Small Business Restructuring in Tasmania & interstate

Small Business Restructuring 

In January 2021, as a result of the impact and forecasted economic impact of the COVID-19 pandemic on businesses coupled with the expected spike in insolvency numbers, the Australian Government enacted the Small Business Restructure legislation to provide pathways to save as many businesses as possible.

The Small Business Restructuring regime allows eligible small businesses in financial difficulty a one-off opportunity to restructure their company debt whilst the owners remain in control of business operations and creditor relationships, which maximises the chances of trading viably in the future and provides better outcomes for creditors and employees.

Following an upsurge in the Australian Taxation Office firmer or stronger recovery action, and better understanding of the process and benefits among key stakeholders has led to an increase in the number of small business restructure appointments. It is becoming the “go-to” solution for many small businesses in financial difficulty and we are of the view it is very well suited to small businesses in Tasmania and will continue to be increased in scope. 

Eligibility criteria

• Must be a company incorporated under the Corporations Act 2001
• Is insolvent or likely to become insolvent
• Creditors less than $1 million (excluding employee entitlements)
• Employee entitlements due and payable are up to date
• Tax lodgements with the ATO are up to date (need to be lodged but not paid)
• No director (current or in previous 12 months) or company has undergone restructuring or simplified liquidation in last 7 years

Process

• The process involves the appointment of a small business restructuring practitioner who works closely with the director to develop a restructuring plan to creditors to pay off their liabilities, in full or in part over a maximum period of 3 years
• The plan must be issued within 20 business days of the Restructuring Practitioners appointment and creditors then have 15 business days to vote on the plan
• A plan is accepted if more than 50% of the creditors by value that vote, vote to accept the plan
• If the plan is accepted, the restructuring practitioner will distribute funds according to the Plan
• After distribution, the company is released from past debts covered by the Plan and can successfully trade into the future
• If the plan is not accepted, the restructuring plan ends and the company doesn’t automatically enter some form of external administration

Please do not hesitate to contact us now for a free and confidential initial consultation.