Small Businesses Restructuring vs Voluntary Administration: Which is better?

Small Businesses Restructuring vs Voluntary Administration: Which is better?

Small Businesses Restructuring (SBR) and Voluntary Administration (VA) are both formal insolvency options in Australia, but they are designed for different situations. Choosing the right one depends on the business size, financial position, and whether the business is still viable or not.

Differences at a glance

Small Business Restructuring (SBR):

• Director remains in control of the business
• Available to companies with liabilities under $1 million
• Lower cost and faster
• Focused on proposing a repayment plan to creditors

Voluntary Administration (VA):

• An independent administrator takes control of the business
• No debt limit
• More complex and costly
• Can lead to liquidation or Deed of Company Arrangement (DOCA)

When SBR may be suitable

SBR was introduced to help small businesses restructure debts while continuing to operate, making it a more accessible and streamlined option for small businesses. Therefore, it is often a good option where:

• The business is still viable and can continue trading
• Debts are under the $1 million threshold
• Directors want to retain control of operations
• There is a realistic ability to repay part of the debt over time

When Voluntary Administration may be more appropriate

In VA, control shifts to an external administrator who evaluates the business and determines the best outcome for creditors. It is generally used in more complex or urgent situations where restructuring under SBR may not possible. Voluntary administration may be more suitable for a business where:

• The business has higher or more complex debt levels
• There are multiple shareholders or disputes involved
• Immediate protection from creditors is required
• An independent party is needed to take control and assess options

Which option is better?

Both processes aim to improve outcomes for creditors and may help avoid liquidation, but the right choice depends on the severity of the financial situation. There is no one-size-fits-all answer. 

• SBR is more cost-effective and allows directors to remain in control of the business, making it suitable for smaller-viable business
• VA is more comprehensive and suited to complex or high risk situations but comes with higher cost and lower control.

Do you have more questions about our Small Business Restructuring? Read our full guide here

The Importance of Seeking Professional Advice

This article has aimed to provide general information about the difference between Small Businesses Restructuring vs Voluntary Administration, however, every company’s exact circumstances are different. We strongly encourage directors comparing Small Business Restructuring and Voluntary Administration and seeking guidance on which option is more suitable for their company’s circumstances to give an insolvency professional like Dissolve to discuss your specific circumstances. Dissolve may even recommend cheaper (or free!) solutions than other insolvency firms.