Members of the Senate have temporarily put aside considerations of postal votes, plebiscites and dual citizens to approve the safe harbour and related laws.
The Bill amends the Corporations Act 2001 (Cth) by:
- creating a safe harbour for company directors (and holding companies) from personal liability for insolvent trading under subsection 588G(2) of the Act if the company is undertaking a restructure outside of formal insolvency; and
- making contractual rights (created post-amendment) that amend or terminate an agreement on an insolvency appointment (known as ipso facto clauses) unenforceable.
In implementing these reforms, the government has stated that it aims to 'promote entrepreneurship and innovation to drive business growth, local jobs and global success'. There have been a number of concerns expressed about the details in these reforms. However, there is general consensus that the proposed reforms will have a positive impact on boardroom culture in Australia and will in many circumstances avoid value dilution for distressed companies.
These reform address important concerns about the current insolvency regime, and may also shift the focus away from punishing business failure and instead promote entrepreneurship and provide protection for honest directors.
Given the recommendations by the Economics Legislation Committee (a copy of their report can be found here) the Bill would be expected to pass into law.