Small Business Restructure (SBR) – Eligibility and benefits

The SBR legislation was enacted in 2021 and allows eligible SMEs to compromise their debts with creditors through a simplified and streamline process and return the company to viability.

The popularity of SBRs has increased dramatically in 2024. In 2024, 770 companies undertook a SBR, compared 329 in 2021 to 2023.

Eligibility Criteria for a SBR

To be eligible for a SBR, the following criteria must be met on the day the Restructuring Practitioner is appointed:

• Business operated in a Company structure, or as corporate trustee for a trust
• Total liabilities of less than $1m
• Before a Restructuring Plan is sent to creditors:
  – All taxation lodgements must be up to date with that ATO
  – All employee entitlements i.e. superannuation must be paid up to the date of the appointment of the  Restructuring Practitioner
• Company must not have undergone a SBR in the last 12 months and the Directors and Former Directors (acting in the last 12 months) cannot have been a Director of a Company that has undertaken a SBR in the past 7 years

Benefits of a SBR

• The Director(s) retain control of their business and its operations throughout the restructure process
• Company enters a ‘protected status’ during the restructure
• An ATO ‘Non-Lockdown’ Director Penalty Notice (“DPN”) will be stayed if the appointment of the Restructuring Practitioner occurs within 21 days of the ATO issuing the DPN
• Less intrusive process than other forms of external administration
• A better return to creditors than other forms of insolvency appointments. Generally, liquidations result in a nil return to creditors.
• High rates of acceptance by creditors, including the ATO, to date.
• Fixed fee, paid upfront
• Enables a Company to restructure debt, improve cash flow and return to financial viability

Recent SBR – Hospitality Industry

• Company operated three (3) cafes located in the Perth metropolitan area
• Historical ATO and State Revenue taxation liabilities totalling $692,000 and supplier debts of $34,000
• Restructuring Plan proposal provided for funds of $155,000 (including costs and fees) to be paid over up to 36 months from future trading
• Return to creditors estimated at 20 cents (compared to estimated nil return in liquidation)
• Restructuring Plan contributions are expected to be paid earlier i.e. in up to 12 months
• Restructuring Plan accepted by creditors, via return of voting forms
• Directors avoided any personal exposure for the DPN
• 19 employees retained their employment
• Finance commitments maintained
• Business continues in operation and liquidation avoided

Please reach out to Greg Quin or Trudie Walsh to find out more about the SBR process and how it might benefit your client(s).

Should you and your team be interested in booking a complimentary training presentation on SBRs, please do not hesitate to contact Amy Meacham via email: ameacham@hlbinsol.com.au or 08 9215 7900.