Can a Business Trade While Undergoing a Small Business Restructure?
When a company is facing financial stress or significant ATO tax debt, it can be easy to assume that trading must stop. But under the Small Business Restructuring (SBR) framework, that’s not the case.
The Short Answer:
Yes — companies can continue trading during the SBR process. Directors remain in control of daily operations while working with a Restructuring Practitioner (RP) to develop and propose a restructuring plan to creditors.
Why Continued Trading Matters
The SBR process was designed to help viable businesses stay afloat by giving them breathing room to manage their debt. Being able to keep trading means the business can:
Maintain customer relationships
Keep staff employed
Generate revenue to support the restructure
Improve chances of successful creditor approval
This approach reflects the intent of Australia’s insolvency reforms: to rescue small businesses, not shut them down.
How Does Trading Work During SBR?
Directors Remain in Control
Unlike voluntary administration, the company’s directors stay in control of the business throughout the SBR. They are responsible for:
Day-to-day operations
Meeting employee obligations
Continuing to comply with tax and legal obligations
The Role of the Restructuring Practitioner
While the business trades, the RP works alongside directors to:
Assess the company’s financial position
Draft a restructuring plan
Communicate with creditors
Ensure the plan is fair and achievable
The RP does not take over the business — their role is advisory and supervisory during the restructure.
Key Requirements While Trading
Even though trading can continue, certain rules apply:
The company must not incur further unpayable debt
Directors must act in good faith and in the company’s best interests
The business must be eligible for SBR:
Less than $1 million in total liabilities
All tax lodgements must be up to date
Employee entitlements (e.g. super) must be paid
✅ Tip: Having up-to-date financials and tax lodgements improves your restructure's chances of success.
What Happens if the Plan Is Approved?
If creditors approve the SBR plan, the company continues trading under the agreed payment terms — usually over 12 to 24 months. This offers a structured way to pay back debt without disrupting operations.
If the plan is rejected, the company can still explore other insolvency options like:
Voluntary Administration
Liquidation
Informal creditor arrangements
Risks of Trading During SBR
While trading is allowed, directors must stay cautious. Risks include:
Trading while insolvent, if new debts are incurred irresponsibly
Failing to meet plan obligations once it starts
Damaging creditor trust if communication is poor
That’s why it’s essential to work with a licensed RP and possibly a trusted accountant.
Conclusion
Yes, a business can — and often should — keep trading while undergoing a Small Business Restructure. It’s a rare opportunity for struggling companies to get back on track without losing control or shutting down.
Handled correctly, the SBR process can protect your cash flow, staff, and clients while working out a realistic repayment plan with the ATO and other creditors.
References
Corporations Act 2001 – Part 5.3B
ATO – Support for businesses with tax debt
Australian Government – Insolvency reforms to support small business
