHG Legal Group’s Comments

Safe Harbour

  • The ‘safe harbour’ provisions represent welcome relief from unnecessary Government interference and encourage more robust entrepreneurial risk taking which is considered to be beneficial to the economy.
  • Nevertheless, there is currently a degree of uncertainty surrounding the ‘safe harbour’. We expect that these uncertainties will be worked out by the Courts over time and, like any area of legal uncertainty, a significant volume of case law is expected to result. The Courts will be called upon to address the limits of the criteria as to what course of action directors may take and what will be held to be a ‘better’ outcome for the company and shareholders as a whole.

Ipso Facto Clauses

  • Our view is that the over regulation of Ipso Facto clauses is likely to inhibit economic growth as opposed to their accompanying reforms. Should people be forced to continue to trade with companies facing insolvency, they may need to pass on their increased risk in the form of higher prices. However, it is not the ‘end all’ for companies as they may apply to the Court to lift the stay if it is in the interests of justice.
  • If you suspect that your business is dealing with a party that may be facing potential insolvency, our solicitors can provide advice as to the effect of these changes and help mitigate any potential losses.
  • If you are uncertain about your legal rights as a director of a company whose solvency is in doubt, you should seek legal and specialist accounting advice, and regularly update that advice as you take steps to manage the company through this time of uncertainty.

This is general information only and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters, please contact HHG Legal Group’s Albany office on 9481 2322.

*This is general information only, and does not constitute specific legal advice. Please consult one of our experienced Legal Team for specific advice relevant to your situation.

Supporting Western Australians for more than 100 years

"Always fast and thorough service. Thank you"

Sitka Pil

"My circumstances at the time I made contact with HHG were dire following my argument being rejected by two no win no fee firms. Following my initial meeting with HHG's employment law team I was left feeling extremely positive by the response and concern shown by HHG in regards to their support of my argument along with their preparedness to pursue an outcome on my behalf.

I accept the fact that nobody really wins in these cases (mental health/ workplace) however the end result was what would be considered most favourable and far in excess of what would have been achieved had I not sought the advice from HHG.

I have no hesitation in recommending HHG to anyone caught up in the messy circumstances I found myself in at the time.

Great advice and five-star commitment to their client!!"

Nathan Lynch

"Thank you for such great assistance with the transaction of Flying Domestics on behalf of Lorna Good. It has been such a pleasure to work with the HHG Legal Group and I look forward to working with you in the future."

Jim Goodwin

"Simon Creek and his team were at all times empathic, professional and confident.  My matter needed to be addressed within a pressing time frame, and their availability at short notice and contact after hours was much appreciated.  It caused me considerable stress, but having such a thoroughly reliable and competent team to call on helped me to feel in control. Although I hope not to need their services again in future, I would be confident in doing so!"

Dr Lana Bell

"A good outcome is what we can expect.  A great outcome is a sign of a company which does the very best for their clients. A very big thank you to Daniel Morris for showing empathy towards my small and much needed legal action.

To HHG Legal Group, thank you for a great outcome.  I would recommend your company to anyone seeking legal services."

Jan Atkinson

"Your support this morning was amazingly kind, not to mention your totally reassuring competence, knowledge and wisdom that you used on my behalf.  It was extremely reassuring to have your knowledgeable support, and I particularly appreciated your real and obvious kindness to me. It means so much at a very difficult time. I'm so grateful to you."

Family Law Client

"Janene was very professional and we established a good rapport quickly. The subject of death and wills can be quite confronting to deal with, however, Janene's approach was soft and accommodating."

Lynette Livesey

"A big thank you to HHG for their professional service, continued support, and wide range of legal knowledge. Our clients have given us nothing but kind words regarding HHG Legal Group and so we have no hesitation in referring and recommending Simon Creek and HHG Legal Group for their outstanding services and legal expertise."

Nigel Plowman, Director at Mckinley Plowman & Associates

"Simon is a friendly and practical legal advisor. I have received great feedback from the clients I have referred to him and his team at HHG Legal Group."

Richard Beal, Director at BDO

"Over the last few years, I have been impressed by Simon’s legal ability, management skills, entrepreneurial spirit, personal integrity and people skills. He appears to be that rare breed of lawyer – both knowledgeable and commercial."

Michael Malone, Founder of iiNet

"Our family has been a client of HHG Legal Group over many years.  Business has included drawing up of wills for three generations and preparing of probate for my father in law. I would have no hesitation in recommending HHG Legal Group to anyone requiring such services."

Bernice Climie

"You should be congratulated for the manner in which your staff address clients and we found our dealings with your company, once again a very pleasant experience and we would like to truly thank you for your efforts."

Steve Harvey and Jane Powell

"HHG Legal were absolutely fantastic. Extremely responsive and brought calm to our chaotic family situation through their knowledge and caring attitude. Extremely professional from our very first contact with them and they expertly guided our family though the required legal process over almost a 12 month period."

Amanda Williamson

"Fantastic team! They really care about their client. Tim Colcutt is a 'go that extra mile' guy who gives his client his all. I can't recommend HHG and Tim enough."

Kerry Samson

"I had a fantastic lawyer in Matthew Lilly. He helped me out a great deal with good, sound advice in a friendly, professional manner. First class, thanks Matthew"

Graeme Hammond

"Marine Plant Systems has been working with HHG Legal Group for a few years now and they continually provide first-class service. Their professional advice has been invaluable to our company."

Carolin Grimm - Marine Plant Systems

"We were kept up to date at all times. Pricing was always updated over the time period so we remained "in budget". Personal access to someone whenever I had questions. All in all a great experience without too much fuss."

Rosslyn Tasker - COO Altusq Pty Ltd

"Good service you can count on."

Miles Lee

"HHG Legal Group has provided outstanding support as I have taken the journey of buying a business, their professionalism is beyond reproach. Their assistance throughout the Due Diligence process has been invaluable, I would fully recommend them."

Mark Armitage

"Very friendly and efficient service - what a pleasure working with Matthew."

Jacques Taylor

"I highly recommend Daniel from HHG Lawyer in Mandurah. When dealing with a complicated legal property matter recently I was extremely impressed by Daniel's honesty and integrity and the legal advice I received. I am very happy with the service from HHG Legal."

Tony Walker

"Lisa, thank you so much for representing me in court, honestly, I would not have had the outcome I got without you. Once again, Thank you so much."


"Matthew Lilly was excellent in processing our project. He achieved the excellent result that we required on our project.

We would give Matthew a 5 star rating.

We will definitely commission Matthew for any further projects if we have the need."


"I have had the pleasure of being represented by Ms Lisa Riley. Lisa helped me in December 2020 when I was charged. Lisa was extremely supportive, reassuring, and preserved with her investigation of the laws and was able to save me from a terrible outcome. Another incident occurred in August 2021 in which I sought Lisa’s help. Lisa preserved and was very patient with me. This only got resolved this year. When she advised me that she was leaving her old firm, I insisted that she remain my lawyer, as I had the utmost faith in her. Hence I moved over to HHG. Lisa took no shortcuts in my defence and continued to preserve for the toxicology report that ultimately saved me. She kept me up-to-date with the progress and provided support. Having someone as understanding as Lisa was a huge gift, to me and my family. You have gained a huge asset in Lisa joining your firm.

Thank you, Lisa, forever grateful for your work, and if ever needed, I will be sure to refer to you"


"We can highly recommend HHG Legal Group and particularly Mr Blair Campbell (Special Counsel / Dispute Resolution)

Blair worked with us as we navigated a very difficult third party dispute.

Blair’s expertise, wisdom, and the way he guided us in a very measured and calm manner gave us great encouragement and comfort. Blair helped us to focus on what we needed to and to trust the process.

Blair was always responsive to us, he always got back to us very promptly to answer our questions and to help us to step through some really hard days.

We are very grateful for Blair’s expertise and wisdom along with his empathy and care, this truly made the difference for us."

Wayne and Janice Belcher

Preferred office location:

Please select your nearest office location so we can show you the most relevant information.