Safe harbour as an early-stage turnaround tool

Since the introduction of Australia’s safe harbour regime, its role in corporate restructuring has continued to evolve. A review of early safe harbour engagements undertaken for BDO clients, combined with broader research and ongoing discussions with directors and management teams, highlights a consistent theme: safe harbour is increasingly being used as a proactive turnaround framework, rather than a last-minute response to financial distress.

When engaged early, safe harbour can influence board behaviour, management decision-making and the structure of turnaround strategies in ways that extend well beyond its statutory protections.

This article outlines who is using safe harbour, how it is shaping governance and management behaviour, and why early engagement can materially improve restructuring outcomes.

Who is using safe harbour?

An analysis of companies engaging BDO for safe harbour advisory shows a diverse ownership profile:

• 31 per cent ASX-listed companies
• 44 per cent privately held businesses
• 25 per cent private equity-owned entities.

This distribution demonstrates that safe harbour is not confined to large listed corporates. Private businesses and private-equity backed organisations are increasingly using the regime to stabilise operations, manage director risk and create the time and structure required to implement meaningful turnaround initiatives.

The role of legal advisers

In practice, 88 per cent of directors accessed safe harbour through legal advisers. This reflects the regime’s primary positioning as a legal risk management framework, rather than a purely commercial restructuring tool.

Turnaround plans: Common initiatives

Turnaround plans developed under safe harbour were typically multifaceted and focused on immediate stabilisation alongside longer-term performance improvement.

Across the engagements reviewed, the following initiatives were commonly implemented:

• 100 per cent entered Australian Tax Office (ATO) payment plans to improve cash flow
• 76 per cent implemented cost-cutting initiatives, including redundancies and lease exits
• 53 per cent refinanced or entered for existing debt
• 35 per cent secured new banking facilities
• 41 per cent pursued capital raising
• 41 per cent sold assets such as property or non-core businesses
• 18 per cent opted for debt-for-equity swaps.

These outcomes reinforce that safe harbour plans are rarely reliant on a single solution. Effective turnarounds typically combine financial restructuring with operational and strategic initiatives, delivered in parallel and monitored against clearly defined milestones.

Industry observations

Safe harbour engagement spans a broad range of industry sectors. However, certain industries were more prevalent:

• Manufacturing accounted for 35 per cent of engagements
• Construction represented 29 per cent
• Financial services comprised 18 per cent
• Technology accounted for 12 per cent
• Retail represented 6 per cent.

The concentration in manufacturing and construction reflects the capital-intensive nature of these sectors, their exposure to cyclical conditions, and the speed at which cash flow pressure can escalate when trading conditions deteriorate.

Governance and behavioural impacts

Beyond operational and financial restructuring, safe harbour delivers less tangible but highly valuable governance and behavioural advantages.

For boards: the safe harbour framework introduces greater discipline into decision-making. Board discussions become more structured, progress is tracked against documented plans, and accountability is clearly defined through agreed milestones.

For management teams: safe harbour provides breathing space. With a clear framework in place, short-term crisis management and micromanagement tend to reduce, allowing executives to focus on executing turnaround initiatives rather than responding to daily financial pressure.

These cultural and governance impacts are frequently identified by directors and executives as being as valuable as the legal protections afforded by safe harbour itself.

A strategic consideration for directors

Safe harbour should not be viewed solely as a compliance tool. When used appropriately, it can act as a catalyst for structured decision-making and collaborative turnaround execution.

Delayed engagement with advisers often results in short-term focused actions. While these measures may temporarily strengthen a company’s financial position, they do not always address underlying operational or strategic issues, leading to mixed or unsustainable outcomes.

By contrast, early engagement at the first signs of distress allows advisers to work closely with management to design and implement targeted multi‑faceted operational improvements. This approach improves performance stability, protects enterprise value, and materially increases the likelihood of a sustainable turnaround. In an environment of ongoing economic uncertainty, safe harbour should be considered as part of a broader resilience and governance strategy, not just a response to imminent insolvency risk.

How BDO can help

BDO’s business restructuring and special situations teams continue to support boards and management teams in demystifying safe harbour and positioning it as a proactive governance and turnaround tool.