Small Business Restructuring

Small Business Restructuring

From 1 January 2021, the Government introduced a new debt restructuring process aimed at simplifying a business rescue. It provides eligible small businesses with an opportunity to work with a small business restructuring practitioner to develop and propose a debt restructuring plan to creditors, which, if accepted, will allow the company to continue trading.

Eligibility Criteria
The small business restructuring process is available to companies that meet the following eligibility criteria:

• Less than $1M in liabilities.
• Employee entitlements paid (including superannuation).
• Tax reporting lodgements are up to date.

Why is the Small Business Restructuring Process different?
The restructuring process is different to traditional external administrations in that it allows eligible companies and their directors to:

• Retain control of the business, property, and affairs of the company while it develops a plan to restructure the company’s affairs with the assistance of a restructuring practitioner.
• Enter into a restructuring plan with creditors.
• If the restructuring plan is successful, continue to operate your business into the future.

Who prepares the Restructuring Proposal?
The directors of the company prepare the restructuring proposal in the approved format with the assistance of the restructuring practitioner.

How long does the Small Business Restructuring Process take?
The restructuring proposal period generally lasts for 20 business days from the day the restructuring begins, unless it is ended earlier or is extended.

The proposal period can be extended for up to 10 business days.

Once creditors receive your restructure proposal, they are given 15 business days to consider and vote on it.

How many votes are required to have the restructure proposal accepted by creditors?

The plan will be accepted if more than 50% in value of the company’s creditors who vote on the proposal vote to accept it.

Related party creditors are ineligible to vote.

If you would like to discuss the Small Business Restructuring Process, please reach out to the team at 1300INDEBT for a free consultation.