The Small Business Restructuring Process is one of two new formal insolvency appointments introduced by the Federal Government in 2021. In this new process, directors and management remain in control of the company (under supervision of a restructuring practitioner).

The purpose of the Small Business Restructuring Process is to provide directors and the company time to put forward a plan to creditors to pay off their liabilities, in full or in part, within a period not exceeding 3 years.

To be eligible for the SBR process, a business must:

• Be operated by a company
• Owe less that $1 million to its creditors (excluding employees)
• Not previously done a small business restructuring or used simplified liquidation in the past 7 years
• Before a plan is offered to creditors, be able to:
• Pay all outstanding employee entitlements and
• Lodge all outstanding documentation and returns with the ATO.

If a company director suspects that their company is insolvent, may become insolvent or is in financial difficulty, it is crucial that professional advice is sought immediately. There are various consequences that a company director may face if they allow the situation to worsen including insolvent trading. A Voluntary Administration (also known as a VA) occurs when directors of a company recognise their business is in financial difficulty and appoint an external administrator to save or restructure the business. B&T Advisory assists company directors with the administration process to form an arrangement with creditors, which may save the company while maximising the return to creditors.

A creditors’ voluntary liquidation (also known as a CVL) occurs when the company’s members determine that the company can no longer satisfy its debts and is likely to become insolvent or is insolvent. If a business is unable to meet its liabilities, the company’s members must decide what action to take to maximise the return to creditors and avoid the possibility of insolvent trading.

The aim of the Liquidator in this process is to sell the company’s assets and distribute the proceeds to creditors and shareholders. B&T Advisory can assist businesses through this process as an independent party to ensure the process is conducted appropriately and in compliance with all relevant laws and governing bodies.

A court liquidation (previously known as an Official Liquidation) occurs when a creditor/s make an application to Court to wind up a company due to non-payment of a statutory demand. A creditor can resort to this process if they have exhausted all other avenues to obtain payment for outstanding debts. A court liquidation involves a liquidator being appointed to realise the company’s assets, investigate the company’s failure and disburse the funds to creditors according to priority. Once this occurs, the liquidator will apply to ASIC to deregister the company in order for the company to no longer exist. B&T Advisory, as qualified and skilled professionals, are able to administer a company throughout this process while remaining mindful of the impact on all stakeholders.

A receivership is an option for secured creditors to recover unresolved debts under a secured loan in the event that a business defaults on its loan payments. A receivership allows a Receiver to be appointed to realise the company’s assets and distribute the funds accordingly.

A simplified liquidation (also known as a simple liquidation) is one of two new formal insolvency processes introduced by the Federal Government, in the wake of the COVID-19 pandemic (the other being the Small Business Restructure). This new process has been designed to reduce the cost and time involved in completing the liquidation process.

B&T Advisory can assist with a Simplified Liquidation by act as the independent third party to ensure the process is conducted appropriately and according to all relevant laws.

A Members’ Voluntary Liquidation (MVL) is a process by which the assets of a company are able to be distributed to its creditors and members under the control of a liquidator. An MVL may also be used in the winding up of solvent associations and co-operatives, as the procedures set out in the Act are generally adopted by the various State Acts under which Associations and Co-Operatives are governed. An MVL can only be used when a company is solvent, i.e. able to pay its debts (including related entity debts such as shareholders’ loans) in full within 12 months of the commencement of the winding up.