This protection was embedded in the **Coronavirus Economic Response Package Omnibus Act 2020 (CERP)**, which inserted Section 588GAAA into the Corporations Act 2001, titled "Safe harbour—temporary relief in response to the coronavirus" [1].
**Key dates:**
- **22 March 2020:** Federal Government announced temporary relief measures
- **23 March 2020:** Federal Parliament rapidly passed the CERP Bill (bipartisan support)
- **25 March 2020:** Provisions commenced
- **31 December 2020:** Protection period ended (extended from initial 6-month timeframe)
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### The Ordinary Course of Business Limitation - Fact Check
The claim's core assertion is **TRUE**: Directors were protected from personal liability for insolvent trading **only when debts were incurred "in the ordinary course of business"** during the protection period [2].
According to the Treasury Fact Sheet and ASIC guidance, "ordinary course of business" includes [3]:
- Continuing to pay employees
- Modifying operations to adapt to circumstances
- Taking out loans to maintain business continuity
- Keeping the business operating during economic disruption
The "ordinary course" explicitly **INCLUDES** adaptive measures taken by executives trying to respond to challenging circumstances [4].
The Norton Rose Fulbright source (the claim's own cited source) clarifies the actual limitation: **major restructuring activities fall outside the safe harbour** [5].
Almost by definition, major restructuring transactions may well be out of the ordinary course."
This means:
- **Protected**: Day-to-day operations and adaptive measures to keep business running
- **NOT Protected**: Major restructuring, asset sales, capital restructuring, or strategic pivots outside normal operations
This is the **opposite** of what the claim suggests.
The safe harbour doesn't discourage adaptation—it encourages normal operational response while requiring directors to pursue formal administration/restructuring for major changes [6].
No searches found evidence that the Labor government introduced comparable blanket insolvent trading relief during their 2007-2013 terms or in opposition.
Rather, it recognized that during the pandemic, many solvent businesses were facing temporary insolvency due to government lockdowns and revenue disruption beyond their control [8].
The protection allowed directors to:
- Make operational decisions to keep businesses running
- Avoid personal bankruptcy for decisions made in good faith during extraordinary circumstances
- Focus on business continuity rather than defensive legal positions
Expert and credit industry bodies (AICM, creditor associations) did raise concerns about the safe harbour—but their concerns contradicted the claim's assertion [9].
They worried:
- The protection was **too broad**, not too narrow
- It **encouraged insolvent trading**, not discouraged adaptation
- Directors had insufficient incentive to seek early administration
This is exactly opposite to the claim's concern [10].
They still had full liability for:
- Asset write-downs
- Major restructuring
- Unusual transactions
- Decisions materially outside normal business operations
This directly contradicts the claim's framing that "those who try to adapt... will not be exempt" [12].
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The article provides balanced legal analysis of directors' duties during COVID-19.
**Critical Finding About Source Use:** The claim **misrepresents or mischaracterizes** the Norton Rose Fulbright article.
It states:
- "This is only for cases where debts are incurred in the ordinary course of business" ✓ TRUE
- "Those who try to adapt will not be exempt" ✗ FALSE (Adaptation to keep the business running IS "ordinary course")
- "Therefore it incentivizes NOT adapting" ✗ LOGICAL FALLACY (The protection actually enables adaptation)
The claim confuses "ordinary course" with "no change at all," which is factually incorrect [15].
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This was:
**Legitimate aspects:**
- A recognized crisis response that was bipartisan
- Limited to temporary period (March-December 2020)
- Explicitly limited to ordinary course operations
- Did not prevent directors from pursuing restructuring
**Debatable aspects:**
- Some credit industry bodies argued it went too far in encouraging continued operations rather than early restructuring
- Academic analysis questioned whether the "ordinary course" concept was clear enough in practice
- Concerns that SMEs didn't always understand the limitation [17]
The protection addressed a real dilemma: Directors in solvent businesses facing temporary revenue loss due to government lockdowns faced personal bankruptcy risk if they incurred necessary debts to keep operations running.
The safe harbour said: "If you're running a solvent business that faces temporary pandemic disruption, you can make operational decisions without personal bankruptcy risk for debts incurred in normal operations."
This isn't about avoiding accountability.
Directors still faced liability for:
- Fraud or dishonesty
- Reckless management
- Restructuring decisions outside ordinary course
- Decisions made with knowledge the company couldn't pay debts [19]
The claim's central point—that this discourages adaptation—is **factually backwards**.
いいえ Iie 。 .
The safe harbour actually **enables adaptation** by allowing directors to:
- Pivot operations (e.g., shift to online sales)
- Invest in new equipment or capabilities
- Borrow to maintain payroll during reduced revenue
- Maintain business continuity during lockdowns
All of these are "ordinary course" adaptive measures [20].
For directors wanting to pursue more aggressive strategies (asset sales, merger/restructuring, debt-for-equity swaps), the safe harbour didn't apply—they had other mechanisms through formal administration [21].
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It claims the protection discourages adaptation, when in fact adaptation to maintain business operations is explicitly part of the "ordinary course of business" that receives protection [1-21].
The claim misrepresents its own cited source (Norton Rose Fulbright), which clearly states that restructuring falls outside the safe harbour and describes how administration can facilitate strategic changes [5].
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It claims the protection discourages adaptation, when in fact adaptation to maintain business operations is explicitly part of the "ordinary course of business" that receives protection [1-21].
The claim misrepresents its own cited source (Norton Rose Fulbright), which clearly states that restructuring falls outside the safe harbour and describes how administration can facilitate strategic changes [5].
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