Small Business Restructuring - The best option for your client, and you.

Small business restructuring (SBR) is a new option available for small businesses that provides a more efficient and cost-effective approach to debt restructuring. The regime offers many obvious benefits to the small business, but also provides opportunities to you as their accountant.

What is a Small Business Restructure?

An SBR is a process where a company can appoint a Restructuring Practitioner (RP), who must be a Registered Liquidator, to assist with putting forward a restructuring plan to creditors. Under the restructuring plan, creditors are offered a compromise of their debts – often an offer to pay less than 100 cents in the dollar and/or over a longer period. If successful, creditor claims are compromised (reduced), by the restructuring plan and the business can continue to trade.

Why you should get involved?

Efficiency and Cost-Effective Process: The SBR process is less costly and more efficient than other formal insolvency options.  Traditional insolvency appointments generally operate over many months, or they are too costly to be of any use to smaller businesses. Clients that are eligible for an SBR could take advantage of the cost savings, or the shorter appointment period, to improve their financial position quickly.

Supporting your small business clients: With our assistance, you can guide your clients through the SBR process thereby minimizing the impact on business owners and stakeholders, and allowing your clients to continue operating, as your client, for years to come.

Who is Eligible?

To be eligible for the SBR process:

• The company’s total liabilities must be under $1 million. This includes secured debts and related party debts but excludes employee entitlements.
• The company must not have been under a SBR or simplified liquidation process within the preceding 7 years.
• The company’s director (or a former director in the last 12 months) must not have been a director of another company that has been under a SBR or simplified liquidation process within the preceding 7 years.
• Prior to proposing the restructuring plan the Company's lodgements have to be up to date, and any outstanding employee entitlements paid.

Conclusion

SBR was originally designed to assist small businesses to restructure their debts and break through the COVID slump. It can provide a relatively fast and effective way for a company to move forward and remain in business.  As an accountant, identifying when SBR might be appropriate and guiding a client through the process could provide an opportunity for you to keep your client in business and develop an even stronger professional relationship with them as their trusted advisor.

For more information on SBR or to discuss whether it might be appropriate for one of your clients, contact the Smith Hancock team on ph:02 9689 2266.