A Small Business Restructuring Plan Could Save Your Business

The benefits of an SBR are, in brief:

• Directors stay in control of day-to-day runnings of the business during the SBR process.
• Companies receive a fresh start to resolve historical debts.
• There’s a temporary moratorium on unsecured creditors enforcing debt repayment (including personal guarantees) during the restructuring phase.
• The restructuring process takes a relatively short time.
• There’s certainty of costs (SBR is a fixed-price engagement).
• The government has a positive attitude towards the SBR process.

Commonly, the most prominent warning sign your business is in financial distress is a large unpaid tax debt. Other signs can include ongoing losses, cash flow problems, overdue tax lodgements and difficulty gaining access to new credit. These signs all indicate that it would be beneficial to consult with Business Rescue Solutions about a Small Business Restructure.

For a simple eligibility check, complete our 30 second eligibility questionnaire.

To be eligible for Small Business Restructuring, we check that your company fits the following eligibility on the day on which our restructuring practitioner is appointed:

• be insolvent or likely to become insolvent.
• total liabilities of your company must not exceed $1 million.
• no person who is a director of your company, or who has been a director of your company within the 12 months before the appointment of our restructuring practitioner, has been a director of another company that has been under restructuring or subject to the simplified liquidation process within the period of the preceding seven years, unless they are exempt under the regulations.
• your company must not have undergone restructuring or been the subject of a simplified liquidation process within the preceding seven years.

As part of the Small Business Restructure process, we also check that, at the time the restructuring plan is proposed to creditors, your company will have substantially complied with requirements relating to employee entitlement and tax filing obligations. A restructuring plan can’t be proposed until a small business has:

• paid the entitlements of employees that are due and payable (with the exclusion of employee entitlements not currently due to be paid).
• lodged returns, notices, statements, applications or other documents as required by taxation laws (within the meaning of the Income Tax Assessment Act 1997). [Tax debts do not need to be paid – only the required returns lodged.]

For full details on eligibility, see the ASIC website.

The Small Business Restructure process does not involve changes to how you run your business. Your company may, however, decide upon a number of other adjustments to your business to improve how it operates, including reducing costs, selling assets, changing its organisational structure, and so on.

The Small Business Restructure plan is to be presented to creditors within 20 days of the appointment of a Small Business Restructure Practitioner.

Creditors then have 15 days to respond to the plan, advising if they accept or decline the restructuring plan.

The entire process takes approximately 36 business days in total.

• We check to confirm your business meets the eligibility criteria for small business restructuring.
• Whilst the SBR is underway, the directors of the company continue to have control of ordinary business operations.
• We guide you to create a plan to pay historical debts to your creditors. This must be presented to creditors within 20 business days of the SBR commencing.
• We act as your company’s agent, negotiating a plan with your creditors to pay historical debts.
• The creditors decide (within 15 business days) whether or not to accept the plan.
• If creditors accept the plan, the company must make payment of the agreed sum in either instalments, or in a lump sum (as per the plan).
• After the payment is complete, the company is no longer liable to pay the balance of the debt, and it is considered “cleared”.

If the SBR plan is accepted, then it is binding on all unsecured creditors. This means that for the agreed timeframe of the plan, creditors who agreed to the arrangement can’t launch any other enforcement action relating to the recovery of debt or the winding up of the company. The result of this is that businesses can continue to operate during this agreed time period without the worry of court proceedings related to the debts subject to restructuring under the SBR plan.

An SBR will be considered terminated in any of the following circumstances:

• A court orders its termination.
• The company discharges its obligations required under the plan.
• The plan is not adhered to, and this contravention hasn’t been rectified within 30 days.
• A liquidator or voluntary administrator is appointed to wind up the company.