Small Business Restructure (SBR)
A Lifeline for Small Businesses
Under Pressure
✔ Non-judgemental, compassionate advice.
✔ Keep control of your business.
✔ ATO and creditor enforcement protection.
✔ Powerful alternative to Voluntary Administration.
✔ Free 24-hour hotline.
SBR – Your Path to Financial Recovery
Serious financial distress creeps up slowly on the most diligent of small business owners. It can start with a few late tax lodgments, a missed BAS, or supplier payment reminders … but before you know it, those once seemingly insignificant problems have grown into serious insolvency risks … threatening your survival.
A Small Business Restructure (SBR) can bring you a welcome lifeline.
This formal and legal process is a powerful option … allowing you to settle debts, keep control, and regain stability. Avoiding the seemingly drastic consequences of administration or liquidation, it can give you the much-needed breathing room and legal protection for an effective turnaround.
At Ash Walker Lawyers, we fully understand your worries and concerns, and know that you need proactive guidance. Without legal jargon or judgement, we deliver compassionate advice and action to defend your business, your livelihood, and your peace of mind.
What Is Small Business Restructuring?
As a response to the much-feared surge of company insolvencies resulting from the COVID-19 pandemic, the Australian government introduced Small Business Restructuring to give viable, yet financially distressed, enterprises an affordable, simple, and fast way to recover.
Now an established process in insolvency law, it continues to provide struggling operations with a structured, legally recognised pathway to resolve and restructure debts and avoid liquidation.
In brief, a Small Business Restructuring Practitioner (SBRP) is appointed by the company, a restructuring plan is proposed to creditors, which includes repaying debts, and if accepted, the business continues to trade.
And importantly, unlike administration, where control goes to an external administrator … the SBR process means you, as a director, stay at the helm of your business while solutions are found.
The Many Advantages of a Small Business Restructuring Plan
Small Business Restructuring is both a shield and a lifeline … protecting you and your operation while finding a positive route forwards. Its numerous benefits include:
✔ Company shielding – while a recovery plan is being made, a pause is placed on the majority of creditor and ATO debt enforcement, giving you a welcome break.
✔ Directors stay in control – day-to-day operational matters remain in your hands, not a third party.
✔ Lower cost and complexity – the streamlined process is quicker and more affordable than Voluntary Administration.
✔ Personal protection – personal and director guarantees cannot be enforced during Small Business Restructuring or insolvent trading issues.
✔ Positive outcomes for creditors – trader suppliers and the ATO are more likely to recover funds as opposed to a complete business collapse.
✔ Contract continuity – protecting against the termination of necessary supplier contracts due to the company entering SBR (the ipso facto stay).
Is Your Business Eligible for Small Business Restructuring?
Not all companies are able to take advantage of the Small Business Restructuring framework. As outlined in the Corporations Act 2001 (Cth), Part 5.3B, to be eligible, your business must:
- Be incorporated under the Corporations Act.
- Not have total debts exceeding $1 million.
- Be insolvent, or likely to become insolvent.
- Have all employee entitlements paid in full before the plan is proposed.
- Not been involved in another SBR within the last seven years, including its directors.
- Have all tax lodgments (such as BAS and PAYG) up to date.
If your business doesn’t meet all of these rules, there are still other options, such as Voluntary Administration and Debt Negotiation. Ash Walker Lawyers can help you determine the most suitable pathway depending on your company’s specific circumstances.
Unsure if You Qualify?
The Small Business Restructuring Process
Reassuringly, the Small Business Restructuring process is relatively quick, although time-critical. While specific timeframes and actions can depend on individual company situations, the steps are usually something like this:
1. Resolution
Officially, the SBR process starts when the directors pass a written resolution that says the company is insolvent … or is likely to become insolvent … and they will appoint a Small Business Restructuring Practitioner (SBRP). Immediately, a stay on most enforcement action occurs.
2. Drafting a Plan
Working with the SBRP, you and fellow directors create a small business debt restructuring plan. This itemises all creditors and amounts owed, a proposal for payment, and how funds will be made available to address the debts. This plan is then passed to the creditors within 20 business days of starting the process.
3. Creditor Decision
Once the creditors have received the plan, they have 15 days to vote to accept or reject. As long as over 50 percent of the creditors are in support (by debt value), it’s accepted. If the plan is rejected, the SBR process ends, and control of the company stays with the directors. Other options may be looked at with a legal professional.
4. Binding Agreement
Assuming the Small Business Restructuring plan is passed, it’s then a legally binding agreement between the company, creditors, and the ATO.
5. Repayment
The company carries on trading, while meeting all the repayment rules outlined in the SBR plan. Usually, the period of repayment can last up to three years. Once completed, the company is then released from the debts included in the plan, and can look forward to a more positive, stable future.
At Ash Walker Layers, we take you patiently and reassuringly through every step of this time-sensitive process. Ceaselessly acting in your best interests, we take care of the technicalities while you focus on restoring your business back to full health.
SBRs – Shielding Your Business Against Creditor Action
As mentioned above, when your enterprise starts the Small Business Restructuring (SBR) process … a temporary legal pause, known as a moratorium, is made on creditor enforcement action. i.e. they cannot try to recover any debts while the plan is considered.
For you and your operation, this means:
- Creditor enforcement ceases – the ATO and unsecured creditors can’t start, continue, or make claims to recover debts.
- Asset recovery stops – owners of property or equipment rented/leased to your company can’t be recovered, meaning you can keep trading.
- Secured creditor action may be restricted – in many circumstances, even secured creditors are prevented from immediately executing their security.
- Contract termination is blocked – Ipso facto clauses are paused, meaning suppliers can’t terminate contracts with your business.
- Personal guarantees are frozen – creditors can’t take direct action against you without permission from the court.
Small Business Restructuring and the ATO
Usually, the ATO is the largest unsecured creditor in a small business restructure, meaning having the tax office on side is essential for the acceptance of an SBR plan … since its single vote to accept could be the 50 percent in value needed.
How an SBR and the ATO Are Interlinked:
✔ Moratorium protection – when an SBRP is appointed, the ATO can’t start or continue action, such as Statutory Demands, Garnishee Notices, or Director Penalty Notices (DPNs).
✔ Positive participant – although the ATO looks at each proposal on its own merits, generally, it supports viable SBR plans.
✔ DPN protection – if you go into the SBR process within 21 days of receiving a non-lockdown DPN, your personal liability can be protected once the plan is approved.
✔ Eligibility compliance – the ATO specifies that all tax lodgements must be up to date before an SBR can begin.
✔ Post-plan lodgement – assuming the SBR plan is accepted, your business must continue to lodge and pay ongoing tax obligations on time. Fail to do this, and it might jeopardise the restructure.
Why a Lawyer Is Crucial for Small Business Restructuring
Although the SBR process is purposely more straightforward and quicker than the usual administration route … it’s still a strict, formal system with essential requirements under the Corporations Act. Do it on your own, and just one small error could mean failure of the plan … or expose you to serious personal liability risks.
Ash Walker Lawyers provides you with the unparalleled guidance and tailored advice you need during this crucial time. Having an experienced SBR lawyer means you gain the benefits of:
- Time-crucial assessment – we undertake the necessary review to confirm your company’s eligibility.
- Personal risk shielding – detailed advice on your duties as a director, personal guarantees, and asset protection.
- Strategy for ATO acceptance – drafting a powerful and convincing SBR plan and managing to maximise the chance of acceptance by the ATO.
- Collaboration with the SBRP – acting on your behalf to liaise with the Restructuring Practitioner while you focus on running your enterprise.
- Planning for contingencies – guidance on the next steps if your plan is rejected.
You’re Not Alone
Ash Walker Lawyers … Your SBR Lawyer
Mounting debts and unrelenting pressure from the ATO and trade creditors can make it feel like your enterprise is on the brink. These commercial worries, combined with the fears of failure and losing control, can seem insurmountable.
But there are powerful, effective solutions with an SBR plan from Ash Walker Lawyers.
With genuine understanding, we will quickly check your company’s eligibility for SBR, give expert guidance on whether the process is the best course of action, and find a way towards a positive future.
With Ash Walker Lawyers, You Gain the Benefits Of:
FREE 24-Hour Hotline
Business debt worries don’t keep 9-to-5 hours, get guidance on urgent SBR matters when you need it.
Urgent DPN Response
Clear and fast advice, acting quickly to meet the critical 21-day non-lockdown DPN deadline to eliminate personal tax liability.
Non-Judgemental Assistance
Supporting you and your business, not giving criticism and condemnation.
Protection Advice
Making sure all your actions are compliant with SBR regulations to safeguard against insolvent trading.
Tailored Advice
Prioritising your company’s best interests over our fees.
Transforming Chaos Into Clarity
Bringing reassurance and structure to stressful financial situations.
Are You Ready for a Small Business Restructure?
Small Business Restructuring Lawyer FAQs
How Do I Know if My Company Is Insolvent?
Your company is classed as being legally insolvent when it can’t pay all its debts when they are due. Therefore, fulfilling an eligibility requirement for SBR.
The main warning signs are:
- Constant cash flow issues.
- Outstanding taxes and lodgements.
- Getting legal pressure from creditors.
What Debts Are Included in the SBR Plan?
All the company’s unsecured debts … incurred before the company enters the SBR process … are included in the plan. The largest exception is employee entitlements such as wages and superannuation. These must be paid in full to be eligible for an SBR.
What Does a Small Business Restructuring Practitioner (SBRP) Do?
What they don’t do is take over running the business like an administrator! Instead, they oversee the formal debt restructuring. Their role is to assist the company in certifying the SBR plan and distributing it to the creditors, and once agreed, managing the disbursement of payments to the creditors.
How Much Does Small Business Restructuring Cost?
The total expense depends on the company and debt complexity. The SBRP’s fees are agreed before restructuring starts.