Insights – Key takeaways on safe harbour from TMA Education Day (Sydney)

We set out below our key takeaways from the TMA Education Day held in Sydney on 7 May 2026.

  • What is safe harbour?

    • Australia’s “safe harbour” regime is a director protection framework under the Australian Securities and Investments Commission and the Australian Corporations Act designed to encourage directors of financially distressed companies to pursue restructuring and turnaround efforts without immediate fear of personal liability for insolvent trading

    • Ordinarily, directors may be personally liable if a company incurs debts while insolvent. Safe harbour provides protection from that liability where directors are actively developing and implementing a genuine restructuring plan that is reasonably likely to lead to a better outcome than immediate liquidation or administration

  • Core requirements

    • To rely on safe harbour, directors must:

      • Suspect the company may become or be insolvent

      • Start developing one or more courses of action reasonably likely to achieve a better outcome than liquidation

      • Ensure the company:

        • Continues to pay employee entitlements when due; and

        • Complies with tax reporting obligations

        • Properly inform themselves of the company’s financial position

        • Take steps to prevent misconduct by officers/employees

        • Obtain appropriate professional advice (e.g. legal, restructuring, insolvency, financial)

        • Maintain appropriate books and records

  • What is a “better outcome”?

    • The test is whether the proposed restructuring is reasonably likely to produce a better result for the company and creditors than immediate formal insolvency proceedings

  • How to use safe harbour effectively?

    • Act early – the biggest mistake is waiting too long. Safe harbour is most effective when directors move:

      • At the first signs of liquidity stress

      • Covenant pressure

      • Deteriorating trading performance

      • Refinancing risk

    • Establish a credible restructuring plan – Safe harbour protection depends on pursuing a course of action “reasonably likely” to lead to a better outcome than liquidation. This could include:

      • Cost reduction programs

      • Working capital optimisation

      • Asset divestments

      • Standstill arrangements with lenders

      • Refinancing or recapitalisation

      • M&A processes

    • Get advisors involved early – Professional advice is one of the core requirements. Typical advisers include:

      • Legal advisors

      • Financial / restructuring advisors

      • CROs and interim management to lead the restructuring

    • Focus on liquidity

    • Manage stakeholders proactively

    • Maintain strong board governance

    • Protect employee and tax compliance

    • Continuously reassess viability and the projected outcome from the restructuring plan versus the likely outcome under liquidation

About TMA
The Turnaround Management Association (TMA) is Australia’s premier membership association for professionals in turnaround, restructuring, and corporate renewal.

(Photo taken from host Corrs Chambers Westgarth office)

David Chew1-30