What is the
SMALL BUSINESS RESTRUCTURING PROCESS?

The Federal Government made sweeping changes to insolvency law in January 2021. A key change was a new Restructuring Process designed for Small Business called Small Business Restructuring.

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    WHAT IS THE SMALL BUSINESS RESTRUCTURING PROCESS?

    The process draws on key features of the US Chapter 11 bankruptcy process allowing small businesses to restructure their debts while remaining in control of their business.

    The previous “one size fits all” approach of Voluntary Administration is often criticized for being too costly for small business, and it can be too daunting for small business owners to hand over control of their business. The new process aims to fix those criticisms.

    What does the Small Business Restructuring Process look like?

    An insolvent small business has 20 days to come up with a restructuring plan, and creditors have to vote on whether to accept it within 15 days after that. If creditors don’t accept the deal the company can choose to proceed into a new simplified liquidation process, or Voluntary Administration.

    Who can use the Small Business Restructuring Process?

    The process is accessible to incorporated businesses with liabilities of less than $1 million. To be able to propose a deal the business must have paid all employee entitlements and have all tax lodgements up to date.

    Who controls the company during the Small Business Restructuring Process?

    The company remains under the control of its directors during the Small Business Restructuring Process.

    How does the Small Business Restructuring Process differ from a Voluntary Administration?

    The Small Business Restructuring Process is designed to be shorter and less regulated than a Voluntary Administration. This is intended to keep the costs lower.

    The company remains in the control of it’s directors during the Small Business Restructuring Process, whereas it transfers to the control of the Administrator in a Voluntary Administration

    What is a Small Business Restructuring Practitioner?

    A Small Business Restructuring Practitioner is a new tier of Insolvency Practitioner created to run the Small Business Restructuring Process.

    The practitioner will: help determine if a company is eligible; support the company to develop a plan and review its financial affairs; certify the plan to creditors; and manage disbursements once the plan is in place.

    Who can be a Small Business Restructuring Practitioner?

    A Small Business Restructuring Practitioner must be a Registered Liquidator.

    What does the Small Business Restructuring Process cost?

    The government has strongly encouraged a flat fee for the Small Business Restructuring Process.

    Restructuring Works quotes on a case by case basis, but fees are likely to be in the ballpark of $20,000.

    When will the Small Business Restructuring Process become available?

    The government has now passed the legislation so the Small Business Restructuring Process became available on 1 January 2021.

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    Restructuring Law can be a complex area and circumstances vary, so we recommend a telephone call for your initial consultation. We will then gladly meet you or just confirm our advice and quote in writing.

    Please either give us a call or submit the form and we will get back to you.

    1300 095 750