Small Business Restructuring
At BRI Ferrier, our ASIC-registered liquidators specialise in the Small Business Restructuring Process (SBRP), helping struggling businesses restructure debt, protect assets, and regain stability.
What is Small Business Restructuring?
The Small Business Restructuring Program was introduced by the Federal Government in 2021 with the aim of helping small businesses who found themselves facing financial issues. Developed in the wake of COVID-19, it gave businesses a blueprint to restructure their debts and get back on their feet.
While the Small Business Restructuring Program was developed off the back of the COVID-19 pandemic, it is available to any company that meets the requirements.
Under a small business restructuring process, the directors and management of a company are able to retain day-to-day operational control, with an approved restructuring practitioner supervising and putting forward a plan to help the business pay off liabilities owed to creditors and regain financial stability, within a period not exceeding three years.
The goal is to save your business and get control and stability back into your life. You can do this by engaging a Small Business Restructuring Practitioner at BRI Ferrier. Only a professional registered with ASIC as a liquidator can be appointed as a restructuring practitioner.
Signs Your Business Needs Restructuring
Are you struggling with your cash flow? Is your debt mounting? Are you losing your clientele and feeling like your business growth has flatlined? Then Small Business Restructuring may be the perfect choice for you.
Working with a Small Business Restructuring Practitioner allows businesses to continue their day-to-day operations, while also having a direction and plan to put forward to creditors that showcase a structured pathway to repaying back debts owed.
To plan the path to the recovery of your business, you need to understand the challenges that stand in your way first. The expert team at BRI Ferrier can assist you in assessing whether your business meets the eligibility criteria and is a good candidate for a small business restructuring.
What is the Process for Small Business Restructuring?
For a business to access the Small Business Restructuring process, they first need to meet the required circumstantial criteria. This criteria includes;
Directors need to show that the business is in the process of insolvency or likely to become insolvent.
Total liabilities should not be over $1 million.
Tax lodgements and owed entitlements to employees should all be paid and up-to-date.
The company and its directors cannot have utilised the restructuring or simplified liquidation process in the past 7 years.
The process for Small Business Restructuring begins with the appointment of a Restructuring Practitioner, who will oversee the whole operation.
Working alongside the director, the practitioner will assess the company’s eligibility and assist in the curation and development of a restructuring plan. Instead of entering into liquidation, this plan will allow the business to repay creditors over a set term, which can be no longer than three years,
Once eligibility has been confirmed and the practitioner has commenced restructuring, the practitioner and director have 20 days to develop and present a plan to its owing creditors.
Following the presentation of the plan, creditors have 15 days to vote on whether or not they want to proceed with the proposal. A restructuring plan is approved when more than 50% of the voting creditors, based on the value of their claims, vote in favour of it. Creditors connected to the company – such as those with ties to its directors, shareholders, or the business itself – are excluded from voting.
Upon receiving approval, the business may continue its day-to-day operations, while the plan is administered by the restructuring practitioner. The restructure is mainly carried out behind the scenes, with minimal impact to the daily activities of the business and its owners.
What does the Small Business Restructuring Practitioner do?
Our team of expert practitioners at BRI Ferrier are here to help you get back on your feet.
While you worry about the operations of your business, the practitioner will assess your financial situation and work with you to develop a restructuring plan to get your business back on the right track.
Key actions include;
Assess Finances
Evaluate if you meet the eligibility requirements for restructuring and identify any glaring points of note.
Plan Development
Work with business directors in the development of a restructuring plan, which will clearly outline the pathway to clearing your debts.
Creditor Communication
The practitioner will circulate the plan to all relevant parties, and certify that the business is eligible for restructuring and that it will be able to meet all obligations under the proposed plan.
Manage Finances
Based on the terms of the plan, the practitioner will disburse payments to all relevant parties.
Assistance Not Control
Practitioners are here to help, but the company directors will remain in control of all day-to-day operations of their business.
Our team of practitioners at BRI Ferrier are leading experts in the fields of liquidation, insolvency, and restructuring. We will be here every step of the way to ensure a swift and strong turnaround for your business.
Who’s in control during Small Business Restructuring?
One of the most enticing aspects of Small Business Restructuring is that the directors of a business retain full control of any activities and operations that fall under the “ordinary course of business”.
The restructuring practitioner does not take control of the company but must approve any transactions that fall outside the ordinary course of business during the plan phase. This includes actions such as debt repayments, dividend disbursements to shareholders, or other significant matters that may impact the implementation of the restructuring plan. Once the plan is accepted, this approval requirement ends.
What are the Financial Implications of Small Business Restructuring?
Compared to traditional insolvency methods, such as voluntary administration, small business restructuring is generally a more cost-effective solution.
The Small Business Restructuring scheme has allowed for many Australians to stay afloat and create a successful future for themselves and their businesses.
There is no general agreed-upon amount, as the total cost is usually based on the complexity of the individual case at hand. An initial fixed fee presented by the practitioner is required for the restructuring process to begin. This flat fee must be presented by the practitioner and agreed upon by the business directors before anything can commence.
The cost-effective nature of the Small Business Restructuring process increases the likelihood that the company can meet the terms of the plan and remain operational.
To get a better understanding of what the total costs could look like for your company, reach out to the experienced team at BRI Ferrier to discuss the Small Business Restructuring process and obtain a quote.
The Impacts of Small Business Restructuring on Employees and Stakeholders?
As any good director knows, the backbone of any good company is your employees, and ensuring they are looked after during a restructuring process is necessary to maintain continuity and morale. During this period, information communication needs to be clear to ensure everyone knows their roles and how the restructuring process may impact them.
Also, for a business to be eligible for Small Business Restructuring, they must have paid all owed employee entitlements
Another important group that needs to be considered are the investors and stakeholders within your business, who have a vested interest in the small business restructuring process and its eventual outcome. Providing regular updates to them and outlining clearly the path to recovery through restructuring will help to instill confidence that the business’s future looks sound.
What are the Outcomes of Small Business Restructuring?
The process of Small Business Restructuring allows for businesses to develop a plan for recovery moving forward. They develop this plan with an approved restructuring practitioner, which is then presented to creditors.
If the plan is approved by the creditors, the restructuring practitioner will work alongside the business director to execute the plan over a set time period. The plan can include actions such as debt restructuring, operational changes, and altering the business structure and how it operates.
Approval of a restructuring plan is not based on a simple majority of the number of creditors. Instead, the plan is approved when more than 50% of the voting creditors—based on the total value of their claims—vote in favour of it.
For example, consider three creditors:
- Creditor A is owed $500,000
- Creditor B is owed $70,000
- Creditor C is owed $22,000
The total amount owed is $592,000. If Creditor A votes against the plan, it will fail, even if Creditors B and C vote in favour. This is because the combined value of B and C’s claims ($92,000) is less than 50% of the total debt and therefore does not meet the required threshold for approval.
The plan can be rejected by the creditors. In the case that this happens, the Small Business Restructuring plan ceases immediately. Legal action can then again be taken against the business in order to recover any outstanding debts. The business, if the plan is rejected, does not automatically enter into another form of formal insolvency, and the directors will remain in control of the business.
Directors, as an alternative, can consider placing their business into Voluntary Administration, and creditors can consider legal action.
In an ideal outcome, the restructuring practitioner and director will enact a plan, which will allow the business to regain financial stability and continue operating.
When does the Small Business Restructuring process end?
The Small Business Restructuring process normally ends when the terms of the approved restructuring plan are met, or if the plan is rejected by the creditors, or terminated early under a variety of other circumstances.
The plan may be terminated early by court order if the company fails to propose a restructuring plan within the required timeframe, if the plan is not adhered to, or if a voluntary administrator or liquidator is appointed.
If the Small Business Restructuring plan is terminated early, the business is not released from its debts.
How we can help at BRI Ferrier with Small Business Restructuring?
Here at BRI Ferrier, our expert team pride themselves on providing unparalleled expertise, commitment, and results-driven solutions to safeguard and transform your business.
We at BRI Ferrier believe in exploring ways to save viable businesses, providing unique turnaround opportunities and creative solutions. This new regime gives troubled small businesses another path to survival, with tangible outcomes for their creditors.
With over 80 staff and eight practices across Australia and New Zealand, we can help get your business back on track. The BRI Ferrier team has an extensive understanding of business and a strong track record of delivering the best possible outcomes for businesses experiencing financial distress.
As always, in challenging times, we encourage parties to seek advice early and take decisive action.
For more information on the Small Business Restructuring process, and if it’s the right choice for you, please contact us today and speak to our team of experts.
Whoever you are, wherever you are, whatever your challenge, we look forward to hearing from you.
