Small business restructuring
Benefits of Small Business Restructuring for Directors

If you're a business director who's facing financial distress, don't give up hope. Small Business Restructuring could be the solution you've been searching for. This enlightening video will take you through the benefits of SBR and empower you to make informed decisions for your company's future. Subscribe to stay up-to-date on the latest insolvency, bankruptcy and finance information from Worrells.


What are the benefits of small business restructuring? Why would you, as a director facing financial difficulty or as a company struggling with debts, consider entering this process? The first and most key thing is it gives you space and time to work out a compromise with your creditors. 

As soon as you enter the process, you enter into sort of a protected status. No one can commence proceedings at you; no one can pursue you to try and collect their debts. They have to wait until the process is completed. So, we've got that time to go to the creditors and try to reach an agreement and get a restructuring plan approved. 

You also keep control of your business through the process. You're able to trade in the ordinary course; you maintain control. You don't have an external administrator coming in and taking over. It's still your business; you get to run it. The process is relatively quick, which is beneficial. You know you're done in 35 to 45 business days, and then you've got certainty. You know one way or the other how things are going to go. 

There's certainty as to costs. So, the way costs are structured for small business restructure, and it's set out in a law, is it's a fixed fee that's charged upfront for the restructuring process. You know exactly upfront what it's going to cost to get through that process, and it's certain. Then, for the restructuring plan, if it's accepted, the fee is a percentage of what you paid to creditors. So it's not extra on top. 

If you're paying 100 grand to creditors, the first safe five per cent goes to the restructuring practitioner to pay their costs. It's not on top of what you're paying the creditors. Next, you get positive outcomes. There are a number of creditors who will not compromise their core debt without an external administrator coming in, reviewing the business, and certifying that the plan is reasonable and it's something they should accept. 

The key one is the ATO. While the ATO will compromise interest and penalties sometimes, on application by a client or a company, they won't compromise core tax debt without the company entering into a small business restructure or some other type of formal restructuring process. 

So, the only way you can access discounts on core tax debt is through a process like this. Then, the final real benefit of the process is that it's not final. Unlike with other processes where if the proposal isn't accepted by creditors, you proceed straight to liquidation, if the restructuring plan isn't accepted, the company just gets handed back to the directors. They maintain control, and they have options to do other things rather than being forced directly into liquidation.

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