Transforming Challenges into Opportunities with Small Business Restructuring
The Small Business Restructuring (SBR) process is a formal insolvency pathway introduced under the Corporations Act 2001 to help financially distressed, but viable, small businesses regain stability. It allows eligible companies to restructure their debts while the directors remain in control of daily operations.
Key Features of the SBR Process
- Director-Controlled: Unlike traditional insolvency processes, directors retain control of the business during the restructuring process.
- Appointment of a Restructuring Practitioner: A registered practitioner is appointed to assist in developing and proposing a restructuring plan to creditors.
- Debt Restructuring Plan: The plan outlines how the company intends to repay its debts, typically over a period of up to three years.
- Creditor Approval: Creditors vote on the plan. If approved by a majority in value, it becomes binding on all unsecured creditors.
Eligibility Criteria
To access the SBR process, a company must:
- Be insolvent or likely to become insolvent.
- Have total liabilities (including related-party debts) of less than $1 million.
- Be up to date with tax lodgements and employee entitlements.
Benefits of SBR
- Cost-Effective: Lower costs compared to voluntary administration.
- Business Continuity: Directors stay in control, allowing operations to continue with minimal disruption.
- Creditor Engagement: Encourages early and constructive engagement with creditors.
Benefits of SBR
- Cost-Effective: Lower costs compared to voluntary administration.
- Business Continuity: Directors stay in control, allowing operations to continue with minimal disruption.
- Creditor Engagement: Encourages early and constructive engagement with creditors.
EKC Advisory’s Role
At EKC Advisory, we guide small businesses through the SBR process with clarity and confidence. From assessing eligibility to preparing restructuring plans and liaising with practitioners, we ensure your business has the best chance of recovery.
Frequently Asked Questions: Small Business Restructuring
SBR is a formal insolvency process introduced by the Australian Government to help financially distressed small businesses restructure their debts while continuing to trade under the control of their director.
To be eligible, a company must:
- Be incorporated in Australia.
- Have total liabilities of less than $1 million, including related-party debts.
- Be up to date with employee entitlements (including superannuation).
- Be substantially compliant with tax lodgement obligations.
A registered Restructuring Practitioner (RP) is appointed to:
- Assess the company’s financial position.
- Help prepare a restructuring plan.
- Submit the plan to creditors for approval.
- Oversee the implementation of the plan if approved.
No. One of the key benefits of SBR is that directors remain in control of the day-to-day operations while the Restructuring Practitioner manages the restructuring process
What does a restructuring plan include?
The plan outlines:
- How much creditors will be paid.
- The timeframe for payments (up to 3 years).
- Any conditions or milestones for the business to meet.
Creditors vote on the plan. It is approved if a majority in value of creditors vote in favour. Once approved, the plan is binding on all unsecured creditors.
If creditors reject the plan, the company may consider other insolvency options such as voluntary administration or liquidation.
The initial phase (plan preparation and creditor vote) typically takes 20 business days, with an optional extension of 10 business days. The repayment period under the plan can be up to 3 years.
- Lower cost than traditional insolvency processes.
- Directors stay in control.
- Faster and simpler process.
- Opportunity to continue trading and retain value.
At EKC Advisory, we:
- Assess your eligibility for SBR.
- Connect you with trusted Restructuring Practitioners.
- Assist in preparing and negotiating your restructuring plan.
- Support you through every step of the process.
Customer Testimonials
We are here to help
Thank you for expertly guiding us through the VA process. Never a pleasant experience for anyone, I’m sure, but you and your team kept us on track and got us through this. Shedding the baggage from all the mistakes made in the past will help us move forward. There’s a much brighter future ahead for us now.
Michael Pearson Lead FX