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How does the safe harbour defence operate
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Corporate Law Assignment -

Instructions - The purpose of this assignment is to enable you to consider and research a topic of current interest and relevance to Australian corporate law.

It is important that you to take time to think through how to structure and present arguments and to review and discuss what the law is or should be in a particular area. Whilst discussion with others is encouraged, the final piece of work must be your own.

Please note that the word limit is 2,500-3,000 words in total (assignments exceeding the word limit may not be marked and may be returned to the student for re-writing; assignments less than the required length will risk not covering the topic adequately and may result in a fail). Do not include synopsis, references or bibliography in the word count.

Background -

The laws relating to corporations are continually evolving. Judicial decisions, the changing needs of society, various parliamentary hearings and Treasury discussion papers have led to reforms being introduced to corporations law in Australia.

In 1997, the Australian government introduced the Corporate Law Economic Reform Program (CLERP) which aimed to comprehensively improve Australia's business and company regulation. In 2000 when the CLERP Act 1999 came into effect (part of predecessor legislation to the Corporations Act; a part of the Corporations Law), the 'business judgment rule' s180(2) was introduced as a 'safe harbour' defence of s180(1).

The Corporations Act 2001 (Cth) provides for other specific defences; for example against claims of insolvent trading. Section 588H of the Corporations Act contains a defence to insolvent trading under s 588G, but there has been ongoing discussion about the need for a business judgment style rule to be made available under s588G.

The Treasury Discussion paper of 2010 Insolvent Trading: A Safe Harbour for Reorganisation Attempts Outside of External Administration, again raised for discussion the concept of a modified business judgment rule (a safe harbour defence) to be available to directors under s588G of the Corporations Act. The Australian Productivity Commission report Business Set-up, Transfer and Closure, released in 2015, gave further consideration to implementing a safe harbour defence under s588G.

In 2017 the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017 - was introduced offering directors a defence to claims of insolvent trading under s588G. Subsequently, in 2018, the Corporations Act 2001 (Cth) was amended by introducing s588GA and related amendments to Division 3-Director's duty to prevent insolvent trading (Division 3).

Tasks to be completed -

Part A -

Research and consider the reasons for the introduction of the safe harbour defence in s588GA and the effect of the 2018 amendments to Division 3 - Director's duty to prevent insolvent trading.

Answer the following questions.

1. Is the duty to prevent insolvent trading a fiduciary duty? Why or why not? You must give detailed reasons.

2. How does the safe harbour defence s588GA operate?

3. Who does it (s588GA) protect, and is this different to the business judgment rule s180 (2)? Give reasons.

4. Are there any restrictions on the operation of the s588GA defence? If so, what are they?

5. Do you think the changes to Division 3 will have an effect on the number of voluntary insolvencies in Australia in the future? Why or why not?

Part B -

Listen to the podcast (or read the transcript) 'The talented Mr Daly'. Answer the following questions.

1. Did Mr Daly breach any directors' duties? If so, which ones and how?

2. Did any of the other directors breach their duties? If so, who, which duty and how?

3. Do you think the company was trading while insolvent? Give reasons.

4. If the company was trading while insolvent - are there any defences available to Mr Daly and/or other directors? If so, what are they? Give reasons.

5. Would the new 'safe harbour' defence assist the directors? If yes, how? If no, why not?

Attachment:- Assignment File.rar

Answered:-

Verified Expert

The paper is in relation to the analysis of the provisions contained in the Corporations Act on the insolvent trading by the directors and with regard to the defense options being available to them. Also, a transcription have been analysed wherein a director have breached all his duties and roles as a director and have failed to avail the safe harbor defense as contained in Section 588GA.



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  1. user image
    len2320715

    Please note that the word limit is 2,500-3,000 words in total (assignments exceeding the word limit may not be marked and may be returned to the student for re-writing; assignments less than the required length will risk not covering the topic adequately and may result in a fail). Do not include synopsis, references or bibliography in the word count. The assignment will be marked out of 100, adjusted to a final mark out of 30 in accordance with the weighting of this assignment to your final grade for the course: 30%. It is important that you to take time to think through how to structure and present arguments and to review and discuss what the law is or should be in a particular area. Whilst discussion with others is encouraged, the final piece of work must be your own.

  2. user image
    len2320715

    Note: All Federation University Australia rules relating to referencing, citation and acknowledgement must be followed. This assignment requires you to do significant independent research. In this regard, you may find the Library’s databases useful. You should appropriately reference your assignment, including in the text of your assignment or as footnotes, and provide a reference list or bibliography at the end of your assignment.



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