Understanding The Small Business Restructure Process

Small Business Restructuring: An Alternative to Voluntary Administration and Liquidation

Small businesses in Australia have faced a rapidly changing environment in recent months. From rising interest rates, wages growth, slacking consumer demand and coming off the back of the Covid-19 period, business owners are some of the most affected players in the market and must look for ways to stay agile.

Small business restructuring can be a pivotal strategy for small businesses under extreme financial pressure. It allows SMEs to improve their bottom lines and get out of debt.

What is Small Business Restructuring?

The Small Business Restructuring (SBR) regime was introduced by the Federal Government in January 2021 as a cost effective way to provide a fresh start to small businesses adversely impacted by the pandemic.

Its intention is to allow directors to access a Small Business Restructuring Practitioner (SBRP) to maximise their business’ chance of surviving and continuing to trade and employ. Upon the appointment of a SBRP, creditors cannot take action against a company, nor can a personal guarantee be enforced against a director.

SBR allows a small business to propose a Plan to its creditors to restructure its debts while the business continues to trade.

What are some of the Advantages of SBR?

When utilised appropriately, Small Business Restructuring plans function as a relief mechanism for businesses profoundly affected by external factors beyond the control of their directors.

Here are some of the benefits:

Directors stay in control of the business and continue to be the decision maker
Designed to be streamlined, concise, and subject to fewer regulations
Puts a stop on any creditor actions while the restructure is being finalised
Reduce debt and implement manageable payment schedules
Allows you to remain trading, retain staff and get back to running the business
The process is structured to minimise access costs for small businesses
Qualified Small Business Restructure Practitioners oversee the process, ensuring compliance and offering valuable protection for directors.

Is my Business Eligible?

The SBR process is designed for small businesses who meet the eligibility criteria, principally:

Businesses with less than $1 million in liabilities
Have not been through the debt restructuring process before
All employee entitlements must be paid
All Super Payments must be up to date
ATO lodgements must be up to date.

What is the Process?

The SBR process begins when the directors of the company resolve to appoint a Small Business Restructuring Practitioner – a licensed insolvency specialist who understands the complexities of financial distress and has the expertise to help navigate your business through challenging times.

There are four stages to the SBR process.

Proposal period. The SBRP determines the company’s eligibility and assists the directors to develop a Restructuring Plan, a proposal statement (which includes a list of your debt and to whom it’s owed) and voting forms. This must be developed within 20 days of appointment. The plan allows the company to repay creditors (in part or in full), providing better outcomes for all stakeholders than Liquidation.
Acceptance period. Creditors (the people to whom you owe money) have 15 business days to cast their vote for or against the proposal. If the majority (in debt value, not number) agree to your plan, then it goes ahead.
Plan rollout. Once the proposal has been accepted, the plan is then put into place. The SBRP is responsible for ensuring debt payments are made according to the agreed plan and that everything is being lawfully adhered to. The practitioner provides ongoing support and guidance to the business owner throughout the process.
Completion and discharge. Once the restructuring plan is successfully implemented and all obligations are fulfilled, the SBRP issues a certificate of discharge, formally concluding the SBR Process. The business can then continue to operate with renewed financial stability.

Here’s a great resource from the Treasury Department with more info on the SBR.

Here’s one from ASIC that steps you through the SBR process in more detail.

How can Balanced Beans help?

The Small Business Restructure Process (SBRP) is a government-legislated option for small businesses in Australia that are struggling with cash flow.

If your business is experiencing financial distress, talk to Balanced Beans.

If we agree you’re in a bit of strife and restructuring is a good option for you, we’ll put you in touch with a Small Business Restructuring Practitioner.

Tackling debt head on and engaging a restructuring specialist can increase your chances of holding onto the business in the long term.

Don’t hesitate to get in touch .

We understand the pressures on business owners experiencing financial distress.

Reach out to our Newcastle and Hunter Valley Accountancy and Bookkeeping specialists for help assessing your situation and assisting you to achieve the best outcome for your business.