Small Business Restructuring is a simpler process for eligible small companies, where directors usually stay in control while proposing a debt repayment plan. A DOCA follows voluntary administration, where an administrator first takes control. SBR is generally cheaper and faster; a DOCA suits larger, more complex restructures.
On This Page
- Introduction
- Quick Comparison
- Pros & Cons of Small Business Restructuring
- Pros & Cons of DOCA
- Impact on Employees, Creditors, and Business Operations
- When SBR May Be the Better Option
- When DOCA May Be the Better Option
- Next Steps
- FAQs
Introduction
When a company is struggling with debt, directors may hear about both Small Business Restructuring and a Deed of Company Arrangement (DOCA). Both options can help a company avoid liquidation, but they work in different ways.
SBR is generally designed for smaller, eligible companies that need a streamlined restructuring process. A DOCA is usually more suitable for larger or more complex companies that need a broader restructuring framework.
This blog explains the difference between SBR and DOCA, when each option may apply, and what directors should consider before choosing a pathway.
Quick Comparison
When comparing DOCA vs restructuring, the key difference is usually control, complexity and eligibility.
Small Business Restructuring (SBR) is a formal insolvency process that allows eligible small companies to continue trading while proposing a plan to repay creditors a portion of their debts over time.
A Deed of Company Arrangement (DOCA) is a binding agreement between a company and its creditors that is proposed following voluntary administration and sets out how creditor claims will be dealt with.
While both can help businesses avoid liquidation, they aren’t the same. Each option comes with its own requirements, costs, and implications for directors and creditors.
| Feature | Small Business Restructuring (SBR) | Deed of Company Arrangement (DOCA) |
| Main purpose | To help an eligible small company restructure debts while continuing to trade | To create a binding arrangement between the company and creditors after voluntary administration |
| Voluntary administration required? | No. SBR is a separate process and does not require the company to enter voluntary administration | Yes. A DOCA is generally proposed after the voluntary administration stage |
| Who controls the company? | Directors generally remain in control of day-to-day operations | The administrator controls the company during voluntary administration |
| Who manages the process? | A Small Business Restructuring Practitioner oversees the SBR process | An administrator manages the voluntary administration; if a DOCA is accepted, a deed administrator manages the DOCA |
| Process complexity | Simpler — more streamlined and designed for eligible small companies | More formal and usually more complex because it involves voluntary administration, investigations and creditor reporting |
| Cost of SBR vs DOCA | SBR is generally lower cost because it avoids the voluntary administration stage and is designed to be simpler | A DOCA is generally more expensive because it follows voluntary administration and involves greater investigation, reporting and administration work |
| Creditor involvement | Creditors vote on the restructuring plan through a streamlined process | Creditors vote after receiving the administrator’s report and recommendations |
| Eligibility | Only available to companies that meet strict SBR eligibility requirements | Available after voluntary administration where creditors accept a DOCA proposal |
| Best suited for | Smaller companies with manageable complexity, viable operations and debts that may be compromised through a simplified plan | Larger or more complex companies that need a broader restructuring framework or have more complicated creditor issues |
| Business continuity | The business usually continues trading under director control | The business may continue trading during administration if the administrator considers it appropriate |
In simple terms, SBR is usually the simpler and lower-cost option for eligible small companies. A DOCA is generally more flexible, but it is also more formal, more expensive, and tied to the voluntary administration process.
Pros & Cons of Small Business Restructuring
Pros
- Allows the business to continue trading while addressing its debts.
- Directors generally remain in control of day-to-day operations.
- May reduce the total amount that needs to be repaid to creditors.
- Helps avoid liquidation where the business remains viable.
- Can improve cash flow by making debt obligations more manageable.
Cons
- Strict eligibility requirements must be met.
- Creditors must approve the restructuring plan.
- Professional fees and compliance costs are involved.
- Failure to comply with the plan can lead to further insolvency action.
- Not suitable for businesses that are no longer commercially viable.
Pros & Cons of DOCA
Pros
- Available to a broader range of companies.
- Can accommodate more complex debt arrangements.
- Offers flexibility in how creditor claims are dealt with.
- May allow businesses with substantial debts to continue operating.
- Can provide a better return to creditors than liquidation.
- Can help preserve jobs and business value where a viable turnaround is possible.
Cons
- The business must first enter voluntary administration.
- An administrator takes control during the administration period.
- DOCAs generally involve higher costs because they require a voluntary administration process, investigations, creditor reporting, and administrator involvement before the DOCA can be proposed.
- The process is generally more complex and time-consuming than SBR.
- Public knowledge of the administration may affect supplier, customer, and stakeholder confidence.
- There is no guarantee creditors will approve the proposed DOCA.
Impact on Employees, Creditors, and Business Operations
1. Employees
Employees generally continue working while the business undergoes either restructuring process.
Depending on the circumstances:
- Existing employment arrangements may continue unchanged.
- Outstanding employee entitlements must be considered as part of the restructuring process.
- Preserving jobs is often one of the key objectives of both options.
2. Creditors
Creditors are asked to consider whether the proposed arrangement offers a better outcome than liquidation.
Creditors may:
- Receive a partial repayment of debts over time.
- Vote on the proposed restructuring arrangement.
- Compare expected returns under the proposal with potential liquidation outcomes.
3. Business Operations
- Under SBR, daily operations typically continue under the control of existing directors.
- Under a DOCA, the voluntary administration stage can create greater operational disruption while the administrator assesses the business and reports to creditors.
In either case, the goal is to improve the company’s financial position and allow it to continue trading where possible.
When SBR May Be the Better Option
SBR may be better than a DOCA where:
- The company meets the eligibility requirements.
- Financial difficulties are serious but still manageable.
- Directors want to remain in control of day-to-day operations.
- The business has a realistic prospect of returning to profitability.
- Debts can be addressed through a structured repayment proposal.
- Minimising costs is an important consideration.
- The company wants to avoid the disruption associated with voluntary administration.
SBR is only available if the company meets strict eligibility requirements. For many small businesses, it can provide a practical pathway to compromise debts while maintaining continuity of operations.
When DOCA May Be the Better Option
A DOCA may be better than SBR where:
- The company does not qualify for Small Business Restructuring.
- The level of debt exceeds SBR eligibility thresholds.
- The business has a complex creditor structure.
- Significant restructuring measures are required.
- An independent administrator’s involvement may help build creditor confidence.
- Creditors require a more detailed assessment of the company’s financial position.
- A flexible arrangement is needed to deal with a wide range of creditor claims.
In these situations, a DOCA can offer a broader restructuring framework and may provide a better chance of preserving the business than liquidation. However, DOCA is generally available after voluntary administration, not through the SBR pathway.
Next Steps
If your business is experiencing financial distress, choosing between Small Business Restructuring and a DOCA is a decision that should be made carefully and as early as possible. The right option will depend on your company’s financial position, creditor relationships, and long-term viability.
Practical next steps include:
- Reviewing your company’s financial position, including debts, cash flow, and creditor obligations.
- Determining whether your business is eligible for Small Business Restructuring.
- Assessing whether the complexity of your circumstances may be better suited to a DOCA.
- Comparing the likely costs, timeframes, and operational impacts of each option.
- Seeking professional advice before creditor pressure or enforcement action escalates.
Understanding your options early can improve the chances of achieving a successful restructuring outcome and avoiding liquidation.
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, understand your restructuring options, and identify the most appropriate path forward. Get in touch today.
FAQs
Can a company move from Small Business Restructuring into a DOCA if the restructuring plan fails?
Not directly. If a Small Business Restructuring plan is unsuccessful, the company would typically need to enter voluntary administration before a DOCA can be proposed.
Can Small Business Restructuring help avoid liquidation?
Yes. Small Business Restructuring may help avoid liquidation where the company remains viable and creditors accept the proposed restructuring plan. It allows eligible companies to continue trading while dealing with debts through a formal compromise, rather than immediately winding up the company.
Can a DOCA help avoid liquidation?
Yes. A DOCA may help avoid liquidation if creditors accept the proposed arrangement after voluntary administration. It can provide a structured way to deal with creditor claims while allowing the company, or parts of the business, to continue where a better outcome than liquidation is possible.
Can business contracts be renegotiated as part of a DOCA?
In many cases, a DOCA can support broader restructuring efforts, including negotiations with landlords, suppliers, and other stakeholders, where their agreement can be obtained.
SBR vs DOCA: Which process is faster?
Small Business Restructuring is usually completed more quickly because it avoids the voluntary administration stage required before a DOCA can be implemented.
Can directors continue making business decisions during Small Business Restructuring?
Yes. Unlike a DOCA, where an administrator takes control during voluntary administration, directors generally remain responsible for day-to-day business decisions throughout the Small Business Restructuring process.
Does Small Business Restructuring require the appointment of an administrator?
No. Small Business Restructuring involves a restructuring practitioner, but the company does not enter voluntary administration and directors remain in control of operations.
Can a business continue trading while creditors consider a Small Business Restructuring plan?
Yes. The business can generally continue trading as usual while creditors review and vote on the proposed restructuring plan.
Is Small Business Restructuring designed specifically for small companies?
Yes. Small Business Restructuring was introduced to provide a simpler and more affordable restructuring pathway for eligible small businesses that may not require the complexity of a DOCA.
Does Small Business Restructuring involve an investigation into the company’s affairs?
Not to the same extent as a DOCA. Voluntary administration typically involves a detailed review and reporting process by the administrator, whereas Small Business Restructuring is generally more streamlined.
