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Small Business Restructure Plan - Retain Control Of Your Business

Small Business Restructure Plan - retain control of your business

Desmond Teng

At the end of last year Moore Australia welcomed Desmond Teng as a Partner of Moore Recovery, bringing his expertise built over 15 years in Corporate Recovery and Insolvency.
 
“What I see all too often with clients is that there are simple restructuring fixes that can help and reposition how the business operates. Making these changes can have positive impacts on their business trajectory and ensure they are on track, alleviate a lot of stress and save on overall restructuring practitioner costs” comments Desmond Teng, Partner, Moore Recovery.
 
HOW CAN A SMALL BUSINESS RESTRUCTURE PLAN HELP YOU RETAIN CONTROL OF YOUR BUSINESS?
 
A small business restructure plan (SBRP) allows eligible business owners to retain control of the business, properties and affairs of the company. This requires the development of a strategy with the objective to enter a restructuring plan with creditors. For struggling businesses, this enables a more streamlined process and lower costs.
 
For a business to be eligible for an SBRP, the undertaking has to meet a number of requirements, including:
  • The business must be operated by a company;
  • The business must owe less than $1 million to its creditors (excluding employees);
  • Appoint a small business restructuring practitioner to oversee the restructuring process and development of the plan and restructuring proposal statement.
  • The business must not have previously undertaken a small business restructuring or used simplified liquidation in the past seven years (this restriction applies to this company or any company that the individuals have been director/s of within the prior twelve months); and
  • Before a plan is offered to creditors, the business must be able to: 
    • pay all outstanding employee entitlements, and
    • lodge all outstanding statements and tax returns with the Australian Taxation Office (ATO) as required under tax law.
 
There are two distinct phases in a restructure: the restructure and the plan, which are divided into proposal, acceptance and plan periods:

SBPR-DIAGRAM-DESMOND.png
 
THERE ARE IMPORTANT CONSIDERATIONS WITH RESTRUCTURING PLANS
 
If a business is to undertake a restructuring plan, there are a number of considerations to be taken under advisement. For example, Directors remain in control of the business during the restructuring. There are also limits on the powers of the company to deal with its assets. Perhaps one of the most important considerations is that the company may only deal in the ordinary course of trade, unless it seeks and obtains the written consent of the restructuring practitioner.
 
Additionally, to use a restructuring plan approach, the appointment of a restructuring practitioner is required. This has consequences for secured creditors and others in relation to their dealings with the company.
 
It is essential to understand what your rights and risks are when
entering the restructuring process. We recommend seeking advice from a qualified expert who is familiar with the complex area of insolvency law.
 
For more information and to initially explore your options, please contact Desmond Teng for 
Corporate Recovery Services.