Great to jointly present today with Scott Guthrie. It is important to remember that being in the Safe Harbour against insolvent trading only protects directors from insolvent trading liability. Directors still have to satisfy their duties to the company, including taking into account the interests of creditors. These duties likely mean a director cannot cause the company to incur new debts under a safe harbour restructuring plan that they do not reasonably believe will be repaid, even if the overall amount of creditors will be improved if the plan is successful. The exception to this may be if the new debt is with an existing creditor who overall will be better off under the plan. Put another way, you can’t sacrifice the interests of new creditors to achieve a better return for existing creditors.
Partner at Thomson Geer; Chairperson at TMA Australia (Qld Committee); Deputy Chair, Insolvency & Restructuring Committee (Qld), Law Council of Australia
It was my pleasure to present at the ARITA - Australian Restructuring Insolvency & Turnaround Association Queensland forum today with Scott Butler on the topic: do directors of a financially distressed company (esp. when in safe harbour) owe a distinct duty to creditors? Short answer: “no”. Long answer: the interests of a company in financial distress begin to include the interests of creditors - and are eventually subsumed (my word) by them when the company becomes insolvent. Thank you to Gadens for hosting and to Helen Newman for her warm introduction.
Managing Principal - Worrells Queensland ● We’re insolvency and turnaround teams who help people and business move past financial messes ● Worrells
5moGreat presentation Scott x 2.