Australian business owners are urged to get their accounts and records in order, as the temporary safe harbour deadline is fast approaching, a corporate insolvency advisory has warned.
The Federal Government’s safe harbour scheme protected companies trading while insolvent during the Covid-19 crisis, and while it was originally due to end in September, it was extended to 31 December when it became clear the economic effects of the pandemic were still wrecking havoc on small businesses.
The ‘safe harbour’ meant the Corporations Act suspended provisions that would otherwise hold directors personally liable for trading while insolvent, according to leading corporate insolvency advisory Mackay Goodwin.
"It is critical to get the message out that from New Years’ Day, company directors could face penalties if their business is found to continue trading while insolvent," Mackay Goodwin CEO Domenic Calabretta.
Safe harbour laws state that an external administrator must be appointed to your company before the moratorium's expiry on 31 December 2020, if the debts incurred during Covid are to be excluded from a liquidator's claim for insolvent trading, Calabretta said.
“I really encourage companies to take the time now to examine their businesses and identify if it is still viable, or suffering from temporary liquidity challenges.
“Those companies could undertake a restructure, which could see them continuing to trade, but in a stronger financial position. With the right advice, they may come out of Covid stronger than they went in."
Calabretta urged businesses to seek professional advice on compliance with regulatory obligations and to undertake a general health check to ensure they have viable plans for recovery and growth.
"Directors may need advice on lending, cash flow, restructuring, forensics, and improving efficiencies to avoid financial trouble,” he said.
“A professional adviser is best placed to help.”
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