Should the company meet certain eligibility criteria, a small business restructuring practitioner may adopt this process rather than a voluntary administration. Because the small business restructuring (SBR) process is more streamlined and less onerous than other formal insolvency appointments, not all businesses are eligible to use it as a debt restructuring tool. To be eligible to commence the SBR process a business must:
Be operating through a company structure.
You must either be operating as a company, or via a trust with a corporate trustee. Sole traders are not eligible for the SBR process but may have other options available to them; our teams can help assess.
Have liabilities of less than $1 million.
Total liabilities must be less than $1 million, excluding employee entitlements. These typically include, the ATO, suppliers and related party debts.
Have not recently used the SBR process.
The company and its directors can only use the SBR process once in a seven-year period. This means if a director becomes a director of another company, the exclusion moves with the director. Former directors who resigned in the previous 12 months are also factored into this restriction. Some limited exceptions to the seven-year exclusion period apply for a group of companies.
Director declarations
Before proceeding, directors must make a declaration about whether they believe the company has entered into any voidable transactions; and that there are reasonable grounds for believing the company qualifies to propose an SBR. Directors must also resolve if the company is insolvent or is likely to become insolvent and that a restructuring practitioner should be appointed.
Appoint a small business restructuring practitioner
Directors must engage with and appoint a registered small business restructuring practitioner (like us at Worrells) to oversee the SBR process