The panellists today noted the increased use of the safe harbour for directors as a protection against insolvent trading risk in the current economic environment. Its potential use as a tool in a business overhaul by concerned companies, and not merely insolvent ones, was also noted.
Its use in the following contexts was noted:
- a tool to allow a company to consider strategies for long-term profitability rather than just to fix immediate cashflow issues;
- to use as a tool for target entities of private equity and credit firms, not just financially distressed companies themselves;
- as a protection for directors of companies considering capital raising; and
- companies facing unpredictable and unforeseen disruption to business.
Improving working capital remains the key priority in safe harbour engagements, but once that has been stabilised, safe harbour engagements can be used to implement solutions focussed on the long-term success of the business by examining the underlying objective of the business – the “why” – and how the processes, systems and cultural leadership play a significant part in ensuring clear strategic intent and continuity of business.
The flexibility of the safe harbour regime shows that these engagements can be an early protective step for companies to take and can simultaneously be used as a restructuring tool rather than just a defensive measure.
Genevieve Sexton (Partner, Arnold Bloch Leibler) was joined by panellists Macaire Bromley (Partner, Vantage Performance), James Simonian (Executive Director, Weston Energy) and Robyn Duggan (Associate Partner, Ernst & Young) to explore the above issues.