Frequently Asked Questions

Get the Answers You Need About Small Business Debt Restructuring

General Information About the SBR Process

What is the Small Business Restructuring Process (SBRP)?

The SBRP is a government-backed initiative that allows small businesses facing financial difficulties to restructure their debts while continuing to trade. It provides an alternative to liquidation or voluntary administration, enabling businesses to regain control and secure their financial future.

How do I know if my business is eligible for debt restructuring?

To be eligible for the SBRP, your business must meet certain criteria, such as having total liabilities under $1 million, keeping tax lodgements up to date, and ensuring employee entitlements are paid. You can use our Qualification Test to quickly determine if your business qualifies.

What debts are covered under the restructuring plan?

The restructuring plan typically covers unsecured debts, such as those owed to suppliers and the ATO. Secured debts and new debts incurred after the restructuring process begins are generally not included in the plan.

What happens if my business has previously gone through a restructuring process?

If your business or its directors have used the Small Business Restructuring Process or the simplified liquidation process within the last 7 years, your business will not be eligible to use the SBRP again.

Can I restructure personal debts through the Small Business Restructuring Process?

No, the SBRP is specifically designed for business-related debts. Personal debts fall under separate regulations, such as those covered by the Bankruptcy Act 1966. However, if you are personally liable for certain business debts, they may be included in the restructuring plan.

Practitioner Roles and Insolvency Concepts

1. What is the Small Business Restructuring Process (SBRP)?

A Small Business Restructuring Practitioner is a qualified professional tasked with guiding businesses through the restructuring process. They work alongside business owners to develop a workable plan for creditors, ensuring compliance with relevant laws and overseeing the approval process.

What does Voluntary Administration mean?

Voluntary administration is when an external administrator takes over the management of a business to assess its financial situation and determine the best course of action—either saving the company or winding it down in an organised manner to pay off debts.

What is Safe Harbour protection?

Safe Harbour laws offer protection for company directors who are making a genuine effort to restructure their business and avoid insolvency. This protection can help directors avoid personal liability for certain debts during the restructuring period as long as they are working in the company's best interest.

The Role of Creditors and the Practitioner

How are creditors involved in the restructuring process?

Creditors play a key role in the restructuring process. Once a plan is submitted, creditors are given up to 15 business days to review and vote on it. The plan will proceed if more than 50% of creditors (by value) approve it.

What happens if creditors don’t approve the restructuring plan?

If more than 50% of your creditors (by value) reject the restructuring plan, the process will not proceed. In this case, other options such as voluntary administration or liquidation may need to be explored.

What is the role of a Small Business Restructuring Practitioner (SBRP)?

A licensed restructuring practitioner will work with you to develop a fair and compliant restructuring plan. They oversee the process, ensuring that both your business and its creditors are protected, while you remain in control of day-to-day operations.

What happens if I can’t meet the terms of the restructuring plan?

If your business is unable to meet the agreed terms, the restructuring plan may be terminated, and creditors will have the right to pursue their claims. It’s important to work closely with your restructuring practitioner to ensure the plan remains viable.

Benefits and Expectations of Debt Restructuring

What are the key benefits of debt restructuring?

Debt restructuring allows businesses to avoid liquidation, continue trading, and work on a structured repayment plan with creditors. It provides a lifeline for businesses under financial stress, offering time to stabilise operations and a clear path to financial recovery.

Can I continue trading while undergoing debt restructuring?

Yes, one of the key benefits of the SBRP is that you can continue trading while working through the restructuring process. This allows your business to keep generating revenue and maintain operations as you manage your debt.

How long does the Small Business Restructuring Process take?

The entire process typically takes around 35 business days. This includes developing the restructuring plan, submitting it to creditors for approval, and implementing the plan once approved.

How long does it take to implement the restructuring plan?

Once the plan is approved by creditors, the implementation period will vary based on the agreed terms. Typically, businesses are given a structured repayment schedule that may last several months or even years, depending on the amount owed.

How will restructuring affect my business’s reputation?

While debt restructuring can raise concerns among creditors and stakeholders, it is often seen as a proactive step to stabilise a business. Successfully restructuring your debt can restore confidence in your business’s long-term viability.

Debts and Legal Notices

What happens if I don't pay superannuation for employees?

Failure to pay employee superannuation can lead to significant penalties from the Australian Taxation Office (ATO). Unpaid superannuation is treated as a serious breach, and directors can be personally liable for these unpaid contributions under certain conditions.

What are creditor notices like Winding Up Notices or Letters of Demand?

These are formal legal documents that creditors use to pursue outstanding debts:

Winding Up Notice: This document is a request to liquidate the business, forcing it to sell assets to cover debts.
Letter of Demand: This is an initial formal request asking the business to settle an unpaid debt before further legal action is taken.
Statement of Claim: A legal document outlining the details of a debt claim, usually the first step in initiating court proceedings.

What is a Director Penalty Notice (DPN)?

A Director Penalty Notice (DPN) is a formal notice issued by the Australian Taxation Office (ATO) to company directors, holding them personally accountable for specific unpaid company taxes, such as PAYG withholding or superannuation guarantee charges. If the company fails to pay these debts within the stipulated time, directors may become personally liable for the outstanding amounts. Directors must act promptly upon receiving a DPN to avoid legal and financial consequences.

Costs and Modifications

Is there a cost involved in the restructuring process?

Yes, there are fees associated with the Small Business Restructuring Practitioner’s services, as well as any other professionals involved in the process. The costs will vary depending on the complexity of your business’s financial situation.

Can I modify the restructuring plan after it has been approved?

In some cases, the restructuring plan can be modified if circumstances change. However, this would require creditor approval and must be overseen by the restructuring practitioner to ensure compliance with the law.

Responsibilities and Other Options

What are my responsibilities during the restructuring process?

As a business owner, you must ensure that your business continues to operate according to the restructuring plan. This includes keeping up with agreed payments, maintaining accurate financial records, and adhering to the terms outlined in the plan.

Can I restructure my business’s secured debts?

Secured debts, such as loans backed by collateral (e.g. equipment or property), are generally not included in the restructuring plan. The process primarily focuses on unsecured debts, such as supplier payments and tax debts.

What should I do if my business isn’t eligible for the Small Business Restructuring Process?

If your business doesn’t meet the eligibility criteria for the SBRP, other options such as voluntary administration or liquidation may be available. We recommend speaking with our financial experts to explore alternative solutions tailored to your specific circumstances.

How does Simple Debt Restructures help with the restructuring process?

At Simple Debt Restructures, we help businesses navigate the complexities of the restructuring process. We offer personalised advice, assist with eligibility checks, and connect you with the right licensed practitioners to develop and implement the best plan for your business.

Legal Protections and Processes

What legal protections does the Small Business Restructuring Process offer?

The restructuring process provides legal protection from creditors’ claims, meaning they cannot start or continue legal action while the restructuring plan is being developed and considered. This gives businesses breathing room to focus on recovery without the immediate pressure of debt enforcement.

What happens if I can’t follow the restructuring plan?

If the terms of the restructuring plan aren’t met, creditors may be able to resume legal actions, such as demanding repayments or liquidating the company. It’s critical to maintain regular communication with your restructuring practitioner to avoid falling out of compliance.

Still Have Questions?

If you didn’t find the answer you were looking for in our FAQs, our team is ready to assist. We understand that every business has unique challenges, and personalised advice can make all the difference. Whether you need clarification on eligibility or how the restructuring process works for your business, we’re here to help.

Contact us for more information, or take our quick eligibility test to see if your business qualifies for the Small Business Restructuring Process. This could be your first step toward financial stability.

Check If You Qualify Today

Are you wondering if your business qualifies for the Small Business Restructuring Process? Don’t wait until it’s too late. Take our quick qualification test to see if your business can benefit from this streamlined process and take the first steps toward financial recovery.

Check If You Qualify Now

Speak with an Expert

Still have questions? Whether you’re unsure about the restructuring process or want personalised guidance, our team is ready to help. Contact us today for a confidential discussion and find out how we can assist your business through challenging times.