A crisis in your business is inevitable.
Whether that is cash flow problems, staffing problems, legal problems, a pandemic, rising inflation, a natural disaster or a myriad of other potential issues. Despite the certainty of having to deal with disasters of some kind, business owners rarely plan for the time when disaster strikes.
Being aware of your options BEFORE you need them makes sense. We urge all clients to develop a basic disaster recovery plan, so that you at least have some idea of who to contact in the event of a disaster and what some of your possible tools might be.
One key, but little known, tool available to small business owners in times of financial stress is an SBR (Small Business Restructure). This allows for an incorporated company with creditor consent to restructure (renegotiate) its debt to achieve future profitability and viability.
What is a Small Business Restructure (SBR)?
An SBR permits directors to retain control of the business while a restructuring plan is developed over a 20-business-day period following commencement. Reprieve from existing (pre-appointment) debts is available as a temporary freeze is placed over creditor enforcement. Ongoing debts from commencement must be paid in the ordinary course.
The restructuring plan, where proposed, will typically request that all creditors accept a lesser amount owed to them on a pari passu basis (means: all parties are treated the same). Any payment plan cannot be greater than three years. Creditors are then asked to vote on the plan within 15 business days.
If the plan is accepted by the majority in value of voting creditors, then all creditors are bound by the plan even if they did not vote. The directors continue to remain in control of the business with the plan practitioner responsible for receiving and paying out money under the plan. Once all payments under the plan are complete, the company is released from all creditor debts that were subject to the plan.
An SBR is available for incorporated companies that have not previously used the mechanism and have total liabilities less than $1 million.
In addition, before a plan is offered to the creditors, the company must pay all outstanding employee entitlements that are due and payable and make any required tax lodgements.
For more general information, ASIC provides some useful information on the process.
Who do you talk to about putting an SBR in place?
An SBR is put in place using a restructuring practitioner registered with ASIC.
All Sorted is not a restructuring practitioner, however, we do have relationships with a number and can help you decide which one may be best for your needs.
How successful are SBRs?
Data released by the ASIC indicates that 92% of proposed restructuring plans sent to creditors were approved with 66% of companies that implemented a restructuring plan appearing to continue operating as a going concern. As such, it is evident that an SBR can provide valuable recourse in situations where the business may otherwise have to cease trading.
Need some help?
The above constitutes a brief outline only of the SBR process. If you would like to discuss your situation with us, talk to us. Don't delay.
