Small Business Restructure (SBR)

The SBR process was introduced in January 2021 in response to the COVID-19 pandemic as a cost effective way to provide a fresh start to small businesses adversely impacted by the pandemic. An SBR provides small businesses with a tool to compromise creditor claims and restore business viability. Directors retain control of the Company and its business operations throughout the process.

What are the advantages of an SBR?

It can provide Directors protection from personal liability either for Insolvent Trading and/ or Director Penalty Notices. Creditors are prohibited from taking any action against the company to recover money and/or property, including terminating contracts and formal debt recovery proceedings during an SBR. Directors retain control of the business throughout the process and the company continues to trade under instruction of the existing directors in accordance with normal day to day operations. It is a simple, low cost process aimed to maximise the dividend return to creditors in an expeditious timeframe.

The SBR process provides a simple and cost-effective procedure for companies with unmanageable legacy debts to settle those and other debts, while at all times retaining control of the Company and its business.

Which companies are eligible for a Small Business Restructure?

  • Liabilities – Total debts must not exceed $1m.
  • Tax affairs – All lodgements must be up to date.
  • Employee entitlements – All employee entitlements that are due and payable must be paid in full (including superannuation).
  • Limitation on time period – The company and its directors (current or in the previous 12 months), must not have engaged in a Small Business Restructure or Simplified Liquidation process in the past 7 years.

Any corporate Small Business Enterprises (SME) that can see a pathway to profitability, but is restrained by the burden of attempting to manage significant legacy debts, can benefit from the process.    

We regularly assist businesses in the following industry sectors:

  • Hospitality
  • Retail
  • Building subcontractors (the SBR process does not result in ‘exclusion’ of the Company director by the QBCC)
  • Professional services  

Many of the businesses had accumulated significant debts with a small group of key creditors including the ATO, State Revenue Authorities or commercial counterparties.  These debts in some cases arose as a result of a historical reassessment (eg. payroll tax) or an unfavourable judicial determination.

More often than not, the ATO is a significant creditor and is supportive of the process in the vast majority of cases.

Whilst a rejection of the plan does not necessarily lead to a Liquidation of the Company, the Directors may need to consider the ability to continue trading the Company if it is unable to demonstrate viability.

During the restructuring period, a personal guarantee cannot be enforced against a Director or one of their relatives. 

During the restructuring process, the Company’s Directors retain control of the company, which in turn helps to minimise costs and business disruption. We expect that, in most cases, the professional fees for conducting a SBR process will be less than the cost of conducting a more traditional external administration (such as a Voluntary Administration or Liquidation).

The professional fee of the restructuring professional for developing the restructuring plan and liaising with creditors about the SBR process is agreed and fixed up-front.

While the reforms may be welcome relief for companies with unmanageable legacy debts, the debtor in possession model itself and the introduction of a suite of moratoriums on enforcement activity present an increased risk to those supplying on credit to small businesses.

How we can help

Our full service restructuring team can offer advice and guidance for businesses who may need to enter or are currently in the process.

For more information on insolvency reforms to support small business please see:

Meet the team

John McInerney

John McInerney

Partner
Sydney
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Tony Jonsson

Tony Jonsson

Partner
Cairns
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David Hodgson

David Hodgson

Partner
Perth
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Andrew Hewitt

Andrew Hewitt

Partner & Head of Financial Advisory -...
Melbourne
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