The Small Business Restructuring (SBR) legislation was introduced on 1 January 2021 as an option for companies with debts of less than $1 million to compromise their debts with creditors.
WHAT IS THE ELIGIBILITY CRITERIA?
• Total liabilities of less than $1 million
• Company must be insolvent or likely to become insolvent
• Must be able to pay all outstanding employee entitlements
• Must have lodged all outstanding returns with the ATO
• Company has not undergone Small Business Restructuring (SBR) (some exceptions) or Simplified Liquidation (SL) (see page 37) in the past 7 years
• Current or former director (within 12 months) has not been a director of a company that has undergone a SBR or SL in the past 7 years unless it began less than 20 business days before the process commenced
In order to commence a SBR the directors of a company will need to declare that the company is eligible.
WHAT ARE THE KEY POINTS FOR A SBR?
• Restructuring practitioner (RP) (which must be a registered liquidator) is appointed by resolution of the company
• Directors maintain powers during SBR including the power to continue to trade the business of the company
• Company must disclose that it is subject to a SBR once a RP is appointed
• Restructuring plan is developed for approval by the company’s creditors
• Related creditors are excluded from participation in the SBR
HOW DOES A SBR COME TO AN END?
The SBR concludes:
• Where the RP terminated the SBR because they are of the view that the eligibility
criteria is no longer met or it is no longer in the best interests of creditors
• Where creditors vote against the plan
• The plan is terminated as its terms cannot be complied with
• When the terms of the plan are completed
When the plan is terminated all debts of the company, subject to the plan, become immediately due and payable. If this occurs, you should seek immediate professional advice as to the next steps.
The above is only short summary of the process and therefore professional guidance should be sought as to the full extent of the issues to be addressed.