In recent months we have experienced a marked increase in the utilisation of the relatively new small business restructuring (SBR) provisions introduced during the COVID-19 pandemic as a restructuring alternative to voluntary administration.
The SBR process involves a company appointing a restructuring practitioner following which a restructuring plan is formulated and put to creditors within 20 business days for consideration. If 50% of creditors (by dollar value) agree to the plan, it is implemented and the company is responsible for ensuring that its terms are complied with. Once the terms of the plan are completed, the company is released from all debts subject to the plan and continues in operation.
To be eligible for a SBR your business must:
- be operated by a company;
- owe less than $1m to its creditors (excluding employees);
- not have previously done a SBR or used a simplified liquidation in the last 7 years;
- not have unpaid employee entitlements; and
- have lodged all outstanding documentation and returns with the ATO.
Aside from the significantly reduced cost when compared to voluntary administration, one of the main advantages of the SBR regime is that directors retain control of the company throughout the process, thereby minimising disruption to the business operations.
We are currently assisting a number of companies eligible for SBR and anticipate that demand for this service will increase as the ATO ramps up debt recovery action which was essentially put on hold in recent years.
We have seen some good outcomes for struggling businesses that have restructured under the SBR regime. Please get in touch with us if you think the SBR regime may be appropriate for your circumstances.