The safe harbour reforms introduced in September 2017 have been widely welcomed by many in the marketplace, however some do see it as a new breeding ground for class action litigation, not just involving directors but also any advisers who might be involved in safe harbour such as giving advice as to what is the better outcome for the company.
Other interactions, such as the interaction with disclosure obligations, are also now being clarified by the ASX; it has recently come out and said, notwithstanding directors might believe that they have the benefit of safe harbour, this of itself as a legal outcome is not necessarily one that must be disclosed to the marketplace and it may not have any effect on the price of a company's securities.
The other thing that we are seeing in the marketplace is advisers are being very careful in drafting any retainer agreements. An appropriately qualified adviser is not defined in the legislation; nor does it state what qualifications are required. So, many advisers are carefully looking at their retainer agreements and are very carefully drafting the scope of what they are required to be doing if they are asked to give such safe harbour restructuring advice, or if they are asked to opine on what is the better outcome for a company. In doing so they are taking into account whether they might put themselves in a position of conflict if ultimately the restructure fails and a voluntary administrator appointment is required.
The Federal Government did announce that two years from the date of commencement of the safe harbour it would form a three person independent committee to review the legislation and see what impact safe harbour is having on directors.
There are still some grey areas that need to be ironed out, especially given that directors can also continue to be liable for insolvent trading debts where they act dishonestly, and this can come with some criminal sanctions, so it's important for any directors to seek advice on safe harbour and whether or not they might have the benefit of safe harbour protection.
While the better outcome test is defined in the new safe harbour regime ultimately we see a possibility that a liquidator might be the one to come forward to the courts and seek to challenge the better outcome test in any restructure where the directors have sought the benefit of the safe harbour regime.
What we recommend is that directors carefully consider their position, and seek advice from appropriately qualified advisers who have the right qualifications and experience to be able to help them navigate safely through the safe harbour regime.