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SMALL BUSINESS RESTRUCTURING
The new debt restructuring process will provide eligible small businesses with an opportunity to work with a small business restructuring practitioner to develop and propose a debt restructuring plan to creditors.
It’s a ‘debtor-in-possession’ model, so the directors of the company will remain in control of the business while the restructuring plan is being developed.
There is no one-size-fits-all solution to an underperforming or distressed business. Timely intervention and prevention is always better than delayed reaction. Being proactive requires a recognition of the signs of business stress and a willingness to seek assistance before the stress becomes distressed. For businesses facing the prospect of financial uncertainty, we can draw on a comprehensive and varied range of business solutions to help.
WHAT IS SMALL BUSINESS RESTRUCTURING?
Small business debt restructuring is a formal debt restructuring process for eligible incorporated (ie Pty Ltd) small businesses to allow a faster and less complex pathway to restructure existing debts and maximise chances of survival.
A new process commenced on 1 January 2021 and allows for eligible companies to retain control of their business while developing a plan to restructure their debt with the assistance of a Small Business Restructuring Practitioner (SBRP) and enter into a restructuring plan with their creditors to compromise debts.
As registered liquidators (regulated by the Australian Securities & Investments Commission) we are qualified to act as an SBRP for an eligible company.
Strict eligibility criteria must be satisfied in order to appoint an SBRP. Speak to our team of insolvency professionals today to understand if your company qualifies for the small business debt restructuring process.
Who is eligible?
Currently, small and medium enterprises are part of a uniform system which imposes the same duties and obligations as large organisations. The ‘debtor in possession model’ addresses this issue.
What is the role of a Small Business Restructure Practitioner?
- Help determine if a company is eligible.
- Support the company to review its financial affairs.
- Assist in the development of a business restructuring plan.
- Certify the small business restructure to creditors.
- Once the plan is implemented, manage disbursements.
Restructure practitioners will not be required to manage the day-to-day affairs of a company and will be free of any personal liability. To provide a more cost-effective service, practitioners will be eligible to register as a small business restructuring practitioner only. Registered liquidators will also be able to manage the process.
How long does the process take?
Once a plan Is put to creditors, they have 15 business days to vote to accept or reject the plan.
What happens once a plan is made?
All admissible debts and claims rank equally upon repayment of the plan. That means that all creditors are paid the same ‘cents in the dollar’ and all are paid at the same time.
When a company pays off its obligations under the restructuring plan, it is released from all debts or claims that were admissible under the plan.
A company ‘exits’ a plan if, for example it fails to make payments under the plan. If this happens before its obligations are paid off, it remains liable for the original debt owed prior to the plan commencing, minus any repayments that occurred under the plan.
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