During Small Business Restructuring, control of the business generally remains with the existing directors. They continue to run day-to-day operations, make staffing and customer decisions, and pursue new business — while the restructuring practitioner oversees the process, assesses eligibility, and certifies the plan before it goes to creditors.
Download our free SBR Documents Checklist to understand what information you’ll likely need and where to find it before speaking with a restructuring practitioner.
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Introduction
One of the biggest concerns business owners have about Small Business Restructuring (SBR) is whether they’ll lose control of the company. Many assume an external party immediately takes over. However, that’s not how it works.
In fact, one of the advantages of Small Business Restructuring is that directors can run the business during SBR.
The directors remain in control of the business during Small Business Restructuring. Directors can continue to run the company while working with a Small Business Restructuring Practitioner (SBRP) to develop a restructuring plan for creditors.
This approach gives businesses the opportunity to keep trading while addressing financial difficulties.
Director Responsibilities
- Manage day-to-day business operations.
- Make decisions about staff, customers, and suppliers.
- Deliver products and services as usual.
- Approve operational, sales, and marketing decisions.
- Purchase stock and manage cash flow.
- Maintain stakeholder relationships.
- Pursue new business opportunities and generate revenue.
With this, directors must also:
- Provide complete and accurate financial information.
- Cooperate with the Small Business Restructuring Practitioner.
- Avoid actions that could unfairly disadvantage creditors.
- Continue meeting their legal duties as company directors
Note: Any major transactions outside the ordinary course of business, such as selling key business assets, require the express written consent of the Restructuring Practitioner.
SBR Practitioner powers
The Small Business Restructuring Practitioner oversees the restructuring process, ensures it complies with legal requirements, and helps directors develop a proposal that gives the business the best chance of recovery.
The practitioner’s key responsibilities include:
- Assessing whether the business qualifies for Small Business Restructuring.
- Reviewing the company’s financial position and supporting documentation.
- Assisting directors in preparing a realistic restructuring plan.
- Certifying that the restructuring proposal meets the legislative requirements.
- Presenting the plan to creditors for voting.
- Monitoring compliance throughout the restructuring process.
- Distributing payments to creditors if the plan is approved.
While the practitioner provides guidance and oversight, they generally do not make commercial decisions or manage the day-to-day operations of the business.
Preparation
Before starting, make sure you have a clear picture of your business’s financial position. You need to:
- Bring your financial records and tax lodgements up to date.
- Prepare a list of all debts, creditors, and business assets.
- Review your cash flow and ongoing operating costs.
- Confirm any outstanding employee entitlements.
- Speak with a registered restructuring practitioner as early as possible.
Preparing early helps your practitioner assess your eligibility, develop a realistic restructuring plan, and keep the process moving smoothly.
Next Steps
If your business is under financial pressure, the next steps are about getting clarity about where things stand and options available. It’s important to look at whether the business can keep trading, whether it meets the requirements, and all possible outcomes.
Taking action early helps ensure decisions are made with clarity rather than under pressure.
These involve:
- Reviewing your company’s financial position, including debts, assets, cash flow, and creditor obligations.
- Determining whether your business meets the eligibility requirements for Small Business Restructuring.
- Assessing whether your business remains viable and capable of continuing to trade.
- Comparing the costs, timeframes, and outcomes associated with available options.
- Seeking early professional advice to understand which pathway best suits your situation.
At Halo Advisory, we work with business owners and directors facing financial distress. Financial expert Greg Bartels offers a no-obligation consultation to help you assess your position, options and next steps. Get in touch today.
FAQs
Does Small Business Restructuring affect existing contracts with suppliers or customers?
In most cases, existing contracts continue as normal unless renegotiated or impacted by cash flow limitations. However, counterparties may reassess terms depending on the company’s financial position.
What happens if a business cannot meet its obligations during the restructuring period?
If obligations cannot be met, the restructuring may need to be reassessed or transitioned into another formal insolvency process. Early communication with the restructuring practitioner is essential in such situations.
Can a business still apply for credit or financing during Small Business Restructuring?
Access to new credit is generally restricted and may require disclosure of the restructuring status. Lenders are usually cautious, so approval is limited and subject to strict conditions.
What role do creditors play in the Small Business Restructuring process?
Creditors are asked to vote on the proposed restructuring plan and decide whether to accept it. Their approval is required for the plan to proceed.
Can Small Business Restructuring be stopped once it has started?
Yes, the process can be halted if it becomes unviable or does not meet necessary requirements. In such cases, the business may need to consider alternative formal options.
Do directors need shareholder approval to enter Small Business Restructuring?
In most cases, directors can resolve to enter Small Business Restructuring without requiring shareholder approval. However, a company’s constitution or internal agreements may still impose additional requirements.
What financial records are typically required at the start of Small Business Restructuring?
Businesses are usually expected to provide up-to-date financial statements, tax records, creditor lists, and cash flow information. These documents help assess eligibility and form the basis of the restructuring plan.
Can a business continue using its bank accounts normally during Small Business Restructuring?
Yes, the business can generally continue using its existing bank accounts for day-to-day operations. However, banks may monitor activity more closely depending on the company’s financial position.
Are tax debts treated differently during Small Business Restructuring?
Tax debts are included in the overall restructuring proposal and are typically dealt with as part of the repayment plan if approved. Ongoing tax obligations must still be met during the process.
What happens to director guarantees during Small Business Restructuring?
During the initial restructuring proposal period, there is an automatic statutory freeze (moratorium) on personal guarantees. Creditors cannot enforce guarantees against directors, their spouses, or relatives without court permission while the plan is being formulated. However, these guarantees are not permanently removed and will become enforceable again later if the plan fails.
Can a company trade under a different name during Small Business Restructuring?
Yes, a company can continue trading under its registered business name or a trading name, provided it remains compliant with legal and disclosure requirements. Any branding changes must not mislead stakeholders about its status.
Is Small Business Restructuring recorded publicly?
Yes, the appointment of a Small Business Restructuring Practitioner is recorded on the public insolvency register. This ensures transparency for creditors and stakeholders.
What happens to ongoing legal proceedings against the business?
Once the SBR process begins, there is an automatic stay that pauses all active court proceedings and enforcement actions against the company or its property. Creditors cannot begin or continue legal action without the written consent of the Restructuring Practitioner or leave from the Court.
