The Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 will create a regime that allows company directors to take reasonable steps to restructure their company in certain circumstances. Importantly, the reforms provide directors with a safe harbour from personal civil liability during the restructure phase.
The passage of the Bill fulfils a government commitment to improve Australia’s insolvency laws and acts on a key 2015 Productivity Commission recommendation.
AICD Acting Chairman Gene Tilbrook applauded the government for achieving such a substantial and meaningful reform.
“The government’s safe harbour reforms have the potential to lead a cultural shift in Australian business, saving potentially thousands of jobs and billions of dollars of wealth,” he said.
“Australia’s insolvency laws were widely viewed as among the harshest in the world.
“They created incentives to pull the trigger on administration or liquidation too early, prematurely wiping out jobs and value. They also acted as a barrier to start-ups and scale-ups, the very businesses which stand to create thousands of jobs for the future.
“Crucially, the safe harbour is conditional on meeting employee entitlements, tax reporting obligations and existing statutory obligations to provide assistance in the event of administration or liquidation. The reforms also incentivise keeping company books in good order.
“These reforms are designed to give directors breathing room to turn around companies with the potential for a strong future.
“It will also encourage more experienced directors to provide their expertise and insight on the boards of innovative start-ups.
“Importantly, these reforms are ‘phoenixing neutral’. The AICD strongly supports tougher penalties and measures to combat such behaviour.”
Due to an amendment from the Opposition inserting a two year review period into the legislation, it will now return to the Lower House.
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