How the Small Business Restructuring Process commences
The directors of a company can appoint a restructuring practitioner and commence small business restructuring if they resolve:
- That the company is insolvent or likely to become insolvent at some time in the future
- That a restructuring practitioner should be appointed
- A fixed amount of remuneration of the restructuring practitioner for the proposal period
How does the process work?
Only the directors of a company can propose a Small Business Restructuring Plan, and they must select a restructuring practitioner who is a Registered Liquidator. The restructuring practitioner determines the company’s eligibility and assists the directors to develop a restructuring plan. The plan allows the company to repay their creditors, in part or in full, providing better outcomes for all stakeholders. The restructuring practitioner will also develop the remuneration proposal, which is set at a fixed amount for the proposal period.
After commencement of restructuring, the company has 20 business days to develop and propose the plan to its creditors. During that time, the company has the benefit of a moratorium on most types of security enforcement. Following that, creditors have 15 business days to vote on the plan. The plan is only approved if it gains the support of more than 50% in value of unrelated creditors.
Approving the plan allows the company to continue to trade in the ordinary course of business while the plan is administered by the restructuring practitioner. The plan must operate for no more than three years.