What Is Small Business Restructuring and Why Is It So Popular?
Small Business Restructuring (SBR) is a formal insolvency process where a Small Business Restructuring Practitioner (SBRP) is appointed to form a deal with the company’s creditors to reduce total debts, including tax debt.
Unlike other formal insolvency processes, the company remains under the control of the directors and can continue to trade whilst under SBR.
Small Business Restructuring was created to save viable businesses that were struggling from the one-off financial hit of COVID. SBR was initially not widely used because creditors were being very accommodating. Creditors, including the ATO, are now looking for payment. As a result, SBR has become very popular, in fact it has now surpassed Voluntary Administration as Australia’s most popular restructuring solution.
What Kinds of Debt Haircuts Can Be Achieved Through SBR?
You’ll be surprised at the kinds of deals that creditors, including the ATO, are willing to accept through Small Business Restructuring. Recent SBR Plans achieved debt “haircuts” of between 65% to 91% of total debt. In dollar terms the “haircuts” have reduced total debts by $114,000 to $853,000. And the cost of an SBR to achieve those savings was between $5,500 and $33,000.
Why Is SBR Better Than A Negotiation With The ATO?
At present the ATO appears more willing to renegotiate the debt amount during a SBR than through other means (like the standard payment plan or other attempts at negotiation).
| Likely negotiated Outcomes | Common SBR Outcomes | |
|---|---|---|
| Payment Terms | An ATO Payment Arrangement will require payment in full, plus interest, within 2 years | Payment terms can be up to 3 years, but are often much shorter due to the reduced debt amount - a one off payment is common |
| Debt reduction (writeoff/haircut) | The ATO will rarely agree to a negotiated debt reduction | The ATO has approved SBRs with between 65% and 90% debt reduction |
Why Is SBR Better Than A Voluntary Administration?
Most people are familiar with the term Voluntary Administration (VA). SBR was developed to be a more suitable solution of VA for small business. So how are they different?
| Small Business Restructuring | Voluntary Administration | |
|---|---|---|
| Fixed Cost? | ❌ | |
| Directors retain control? | ❌ | |
| Designed for small businesses? | ❌ | |
| Company returned to directors if deal fails? | ❌ | |
| Rough cost before Plan contribution | $15,000 - $30,000 | $60,000 - $150,000 |
| Duration? | 20 - 30 bus. days | 35 bus. days |
| Level of investigation and reporting? | Low | High |
Some Examples Of Recent SBR Plans Approved
The aim of SBR is for a company to agree a Plan with its creditors. Here are some recent examples of Plans that have been approved using SBR.
| Type of company | Total Company Debts | Creditors agreed to reduce debts to | Cents in the dollar for creditors | Debt forgiven (haircut) |
|---|---|---|---|---|
| Civil Contractor | $902,500 | $90,000 | 10 cents | $812,500 |
| Training Provider | $636,913 | $173,333 | 27 cents | $463,580 |
| Construction | $221,000 | $35,000 | 16 cents | $186,000 |
Why Choose A Small Business Restructuring Practitioner (SBRP) from Dissolve
Experience!!
Our SBRPs each have
over 33 years insolvency experience
Dissolve understands
small business, we are
an SME as well!
But we’ve had over 1,000
formal insolvency appointments in the
last 15 years
OUR
Team
Cliff Sanderson
PARTNER – DISSOLVE
Cliff is a corporate restructuring specialist with over 30 years of experience in Australia and internationally. He is the founder of Dissolve.
Brad Vincent
SENIOR CLIENT ADVISOR
After 15 years of being an advisor, Brad has developed an excellent understanding of the legal and practical issues facing a director of an insolvent company – it is rare for a director to throw a new situation at Brad.
Geoff Granger
PARTNER – DISSOLVE
Geoffrey has over 35 years’ experience in restructuring, turnaround and insolvency. As a registered liquidator, he has extensive experience in all areas of investigations and recoveries.
What Will a SBR Cost?
The good news is that Small Business Restructuring is much cheaper than the (old) alternative of Voluntary Administration.
As a guide, the fixed fee to prepare a Proposal is usually $15,000, and you’ll need to be able to pay about 25% of your company’s debt including tax debt under the Proposal. But in return you are likely to get a reduction in the debt of many times that amount.
What Does the Small Business Restructuring process like?
A Small Business restructuring is easy to initiate – we just need a Resolution by a majority of directors. We prepare all the documents so all you need to do is sign on the dotted line. We will lead the process and deal with the creditors.
A Small Business Restructuring gives your company twenty business days to work with a Small Business Restructuring Practitioner (that’s us) to formulate a deal, and then up to fifteen business days for the creditors to vote on that deal. This period is called the Restructuring Phase.
The SBRP then oversees the execution of the plan. This period is called the Plan Phase.
What Are the Prerequisites for Entering The SBR Process?
To be eligible for Small Business Restructuring, a company must be able to declare that:
- The company is insolvent or about to become insolvent
- The company’s total liabilities, i.e. creditors, do not exceed $1 million on the day it enters the process (exclusive of employee entitlements)
- None of its directors has been a director of another company that has gone through another Small Business Restructuring or a Simplified Liquidation process within the last 7 years
To be eligible to propose a plan (up to 20 business days into the process), the company must also be:
- Up to date with all tax lodgements and
- Able to pay all due and payable employee entitlements
If the company is behind on either point it needs to get them up to date before proposing a Plan.
Simple steps with our Small Business Restructuring experts
Enquire
Book your consultation
We Call You
We have a preliminary confidential phone discussion. We’ll gather some information and discuss the basics of the process.
Meet our Small Business Restructuring Practitioners
In person
Telephone
Video Call
Get A Pack
We provide our recommendations in writing with an engagement letter or formal appointment documents
Push the Button
You sign the forms when you are ready to proceed.
Credentials
Our professional memberships
Chartered Accountants
Members in-house
Association of Independent
Insolvency Practitioners
AIIP Board Member in-house
Turnaround Management
Association
Members in-house
Association of Independent
Insolvency Practitioners
ARITA Members in-house
FAQ
What is a Small Business Restructuring Practitioner (SBRP)?
What are the benefits of Small Business Restructuring (SBR)?
Another significant benefit of SBR is that business owners retain control over day-to-day operations, unlike in other insolvency proceedings where control may be transferred to an external party. The process is intentionally simplified, with fewer legal formalities and less paperwork, making it more manageable for small business owners. Additionally, SBR encourages constructive engagement with creditors by providing a clear and structured framework for negotiating debt repayment terms, often resulting in better outcomes for both the business and its creditors.
How often can a business use Small Business Restructuring?
Are ATO debts included in the restructuring plan?
Can a company restructure if it has a large ATO debt?
What is the role of directors during the restructuring?
Can an approved restructuring plan be terminated?
– The business breaches its terms.
– Creditors or the court raise valid objections.
– Continuation is not in creditors’ best interests.
Termination restores creditors’ rights to pursue the company for unpaid debts.
How do creditors vote on the restructuring plan?
What happens if the restructuring plan is rejected?
What impact does SBR have on secured creditors?
Can creditors collect debts during the SBR process?
Your content goes here. Edit or remove this text inline or in the module Content settings. You can also style every aspect of this content in the module Design settings and even apply custom CSS to this text in the module Advanced settings.
Contact Us
Please either give us a call or submit the form and we will get back to you.