debts or cash flow challenges, you’re not alone, and there’s a pathway forward. A Small Business Restructure (SBR) is a formal, government-regulated process that helps eligible companies negotiate with creditors while continuing to trade. And unlike traditional insolvency, you stay in control of your business throughout.
If your business is feeling the pressure of mountingHere’s what you need to know, brought to you by Hamilton Murphy Advisory, a leading insolvency and restructuring firm with deep experience supporting small businesses through the SBR process.
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What is a Small Business Restructure?
A Small Business Restructure (“SBR”) is a relatively new form of insolvency appointment that commenced in 2021, designed specifically for business owners. It allows you to compromise your debts with a creditors’ agreement, helping you avoid liquidation and regain financial stability.
A SBR is unique compared to a formal administration in the sense that the business owner(s) stay in control of the company during the period of the SBR. Throughout this process, assistance in restructuring the strategic objectives and activities of the company is provided by a Restructuring Practitioner (“RP”) who must be a Liquidator registered with the ASIC to conduct the appointment.
Who is Eligible for a Small Business Restructure?
As the SBR legislation is targeted specifically to assist small businesses, it has strict eligibility criteria that must be met prior to appointment. These criteria include:
- Your business must be operated by a company (not a sole trader).
- You must owe less than $1 million to creditors.
- Neither the company nor its directors can have gone through an SBR or simplified liquidation in the past seven years.
- After appointment (but before the restructuring plan is offered to creditors), the company must:
- Pay all outstanding employee entitlements, and
- Lodge all outstanding returns with the ATO.
How It Works
If you’re considering a SBR, you’ll start by signing a declaration that your company is eligible. A director resolution must also be passed stating that:
- The company is insolvent or likely to become insolvent at some point in the future, and
- A Restructuring Practitioner (RP) should be appointed.
Once appointed the RP will work closely with you, your accountant and your advisors to:
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- Develop turnaround strategies
- Continue trading the business as normal
- Prepare a report to creditors and a proposed restructuring plan
The entire process takes 35 business days, with the first 20 days focused on developing and proposing the plan. Creditors then have 15 days to vote on it.
Plan acceptance rates are a key success measure in SBRs. At Hamilton Murphy Advisory, approximately 96% of restructuring plans have been accepted, a result well above the industry average and a reflection of their experience in this space.
What Happens if the Plan is Accepted?
Once approved, the plan typically outlines how the company will make payments to creditors over 12 months, usually from trading profits. These payments are held in trust by the RP, who later distributes them as dividends to creditors.
Upon finalisation, all creditor claims are settled, and your company is released from liability under the agreed terms. If trading profits aren’t viable, personal contributions or alternative arrangements may be considered.
Why Early Action is Key
As is the case in all matters concerning insolvency, early action is critical to ensure you give your business the best chance at recovering. Allowing creditor claims to accrue without intervention can open you up to personal liability.
Additionally, due to the strict eligibility criteria for an SBR, allowing creditor claims to accrue without acting may make your business ineligible for the appointment.
If you’re concerned about your financial position, don’t wait until it’s too late to seek help.
How Hamilton Murphy and Carbon Can Help
Hamilton Murphy Advisory has a long-standing relationship with Carbon, assisting on Small Business Restructures and other insolvency appointments to support businesses experiencing financial distress. By collaborating closely with the Carbon team, the process ensures a tailored, strategic approach designed to give each business the best possible chance of recovery.
If your business is facing financial pressure and you’d like to explore whether a Small Business Restructure is the right path forward, get in touch with your Carbon advisor.
About Hamilton Murphy
Hamilton Murphy Advisory is one of Australia’s leading insolvency and turnaround firms, specialising in restructuring solutions for small and medium businesses. With a strong track record across Small Business Restructures (SBR), voluntary administrations, and liquidations, their team of registered liquidators and restructuring professionals work closely with business owners, accountants and advisors to deliver practical outcomes in times of financial stress. With offices across Australia, Hamilton Murphy is committed to helping businesses regain control and chart a path forward.
If your business is experiencing financial difficulties or you would like to learn more about an SBR and the benefits it could have for your business, please reach out to the Hamilton Murphy team by email to info@hamiltonmurphy.com.au or by contacting (08) 9334 7400.
Not sure where to start? Your Carbon advisor can guide you through the next steps and connect you with the right experts.