The Senate Economics Legislation Committee has strongly recommended that the Australian Parliament pass the reforms to Australia's safe harbour and ipso facto regime currently before the Senate. As the reforms have already passed through the House of Representatives, this means that as early as the end of August 2017, in prescribed circumstances, directors could be entitled to a safe harbour from personal liability for insolvent trading claims.
On Tuesday, 8 August 2017 the Senate Economics Legislation Committee tabled the report of its inquiry into the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017. It broadly recommended that the Bill be passed in its current form. The Bill introduces a carve out for directors to no longer be held personally liable for debts incurred while the company is insolvent so long as the debts are incurred as part of a course of action that is reasonably likely to lead to a better outcome for the company. The report did flag that some of the issues raised in submissions are best clarified in regulations accompanying the legislation.
The Senate Report also recommended the passing of the reforms proposed in the Bill to the operation of ipso facto clauses during certain insolvency procedures. If passed, from July 2018 a moratorium will be imposed during voluntary administrations, schemes of company arrangement to avoid insolvency and receiverships, which prevents counterparties from enforcing pre-existing rights under company contracts by reason only of the company's voluntary administration, scheme of company arrangement, receivership or financial position.
For more information see our earlier article on the proposed reforms here.