Small Business Restructuring (“SBR”)
SBR allows financially distressed small businesses to access a single, streamlined process to restructure their debts. It allows the director to remain in control of the Company’s day-to-day operations during the SBR process. The purpose of the SBR process is to provide directors and the company time to put forward a plan to creditors to pay off their liabilities, in full or in part, within a period not exceeding 3 years. The SBR process supports more small businesses to survive, meaning better outcomes for businesses, creditors, employees and the economy.
Eligibility
For a company to be eligible for the debt restructuring process, it must:
1. Not have more than $1 million in total liabilities (including secured or related party debt) on the day restructuring begins.
2.No director of the company (or former director within the last 12 months before restructuring begins) has been a director of another company that has been under restructuring or subject to the simplified liquidation process within the last 7 years.
3. The company seeking to undertake the debt restructuring process has not been under restructuring or subject to the simplified liquidation process within the last 7 years
4. Have lodged all of its taxation obligations to date; and
5. Paid all employee entitlements that are due and payable.
The Director would have 20 business days (which can be extended under certain circumstances) to propose a restructuring plan. Before the plan is accepted, the Company must set out in every public document (and in every negotiable instrument of the company) after the company’s name where it first appears, the expression “(Restructuring Practitioner appointed)” .
The contents of the restructuring plan must:
a) must be in an approved form; and
b) identify the company’s property that is to be dealt with; and
c) specify how the property is to be dealt with; and
d) provide for the remuneration of the restructuring practitioner for the plan; and
e) specify the date on which the restructuring plan was executed.
The restructuring plan may:
a) authorise the restructuring practitioner for the plan to deal with the identified property in the way specified in the plan; and
b) provide for any matter relating to the company’s financial affairs; and
c) be conditional for up to 10 business days after the day on which the proposal to make the restructuring plan is accepted.
The restructuring plan may not:
a) provide for the transfer of property (other than money) to a creditor; or
b) provide for the company to make payments under the plan, in respect of an admissible debt or claim, after 3 years beginning on the day the plan is made.
A restructuring plan must include the following standard terms:
a) all admissible debts and claims rank equally;
b) if the total amount paid by the company under the plan in respect of those debts or claims is insufficient to meet those debts or claims in full, those debts or claims will be paid proportionately;
c) a creditor is not entitled to receive, in respect of an admissible debt or claim, more than the amount of the debt or claim;
d) the amount of an admissible debt or claim will be ascertained as at the time immediately before the restructuring began;
e) if a creditor is a secured creditor:
(i) if the creditor does not realise the creditor’s security interest while the plan is in force, the creditor is taken, for the purposes of working out the amount payable to the creditor under the plan, to be a creditor only to the extent (if any) by which the amount of the creditor’s admissible debt or claim exceeds the value of the creditor’s security interest; and
(ii) if the creditor realises the creditor’s security interest while the plan is in force, the creditor is taken, for the purposes of working out the amount payable to the creditor under the plan, to be a creditor only to the extent of any balance due to the creditor after deducting the net amount realised.
After the plan is sent to the creditors for their consideration, the creditors would have 15 business days (which can be extended) to vote on the plan.
A company’s restructuring plan is accepted if, at the end of the last day of the acceptance period, the majority in value of those creditors from whom the restructuring practitioner for the plan has received a statement stating that the restructuring plan should be accepted.
The Restructuring Practitioner will assist with resolving creditors’ disagreement regarding their debts and claims.
If the plan is accepted by the creditors, the restructuring practitioner will collect money under the plan, pays it to creditors and conducts activities required under the plan.