What is the Small Business Restructuring process?
Australia’s Small Business Restructuring (SBR) process is a formal insolvency process introduced by the Federal Government in 2021 to give small businesses the opportunity to restructure their debts while directors remain in control of the business, under the supervision of a restructuring practitioner.
The SBR process involves a company engaging a Small Business Restructuring Practitioner (SBRP), who must be a registered liquidator, and developing a plan with the SBRP within 20 business days of his or her engagement. The practitioner can extend this proposal period by 10 business days.
The plan should outline how the company will restructure its debts and repay creditors over a period of time, which cannot exceed three years.
Once the SBRP issues the plan to creditors, they have 15 business days to vote on it. If the majority of creditors (determined by the size of their debt) accept the plan, then all unsecured and some secured creditors will be bound by the plan and will be unable to take enforcement action on their debt unless the company is in breach of the plan.
To be eligible for small business restructuring, a company must:
- Be incorporated under the Corporations Act 2001
- Resolve that it is, or is likely to become, insolvent
- Have total liabilities that don’t exceed $1 million
- Be up to date with tax lodgements
- Be up to date with employee entitlements
- Appoint a Small Business Restructuring Practitioner to oversee the process, and
- The company or its directors must not have used the Small Business Restructure Process or Simplified Liquidation Process in the last seven years.
In one recent example restructuring unmanageable debt, our team at William Buck successfully assisted with the SBR of a group of cafes. This resulted in the companies paying a dividend of 15 cents in the dollar to their creditors with a combined debt write off in excess of $1,130,000 across the four entities. With William Buck’s assistance, SBR has given the companies a fresh start from the debt that had accumulated during the COVID pandemic and enabled them to continue operating for the foreseeable future, saving the businesses and local jobs from likely liquidation.
For more information on the Small Business Restructure Process and other insolvency reforms to support Australia’s small businesses, please visit the following links:
