Govt seeking insolvency law reforms

The Turnbull government wants to introduce new insolvency laws to provide breathing room for directors in hard times to enable them to try and turn around their business.

Releasing draft legislation for discussion on Tuesday, Revenue and Financial Services Minister Kelly O'Dwyer says the aim is to create a 'safe harbour' from personal liability for company directors during a formal insolvency process and help reduce the stigma associated with a failed business.

"The creation of a safe harbour creates necessary breathing room for directors to turn a company around rather than allowing it to fail for fear of personal liability," Ms O'Dwyer said in a statement.