What is Small Business Restructuring (SBR)? How do I start?

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  Who is Eligible for Small Business Restructuring?

  To qualify for SBR, a business must:

  • Be incorporated
  • Be insolvent or be likely to become insolvent
  • Have liabilities under $1 million
  • Be up to date on employee entitlements and tax lodgements before a proposal is offered to creditors
  • Ensure neither the company nor its directors (including those who recently resigned in the last 12 months) have used SBR or simplified liquidation in the past seven years

  Eligible companies facing insolvency can appoint an SBRP to help restructure debts while continuing to operate. Feel free to contact the de Jonge Read team to review your eligibility and determine if an SBR is the right solution for your business.

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  What are the Benefits of Small Business Restructuring?

  The benefits of SBR include reduced costs, faster turnaround times, and easier access for businesses in financial distress.

  A key advantage is that the directors retain control of the business throughout the process and creditor relationships, allowing normal operations to continue with minimal disruption to staff or customers.

  This “debtor-in-possession” model ensures that business owners can navigate restructuring while still managing day-to-day operations, minimising any disruption to business, staff or customers.

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  How does the Small Business Restructuring Process work?

  The SBR process can take up to 35 business days and is broken down into two key stages:

  1. Proposal stage: Directors appoint an SBRP to assess eligibility and develop a Restructuring Plan. The company has 20 business days to create the Plan, outlining debt repayment and SBRP remuneration.
  2. Acceptance stage: Creditors have 15 business days to review and vote. Approval requires over 50% of unrelated creditors by value. An approved Plan allows the business to manage debts while continuing operations, lasting up to three years.

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  How Much does the Small Business Restructuring Plan Cost?

  The cost of an SBR Plan typically ranges from $15,000 to $30,000, depending on the complexity of the case. This fee typically includes

  • Remuneration for appointed SBRP
    • A fixed flat fee during the proposal stage
    • A fixed percentage of the funds recovered for creditors

  The exact fees are agreed upon upfront between the company directors and the SBR Practitioner. Despite these costs, SBR remains a cost-effective solution, as the potential savings from debt reductions can far outweigh the fees involved.

  Between June and September 2024, de Jonge Read has successfully implemented 12 SBR cases, settling between 15 – 26 cents to $1, and with a total debt reduction of $5.1 million.

  Contact the de Jonge Read team today to review your eligibility and obtain a customised Small Business Restructuring quote.

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  Is Small Business Restructuring popular?

  Yes, SBR has become a popular alternative to Payment Arrangements with the ATO. As of August 2024, SBR accounts for nearly 20% of all insolvency appointments in Australia.

  Debt reductions through SBR have been significant, with agreed plans often reducing debts by up to 91%, and creditors approving 92% of proposed plans.

  On average, creditors receive 15.2 cents per dollar under these plans, making the SBR an effective solution for many businesses facing financial difficulties.

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