The Small Business Restructuring moratorium can temporarily stop many types of creditor action, giving eligible businesses breathing room while a restructuring plan is developed. Coverage varies by creditor type and timing — secured creditors, the ATO, and personal guarantees are each treated differently, and the protections end once the restructuring process concludes.
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On This Page
- Introduction
- When Does the Moratorium Begin?
- What Creditor Actions Can Continue?
- Does the Moratorium Stop the ATO?
- Does the Moratorium Protect Directors and Personal Guarantees?
- What Happens When the Moratorium Ends?
- Next Steps
- FAQs
Introduction
Yes, but not all creditor action. Facing calls, payment demands and legal threats from creditors can be overwhelming. While an SBR moratorium offers valuable protection, it does not block every type of recovery action.
The Small Business Restructuring (SBR) moratorium is designed to give eligible businesses breathing room by temporarily restricting many types of debt recovery while a restructuring plan is being prepared and considered.
During the moratorium, creditors are generally prevented from taking certain enforcement actions without the Court’s permission or unless an exception applies. This helps create a more stable environment for the business to continue trading while working towards an agreement with creditors.
This guide explains what the SBR moratorium does and doesn’t stop, when it begins, and what businesses can expect during the restructuring process.
When Does the Moratorium Begin?
The moratorium begins when a Small Business Restructuring Practitioner is formally appointed. It does not start when a business first considers restructuring or seeks advice.
From the date of appointment, the legal protections provided under the restructuring process generally take effect, allowing the business to focus on developing a restructuring plan without the immediate pressure of most creditor enforcement action.
What Creditor Actions Can Continue?
Some creditor action can still continue. The moratorium does not prevent every creditor from exercising their rights.
Depending on the circumstances, this may include:
- Certain secured creditors enforcing their security interests
- Creditors acting where legislation provides an exception to the moratorium
- Recovery action relating to debts or obligations that are not covered by the restructuring protections
- Creditors continuing to communicate with the business or lodge proofs of debt
Note: If creditors hold a charge over all or substantially all of the company’s property, they must act within a strict 13-business-day window from the start of the SBR, or they are locked out by the moratorium.
The exact protections available depend on the type of debt, the creditor involved and the specific circumstances of the business.
Does the Moratorium Stop the ATO?
Yes, in many cases it limits the ATO’s ability to take recovery action, but it does not erase tax debts. The ATO remains a creditor throughout the restructuring process.
While the moratorium is in place, the ATO is generally subject to the same restrictions as other unsecured creditors regarding debt recovery. However:
- Existing tax debts still need to be addressed through the restructuring plan.
- Businesses must continue meeting their ongoing tax obligations.
- Certain enforcement action that began before the appointment may require separate consideration.
Does the Moratorium Protect Directors and Personal Guarantees?
It provides some protection for directors, but it does not automatically remove personal liability.
Benefits include:
- Enforcement of personal guarantees given by directors, spouses, or relatives generally cannot proceed without the court’s permission during the moratorium period
- Creditors generally cannot pursue your personal assets for company debts while the SBR process is active without court permission
Note: Directors may still be personally liable where legislation specifically allows it. The protections primarily relate to the company and its restructuring process rather than the personal assets of directors.
What Happens When the Moratorium Ends?
When the moratorium ends, the legal restrictions on creditor action also come to an end. What happens next depends on the outcome of the restructuring process.
If the restructuring plan is accepted and successfully implemented, creditors are bound by its terms. If the plan is rejected, terminated or the restructuring process ends unsuccessfully, creditors can pursue recovery action as per their legal rights.
Next Steps
If creditors are chasing your business or you’re worried about recovery action, it’s important to understand what legal options are available. While a Small Business Restructuring moratorium can provide valuable breathing space, it doesn’t stop every type of creditor action. Hence, getting advice early is essential.
Practical next steps:
- Review any creditor demands or enforcement action
- Confirm your eligibility for Small Business Restructuring
- Understand which creditors the moratorium protects against
- Keep meeting ongoing business and tax obligations
At Halo Advisory, we work for business owners and directors facing financial distress. Financial expert Greg Bartels offers a no-obligation consultation to explain the moratorium process, and options available in your case. Get in touch today.
FAQs
Can creditors still contact my business during the SBR moratorium?
Yes. Creditors can still contact your business to discuss the debt or request information, even if they are restricted from taking certain enforcement actions.
Does the SBR moratorium stop interest and fees from being charged?
Not necessarily. Whether interest, penalties or other charges continue to accrue depends on the terms of the debt and any applicable laws or agreements.
Can I keep trading while the moratorium is in place?
Yes. One of the key objectives of Small Business Restructuring is to allow eligible businesses to continue trading while a restructuring plan is developed and considered by creditors.
Can new creditors be included in the restructuring plan?
Generally, only debts that exist at the relevant date of the restructuring process are included. New debts incurred after the practitioner is appointed usually need to be paid in the ordinary course of business.
Does the moratorium stop suppliers from requiring payment for new goods or services?
No. Suppliers can generally require payment for goods or services provided after the restructuring process begins, and businesses are expected to meet these ongoing obligations.
What happens if a creditor breaches the moratorium?
If a creditor takes enforcement action that is prohibited during the moratorium, that action may not be legally effective. Businesses should seek professional advice promptly if they believe a creditor has acted contrary to the law.
