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Introduced in 2021, the Small Business Restructuring Process (SBRP) allows small businesses in Australia to restructure their debt in a way that allows directors to retain control of the company. Particularly following the impacts of the coronavirus, this came as a welcome relief to companies experiencing financial hardship.

How Does It Work?

Provided they meet eligibility criteria, small businesses can commence the SBRP by appointing a restructuring practitioner to oversee the process. Following the appointment, the business then has twenty business days to formulate a restructuring plan.

The restructuring plan includes a schedule of the company’s creditors and the corresponding debts they are owed. Additionally, a proposal statement outlines how the debtors would be repaid, if the plan is accepted; for example, this may be represented in a ‘cents to the dollar’ figure.

Once the plan is finalised, creditors are afforded fifteen business days to either accept or reject the proposal. A significant aspect of the restructuring practitioner’s role is to oversee the voting process. A plan’s acceptance is based on a majority-rules vote, however only creditors that are unrelated to the company, its directors and shareholders are eligible to vote.

If accepted, payments commence in accordance with the terms of the plan. All creditors are paid at the same time, as no debt has priority. Alternatively, if the plan is rejected, directors still retain control of the company, however creditors regain their entitlement to pursue legal action. In these circumstances, the company is no longer protected from insolvent trading liability and could face serious consequences, including wind-up proceedings.

Eligibility

To be eligible for the SBRP, business must:

  • be its own legal entity under the Corporations Act
  • not have total liabilities in excess of $1 million (exclusive of employee entitlements)
  • be insolvent or likely to become insolvent
  • appoint a small business restructuring practitioner to commence the process

Is It Effective?

Since its inception, the SBRP has proven to be highly effective in supporting businesses experiencing financial difficulty. However, the benefits of the restructuring process extend beyond the business itself, as it also supports the business’s creditors, employees and ultimately, the Australian economy.

How To Get Started

If you are concerned that your business is or is likely to become insolvent, taking action as soon as possible offers the best chance of recovery. At Wisdom Business Consultants, our friendly team is experienced in helping businesses turn around their financial situation, so they may grow and thrive again.

To get started, contact us today by phoning 1300 277 148 or emailing help@wisdombc.com.au

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