Court Extends Restructuring Proposal Period After the Deadline

In a recent case involving Sprys Coating Services Pty Ltd, the Federal Court allowed extra time for a restructuring plan to be put forward to creditors – even though the statutory deadline had already passed.

Normally, under the small business restructuring (SBR) process, a restructuring practitioner must send a restructuring plan to creditors within 20 business days. The practitioner can extend this period by up to 10 business days, but this extension is only allowed once under regulation 5.3B.17 of the Corporations Regulations 2001.

In this case, the deadline was missed because of an oversight by the restructuring practitioner. Since no further automatic extensions were available, the practitioner had to apply to the Court for approval to extend the period. The Court agreed.

This highlights a key difference between small business restructuring and voluntary administration:

• In voluntary administration, extensions generally require Court involvement (for example, to extend the convening period for creditors’ meetings).
• By contrast, SBR offers more flexibility, since practitioners can extend timeframes once without needing Court orders – an option not available in voluntary administration.

Why This Matters

For small businesses, the SBR process is designed to be more cost-effective and flexible than voluntary administration. It can give owners breathing space to put forward a workable plan without the higher costs and complexity of traditional insolvency processes.

However, the Sprys Coating case shows that if deadlines are missed, Court involvement may still be needed which can add extra cost and uncertainty – something most small businesses want to avoid.

The key points arising from this case for any businesses participating in SBR would be:

1. Know the SBR deadlines – restructuring plans must be sent to creditors within 20 business days.
2. Use the one extension wisely – you only get a single 10-business-day extension without Court approval.
3. Plan ahead – missing deadlines may mean costly Court applications.
4. While SBR is cheaper and more flexible than voluntary administration, it still requires careful management and an experienced practitioner.
5. Get advice early – work closely with a professional restructuring practitioner to stay on track.

To find out more about SBR and how it might benefit your business/a client’s business, speak to the experienced team at Smith Hancock to ensure the process runs smoothly and effectively.