Safe harbour and ipso facto reforms to become law
After a campaign that ARITA first launched around a dozen years ago, safe harbour and ipso facto reforms passed the Senate late last night.
The reforms are largely an adoption of ARITA’s detailed 2015 policy positions that were subsequently and comprehensively endorsed by the Productivity Commission in their Business Set-up, Transfer and Closure Inquiry.
Amendments to tighten the obligations on directors seeking safe harbour protection and a requirement to use a registered liquidator as part of the restructuring effort were, unfortunately, defeated on the Senate floor. These were closer to ARITA’s original policy positions; however, we are happy to see the law go through in its current form.
ARITA has worked extensively with Treasury on these laws and it is a significant achievement to have them passed into law.
Ipso facto amendments
The Government proposed some technical amendments to the ipso facto provisions which were accepted: these amendments reflect ARITA’s most recent submissions on technical aspects of the Bill. There is also now a provision for an independent review of the safe harbour provisions after two years of operation.
The safe harbour laws will commence operation the day after the Bill receives Royal Assent. The Ipso Facto provisions are set to commence on 1 July 2018 (or earlier by proclamation). The key aspects of the new laws are summarised in our previous update to members upon the Bill’s introduction into Parliament.
As we have advocated all along, these reforms were vital to have in place before another economic downturn and to build a genuine restructuring culture.
The success of these laws will now turn on how the director community responds to the new protections and if they believe it will allow them to work on a business turnaround without unreasonable fear of prosecution.
The other important challenge will be to ensure that ARITA members are seen as being the obvious and necessary choice as restructuring advisers and that, in turn, we keep out dodgy advisers.