How much does small business restructuring really cost?

Saving your business doesn’t have to break the bank.

The Small Business Restructuring (SBR) scheme has enabled many Australian small businesses to successfully restructure their business obligations and keep their doors open for business. As the popularity of SBRs continues to rise, we are hearing more stories of directors who are being quoted excessively high fees to undertake the SBR process.

These stories typically result from directors being approached by pre-insolvency advisors, who charge their own ‘advisory’ fees on top of the amount their chosen restructuring practitioner charges to undertake the actual SBR process. This may lead to directors feeling that the SBR process is cost prohibitive.

Whilst there are costs in appointing a restructuring practitioner to undertake the SBR process, it may not be as expensive as some believe (especially if the director is not unnecessarily paying a pre-insolvency advisor in addition to the qualified restructuring practitioner).

For the SBR process, restructuring practitioners often breakup the total costs as follows:

1. An initial fixed fee to commence the SBR process. This generally involves:

   1. Reviewing the company’s asset and liability position

   2. Working with the company’s directors to formulate the SBR plan

   3. Drafting a report to creditors putting forward the SBR plan.

2. A fixed percentage of recoveries under the SBR plan, subject to creditor approval, to cover the costs of monitoring payments being made under the SBR plan. They will also distribute the SBR plan funds to creditors by way of a dividend.

Recently, Worrells assisted a director of a real estate business in navigating the SBR process to address the company's outstanding tax liabilities and unsecured debts totalling $222,000. As part of this process, the director proposed an SBR plan offering creditors a return of 20 cents on the dollar to be paid via 24 monthly instalments.

The SBR remuneration structure naturally fosters price competition amongst restructuring practitioners. Costs will vary depending upon the company’s circumstances at the commencement of the SBR process. At Worrells, we believe that the quality of our service and our strong track record of delivering successful outcomes for both company directors and their creditors is a key distinction in addition to pricing.

We encourage you to reach out to your local Worrells Principal for a free consultation to discuss the SBR process and obtain a quote, so that your client understands the total costs before commencing the process.