Preserve dated reasons and evidence for changes to a proposed safe-harbour turnaround course.
Corporate Recovery Partners
01 / 06
A revised plan needs a reasoned history
During a turnaround, an expected sale falls through or a customer stops paying. The proposed course may need to change. Keep the earlier version and record why the new decision was made with appropriate advice. Replacing a file with a more hopeful forecast does not explain what directors knew, what changed or how the revised course was assessed.
Imagine a manufacturer pursuing a proposed asset sale as part of a turnaround. The buyer withdraws after due diligence. Preserve the correspondence and note the date the assumption changed. Give advisers the information promptly. Do not leave the sale in the cash forecast because another buyer might appear, or treat the first plan as continuing unchanged.
ASIC's RG217 discusses safe harbour in terms of a supported course reasonably likely to lead to a better outcome and appropriately qualified advice. Ask advisers what the new facts mean for the proposed course and the relevant conditions. This is not a matter of keeping the same label on a different spreadsheet or assuming earlier advice remains sufficient forever.
Record the practical options assessed, their evidence and unresolved assumptions. Keep the explanation proportionate and factual. In the manufacturer example, a revised sale proposal, operational change or formal process may need comparison. Do not rewrite the history to suggest an option was certain when directors actually knew its funding or timing remained unresolved.
Identify which forthcoming debts or actions depend on the revised course and obtain advice before proceeding. Keep the financial position current and give advisers relevant employee and tax information. A change in strategy does not remove the need to understand directors' duties or automatically provide protection for new commitments made while the company is in difficulty.
Retain dated versions, advice received and actions authorised, with responsibility for follow-up. Review whether the revised assumptions are being met. The record should help explain the genuine decision process, not be manufactured afterwards as a defence. Safe-harbour questions depend on the actual circumstances and legal conditions, which require proper ongoing assessment.
