What Happens After an SBR Is Approved?
When a Small Business Restructuring (SBR) Plan is approved, it marks a crucial turning point for a distressed business. But what comes next? Understanding the post-approval process is essential for directors, creditors, and advisers alike.
In this article, we’ll explore what happens after an SBR is approved, how it affects company operations, and the steps needed to complete the restructuring journey successfully.
1. The Restructuring Plan Becomes Binding
Once creditors vote to approve the SBR plan, it becomes legally binding on all unsecured creditors included in the proposal.
Key Facts:
The moratorium (legal protection from creditor action) remains in place.
Creditors can no longer initiate recovery actions for included debts.
The business continues to trade under the supervision of the director, with the oversight of the Restructuring Practitioner (RP).
2. Business Continues to Trade
Unlike liquidation or administration, an SBR allows the business to continue operations.
Practical Impacts:
Directors retain control of day-to-day management.
The RP ensures the company complies with the restructuring plan.
Business reputation may stabilise if debts are managed transparently.
3. Restructuring Plan Payments Begin
The company must begin making payments in accordance with the agreed restructuring plan schedule.
Considerations:
Payments are usually made monthly over a period of up to 3 years.
Funds are distributed to creditors by the Restructuring Practitioner.
If a payment is missed, the RP may terminate the plan, so adherence is critical.
4. Monitoring by the Restructuring Practitioner
Throughout the plan period, the RP:
Monitors the company’s compliance with its obligations.
Distributes funds to creditors.
Reports to ASIC and may take action if the business breaches the plan.
The RP does not manage the business but plays a compliance and oversight role.
5. Completion of the Plan
If the company successfully completes the restructuring plan, all debts included in the plan are considered settled, regardless of the percentage repaid.
Example:
If the company agreed to pay back 30% of debts over 24 months and successfully completed payments, the remaining 70% is extinguished.
What If the Plan Fails?
If the company:
Fails to make agreed payments, or
Fails to meet plan conditions,
Then the plan can be terminated by the RP. This may lead to:
Liquidation
Creditors taking legal action
ASIC involvement
How Long Does It Last?
The duration of the plan depends on what’s agreed with creditors. It’s typically between 12 to 36 months, depending on the financial position and offer made.
Final Thoughts
An approved Small Business Restructure plan provides a lifeline for viable businesses. It offers time, legal protection, and a structured path to settle debts while continuing operations. However, success hinges on strict adherence to the payment plan and proactive communication with the RP.
References
Australian Securities and Investments Commission (ASIC) – Restructuring and the restructuring plan
Australian Restructuring Insolvency & Turnaround Association (ARITA) – Small business restructuring factsheet
Corporations Act 2001 (Cth), Part 5.3B – Federal Register of Legislation
