Letter · Insolvency, Restructuring & Bankruptcy
Letter of advice to directors on insolvent trading and the safe harbour
Letter advising a company's board on the duty to prevent insolvent trading, how the s 588GA safe harbour works and what it requires, director penalty exposure, the formal options, and the steps to take now.
- Kind
- Letter. A letter or email you adapt and send.
- Where it applies
- Australia
- AI use
- Red Keep AI out of the decisive steps. A lawyer does the work.
- Law stated as at
- 17 October 2026
- Status
- Maintained. Checked against the cited sources on 17 October 2026.
- Version
- 1
- Source
- Written for this library
When to use it
Use when a company client is, or may soon be, insolvent and the board needs written advice on its duties and options. Do not use as advice to an individual director in their personal capacity where interests may conflict; advise them to get separate advice.
How AI may be used
Lawyer-led. Whether the company is insolvent and whether a plan is reasonably likely to lead to a better outcome are judgments on the facts with personal consequences for directors. AI may organise the evidence and check references only.
AI may
- Build a dated index of the accounts, cash-flow forecasts, aged payables, ATO portal statements and board papers supplied, flagging gaps and inconsistencies.
- List solvency indicators that appear in the documents (for example overdue tax lodgements or dishonoured payments), with references, without drawing any conclusion.
- Check every section reference in the lawyer's draft against the current Act text and list mismatches.
AI must not
- Must not state or imply whether the company is solvent or when it became insolvent.
- Must not decide or draft the conclusion on whether a course of action is reasonably likely to lead to a better outcome.
- Must not process the company's financial records in a tool whose terms allow training or offshore access the client has not approved.
- Must not send, or prepare for sending, any version of the letter without the responsible lawyer's sign-off.
The lawyer checks
- Facts and assumptions in section 2 match the documents actually reviewed.
- Employee entitlements (including super) and tax lodgement status have been confirmed with evidence, because they decide whether the safe harbour is available.
- The current restructuring eligibility threshold and director penalty position are confirmed.
- Conflicts between the company and individual directors have been considered and addressed.
Method: how the Green, Yellow and Red levels are decided. This is guidance for planning, not legal advice.
Official form
Open the official form. Always use the current version from the issuer.
Read the full text
The full text is for signed-in accounts. It is free. When you sign in you can:
- read the whole precedent, with its drafting notes beside it;
- copy it, or download it as a Word file or Markdown;
- add it to your firm’s knowledge base, so colleagues can find it;
- let the AI tools you connect read it from that knowledge base.
The summary, the law it rests on and the AI-use guidance above stay public. Privacy.
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