SBR is a formal process designed to help viable small businesses in Australia restructure their debts and avoid liquidation. It allows eligible companies to continue trading under the guidance of a Small Business Restructuring Practitioner (SBRP) while they develop and implement a plan to repay their creditors.

SBR offers several key benefits, including reduced debt, protection from creditor actions during the restructuring period, the ability to continue trading, and expert guidance from an SBRP. It provides a structured pathway to financial recovery while minimising disruption to your business operations.

To be eligible for SBR, your business must be an incorporated company (a “Pty Ltd” company) with total liabilities (excluding employee entitlements) under $1 million. You must be up to date with your tax lodgements and have paid all due and payable employee entitlements. Both the company and its directors must not have used this process within the past seven years.

Directors choose SBR because it allows them to retain control of their business while addressing financial distress. It offers a less disruptive alternative to liquidation, providing an opportunity to restructure debt, preserve jobs, and rebuild the business.

The SBR process typically involves an initial consultation, assessment of your business's finances, development of a restructuring plan, creditor approval, and implementation of the plan. The process generally takes up to 35 business days, split into a 20-business-day proposal phase and a 15-business-day acceptance phase.

The plan must adhere to certain regulations, such as equal treatment of admissible debts and a maximum three-year term. It can be conditional on a future event, such as the sale of an asset, occurring within 10 business days of creditor acceptance.

Secured creditors are bound by the plan only to the extent they agree, but any shortfall is covered under the plan. Related creditors do not vote on the plan but receive a distribution under its terms.

The SBRP helps determine eligibility, supports the directors in developing the restructuring plan, certifies the plan for creditor voting, and manages disbursements if the plan is approved. The directors remain in control of the company's day-to-day operations.

The SBRP's remuneration involves a fixed fee for the proposal phase (determined by the directors) and a fixed percentage of recoveries from the plan (approved by creditors). Referral fees, while prohibited in other insolvency procedures, are permitted under SBR regulations.

A company undergoing SBR must publicly disclose this status. For example, "ABC Pty Ltd (restructuring practitioner appointed)."

Once fully implemented, the plan terminates, and the company is released from the debts covered by the plan. Termination can also occur due to a court order, failure of a condition precedent, an unremedied breach, or the appointment of an administrator or liquidator.

Yes, but it requires a court order, which may not be practical in many situations.

AVA Advisory offers other options, such as Voluntary Administration (VA), informal workouts with creditors, and liquidation. We can advise on the most suitable course of action based on your specific circumstances.