Small Business Restructure FAQS

Written By Monica Nava

Are there restrictions on the plan directors can put forward?

Yes. Under the Corporations Act 2001, the restructuring plan must meet several criteria:

  • It must propose how the company's debts will be paid (in whole or in part).

  • It can only bind admissible creditors (generally unsecured creditors whose debts existed prior to the restructuring process).

  • The plan must not unfairly prejudice any creditors.

  • It must include a schedule of affected creditors, amounts owed, and proposed repayments.

The plan cannot:

  • Include new borrowings

  • Discriminate unfairly between creditors

(Source: Corporations Act 2001, Schedule 1—Insolvency Practice Rules (Corporations) 2016, ASIC guidance)

Can an approved restructuring plan be terminated?

Yes. A restructuring plan can be terminated if:

  • The company fails to comply with the terms of the plan

  • The restructuring practitioner determines that it is no longer viable

  • The Court orders the termination

Once terminated, creditors may take enforcement action, and liquidation may follow.

(Source: Corporations Act 2001, s 453J, ASIC Regulatory Guide RG 258)

Can an approved restructuring plan be varied later?

No. Once approved, the restructuring plan cannot be varied. This ensures certainty for creditors. If the business cannot comply, the plan may be terminated, and alternative insolvency measures (e.g. voluntary administration or liquidation) may be pursued.

(Source: ASIC Information Sheet INFO 210, Corporations Act 2001)

How are creditors impacted by small business restructuring?

Creditors are bound by the restructuring plan once approved, which may mean they:

  • Receive only partial repayment of the debt

  • Must stop enforcement actions

  • May have to wait months or years for payments

However, the trade-off is that they often recover more than they would in liquidation.

(Source: ASIC, Australian Restructuring Insolvency and Turnaround Association - ARITA)

How does an approved restructuring plan become complete?

The plan is complete when:

  • All obligations under the plan are fulfilled (e.g. all payments made)

  • The timeframe of the plan has expired with compliance

The restructuring practitioner will issue a certificate of completion and inform creditors.

(Source: Corporations Act 2001 s 453J, ASIC INFO 210)

How should a company under a restructuring plan be referred to?

While under a restructuring plan, companies must include the words "restructuring plan" in public documents and communications. This includes:

  • Invoices

  • Business letterheads

  • Websites

This legal requirement ensures transparency with creditors and stakeholders.

(Source: Corporations Act 2001 s 453G, Insolvency Practice Rules)

What do directors need to declare?

Directors must:

  • Declare that the company is eligible for the SBR

  • Provide accurate financial records

  • Disclose all liabilities and creditors

False or misleading declarations can lead to penalties or disqualification.

(Source: Corporations Act 2001, ASIC INFO 210, ARITA Guide to SBR)

What does a small business restructuring plan cost?

Costs vary depending on complexity, but typically:

  • Initial assessment: $2,000–$5,000

  • Restructuring practitioner fees: $10,000–$25,000+

Fees are usually paid from the restructuring fund before any creditor distributions.

(Source: ARITA, industry standard insolvency firms)

What does the restructuring practitioner do?

A Small Business Restructuring Practitioner (SBRP):

  • Reviews the company’s eligibility

  • Helps draft the restructuring plan

  • Notifies creditors

  • Collects votes and manages the process

  • Disburses payments under the plan

  • Reports misconduct if identified

They act independently in the interests of all creditors.

(Source: Corporations Act 2001 s 453B, ASIC)

What if I'm not eligible for small business restructuring?

If ineligible (e.g. more than $1 million in liabilities, or overdue lodgements):

  • Voluntary administration

  • Safe harbour protection

  • Informal workouts

  • Liquidation

may be explored instead.

(Source: ASIC INFO 210, Corporations Act 2001, ARITA)

What is the role of a small business restructuring practitioner?

The SBRP ensures:

  • The business qualifies for SBR

  • A viable plan is put forward

  • Creditors are informed

  • Proper voting occurs

  • Obligations are tracked and fulfilled

They are registered with ASIC and must meet specific qualifications.

(Source: ASIC Register of Liquidators, Insolvency Law Reform Act 2016)

What's the criteria for a small business restructure?

To be eligible, a company must:

  • Be a Pty Ltd company

  • Have liabilities under $1 million (excluding contingent debts)

  • Be up to date with tax lodgements and employee entitlements (PAYG, super)

  • Not have undergone restructuring or simplified liquidation in the last 7 years

(Source: Corporations Act 2001, ASIC INFO 210, Treasury Legislation Amendment (2021 Measures No. 1) Act 2021)

References

  • ASIC Information Sheet 210: Small Business Restructuring

  • Corporations Act 2001 (Cth)

  • ARITA: Guide to Small Business Restructuring

  • Insolvency Practice Rules (Corporations) 2016

  • Treasury Legislation Amendment (2021 Measures No. 1) Act 2021

  • ASIC Regulatory Guide 258

Monica Nava
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