When did the SBRP Process Come Into effect?
The Small Business Restructuring Process (SBRP) was introduced in Australia on 1 January 2021. This initiative was implemented to provide increased flexibility and support for struggling small businesses during the COVID-19 pandemic and beyond.
Eligibility Criteria for the SBRP Process
To qualify for the SBRP process in Australia, a small business must meet the following eligibility criteria:
Eligible Business Entity: The business must be an incorporated business.
Insolvency: The business must be facing insolvency.
Total Liabilities: The business's total liabilities, including contingent liabilities and debts owed to secured creditors, should not exceed 1 million.
Solvency Declaration: The directors of the business must provide a declaration that the company is currently solvent or that they have reasonable grounds to believe it can become solvent.
Tax Compliance: The business must be up to date with its tax lodgments and reporting obligations.
When Should You Consider an SBRP Process?
It is advisable to consider the SBRP process if your small business meets the following criteria:
Financial Distress: Your business is currently facing financial distress or anticipates such challenges in the near future.
Difficulty Meeting Obligations: Your business is struggling to meet its financial obligations, including payments to creditors.
Structured Repayment Plan: Your business requires a structured repayment plan to overcome financial difficulties and continue operating.
To determine whether the SBRP process is suitable for your small business, seek professional advice from a qualified insolvency practitioner or lawyer who specializes in small business restructuring under Australian laws.
The SBRP Process: Implementing It
The SBRP process involves the following key steps:
Seek Professional Advice: Engage the services of a qualified insolvency practitioner or lawyer experienced in small business restructuring to guide you through the process.
Appoint a Small Business Restructuring Practitioner: You will need to appoint a small business restructuring practitioner to oversee the implementation and administration of the SBRP.
Develop a Restructuring Plan: Collaborate with your Small Business Restructuring Practitioner to formulate a viable restructuring plan that addresses your business's financial challenges.
Documentation and Lodgment: Prepare the necessary documentation, including a restructuring plan, a statement of affairs, and a declaration of eligibility. Lodge these documents with the Australian Securities and Investments Commission (ASIC).
Voting Process: Once lodged, the restructuring plan will be sent to your creditors for consideration. Creditors will vote on whether to accept the plan, and a majority in value must vote in favor for it to be approved.
Implementation and Monitoring: If the plan is approved, it becomes binding on all participating creditors. Your business must diligently implement the agreed-upon restructuring plan, with ongoing monitoring by the Small Business Restructuring Practitioner.
Alternatives to the small business restructuring process
If you do not meet the criteria for a SBRP process then you still have options available to you. Other alternatives include voluntary administration or liquidation.