Small business restructuring allows eligible businesses to negotiate debt under more favourable terms with its creditors, maximising the chances of trading profitably in the future.
This process allows you to remain in control of your business throughout the restructuring period, overseeing critical decisions to steer your company back on track.
Our national Restructuring Practitioners (RP) will guide you through the restructuring process.
Small Business Restructuring Brochure
The key benefits of Small Business Restructuring include:
To be eligible for Small Business Restructuring, your business must:
Before a plan is offered to creditors, your business must:
Precision strategies for navigating financial distress
The process commences when the company director/s appoint the Restructuring Practitioner (RP). A person must be a registered liquidator to act as RP.
The RP evaluates whether the company qualifies for small business restructuring and guides the directors in developing the restructuring plan. The company has 20 business days to formulate and present the plan to its creditors. This plan enables the company to repay its creditors either partially or fully, offering more favourable outcome for all involved parties compared to liquidation.
Subsequently, creditors are given 15 business days to vote to accept or reject the plan. Approval requires a majority of over 50% in value from unrelated creditors. The RP oversees the voting process.
If the plan is approved, the company can maintain its normal business operations while the plan is executed by the RP. The duration of the plan is limited to a maximum of three years.
Insolvency occurs when a company cannot pay all its debts as when they become due and payable. Insolvency warning signs include accruing losses, cash flow difficulties, taxes and payments past due, legal problems, and difficulties obtaining new credit.
Read more - Recognising early indicators of insolvency
To present a plan to your creditors, your company must meet the following requirements:
When a company undergoes restructuring, a moratorium is imposed on unsecured creditor claims as well as certain secured creditor claims. This means:
Once a plan is accepted by creditors, disbursements are made to a company's creditors according to the terms outlined in the plan. All eligible debts and claims are treated equally upon repayment of the plan. This means that all creditors receive the same proportion of their owed amount, and all are compensated simultaneously.
Upon fulfilling its obligations under the restructuring plan, a company is released of all debts or claims that were included in the plan.
A company "exits" a plan if, for instance, it defaults on payments outlined in the plan. In such cases, if the company hasn't fully satisfied its obligations, it remains accountable for the initial debt incurred prior to the plan's initiation, minus any payments made during the plan's execution.
The plan must be supported by over 50 percent of creditors by value who participate in the vote. Should the restructuring plan fail to garner approval, the restructuring process ends. While you retain control of the company, creditors regain the ability to enforce their rights, and you lose protection against liability for insolvent trading. You may consider placing the company into voluntary administration or liquidation.
The restructuring plan encompasses all unsecured debts accrued before the company commenced restructuring. It excludes employee entitlements, such as accrued leave or redundancy benefits, even those that are not yet due for payment. Any debts incurred after the initiation of the restructuring process fall outside the scope of the plan and must be settled separately.
