What Is Small Business Restructuring and Why Is It So Popular?
Small Business Restructuring (SBR) is a formal insolvency process where a Small Business Restructuring Practitioner (SBRP) is appointed to form a deal with the company’s creditors to reduce total debts, including tax debt.
Unlike other formal insolvency processes, the company remains under the control of the directors and can continue to trade whilst under SBR.
You’ll be surprised at the kinds of deals that creditors, including the ATO, are willing to accept through Small Business Restructuring. Recent SBR Plans have achieved debt savings of an average of 75% of total debt. In dollar terms the savings have reduced total debts by $114,000 to $853,000. And the cost of an SBR to achieve those savings was between $15,000 and $20,000.
SBR plans were created by the “insolvency industry” to address the problem of businesses not being able to afford to “go broke!”
All too often insolvent companies were obliged to wait until they were wound up by a creditor as they couldn’t afford the fees charged to appoint an Administrator or Liquidator. This in turn led to the proliferation of “phoenix companies” as directors sought a way to continue in business.
The basic flow of a SBR is as follows:
Day 1 The SBR is appointed to oversee SBR process.
Day 7 The Director advises the SBR of his proposal
Day 14 The SBR sends the Directors offer to all creditors.
Day 30 Voting ceases and the appointed SBR advises creditors of the outcome which is either acceptance or rejection of the Director’s proposal. Should the proposal be accepted all creditors are bound and a dividend paid.
