Voluntary administration (VA) and small business restructuring (SBR) are both formal insolvency processes, but they operate differently. In VA, an external administrator takes control of the company and creditors decide its future. In SBR, directors usually remain in control while proposing a restructuring plan to creditors to manage existing debts.
On This Page
- Introduction
- What Is Voluntary Administration?
- What Is Small Business Restructuring (SBR)?
- Key Differences
- Which Is More Suitable?
- Which is More Expensive?
- Final Take: Which Option Is Better for Your Company?
- FAQs
Introduction
When an Australian company starts facing financial distress, directors are often introduced to several formal insolvency options and restructuring pathways. Voluntary Administration (VA) and Small Business Restructuring (SBR) are two of the most commonly considered processes in such situations.
While both processes are designed to help financially struggling businesses, they operate very differently. Small business restructuring is aimed at eligible smaller businesses that can still continue trading, whereas voluntary administration is more commonly used where creditor pressure, legal risk or operational complexity has become more serious.
This guide helps you understand both processes, comparing small business restructuring and voluntary administration, including how they work, the key differences between them, and when one option may be more appropriate than the other.
What Is Voluntary Administration?
Voluntary administration (VA) is a formal insolvency process where an independent voluntary administrator is appointed to take control of a financially distressed company.
Once appointed, the administrator assumes control and investigates the insolvent company’s financial position to consider whether the business can be restructured or whether liquidation may be more appropriate.
During voluntary administration, directors lose control of the company’s day-to-day operations while the administrator manages the process and organises creditor meetings.
At the end of the administration period the company’s creditors vote on its future.
The three most common outcomes of voluntary administration are:
- The company enters a Deed of Company Arrangement (DOCA),
- The company goes into liquidation, or
- The company is returned to the directors.
Voluntary administration is often used where creditor pressure is escalating, legal action is threatened, or the company’s financial position has become too complex for an informal restructuring approach.
For a comprehensive overview of the voluntary administration process, read our blog: What Does Voluntary Administration Mean? A Guide for Directors
What Is Small Business Restructuring (SBR)?
Small business restructuring (SBR) is a formal restructuring process designed for eligible companies experiencing financial difficulty.
In contrast to Voluntary Administration, where control passes to an independent administrator, during SBR company directors remain in charge of day-to-day operations.
A registered small business restructuring practitioner is appointed to oversee the process and assist with developing a restructuring plan for creditors. Directors can only enter into transactions outside the ordinary course of business with the approval of the Restructuring Practitioner during the Small Business Restructuring process.
The company continues trading while directors propose a debt restructuring plan that sets out how creditor debts will be dealt with over time.
SBR is intended for smaller businesses that remain commercially viable but need a structured agreement with creditors to manage existing debts and cash flow pressure.
Eligibility requirements apply. Generally, employee entitlements that are due and payable must be paid, and tax lodgements must be substantially up to date before a restructuring plan can proceed.
Not sure whether voluntary administration or small business restructuring is more appropriate for your situation?
Key Differences
While both voluntary administration and small business restructuring are formal insolvency processes, they are designed for different situations and operate in very different ways.
The key differences are outlined below:
| Voluntary Administration | Small Business Restructuring | |
| Control of company | Administrator takes control | Directors remain in control |
| Best suited for | Complex, urgent or creditor-pressure situations | Smaller viable businesses with manageable debt |
| Creditor involvement | Creditors decide the outcome at meetings | Creditors vote on a restructuring plan |
| Main outcome options | DOCA, liquidation or return to directors | Restructuring plan accepted or rejected |
| Complexity | Often more complex | More streamlined |
| Cost | Generally higher | Lower than VA |
| Trading during process | Depends on administrator decisions | Directors continue trading |
| Asset sales | Assets may be sold as part of the process | Business continues operating |
| Eligibility requirements | Broadly available | Eligibility criteria apply. |
In general, voluntary administration is more commonly used where stronger external control, urgent creditor protection or broader restructuring options are needed. The Small Business Restructuring process is only available to incorporated businesses, typically Pty Limited companies, that meet the eligibility criteria.
Which Is More Suitable?
VA is a more complex framework suitable for larger businesses or severely distressed scenarios requiring independent management. SBR is only available to eligible small businesses that meet certain debt and compliance requirements. However, that does not automatically mean it will always be the better option.
When SBR May Be More Suitable
- The business remains commercially viable,
- Directors want to continue trading,
- Creditor pressure is still manageable,
- Debts can realistically be restructured over time, and
- The company meets the eligibility requirements for SBR.
In practice, SBR is used where the business still has a realistic pathway forward and directors want to retain operational control during the restructuring process.
When VA May Be More Suitable
- Creditor claims have become severe,
- Legal action or enforcement action is underway,
- The company’s affairs are more complex,
- There are disputes between secured creditors or stakeholders,
- Significant restructuring or asset sales may be required, or
- The business needs urgent protection while options are assessed.
In practice, the earlier directors seek advice, the more likely smaller restructuring options such as SBR may still remain available.
Which is More Expensive?
Generally, voluntary administration is more expensive than small business restructuring because the process is more complex and involves greater external involvement.
The average cost of Small Business Restructuring (SBR) was reported to be $22,055 in 2022, making it a more cost-effective option compared to Voluntary Administration, which can cost around $60,000.
Voluntary Administration Costs
VA costs commonly relate to:
- The administrator’s investigations,
- Creditor reporting,
- Meetings with creditors,
- Business trading oversight,
- Legal and compliance work, and
- Asset realisation where required.
Because the administrator takes control of the company, the process is often more intensive and therefore more costly.
More on this: How Much Does Voluntary Administration Cost?
SBR Costs
SBR is designed to be more streamlined and cost-effective for eligible small businesses.
Costs may include:
- The restructuring practitioner’s fees,
- Preparation of the restructuring plan,
- Creditor communications, and
- Compliance and reporting obligations.
Because directors usually remain in control and the process is narrower in scope, SBR is often less expensive than voluntary administration.
However, cost alone should not determine which process is appropriate. The company’s financial position, creditor pressure, viability and restructuring needs are more important considerations.
Final Take
Neither voluntary administration nor small business restructuring is automatically “better.” Each process is designed for different financial circumstances and restructuring needs.
Small business restructuring is more suitable for eligible smaller businesses that remain viable and want to continue trading under director control.
Voluntary administration is more appropriate where creditor pressure has escalated, legal risks are emerging, or the company requires broader restructuring options and stronger protection from enforcement action.
The right option will depend on:
- The severity of the company’s financial position,
- Whether the business can realistically continue trading,
- The level of creditor pressure,
- The company’s complexity, and
- Whether the company remains eligible for SBR.
Seeking advice early gives directors more flexibility and a wider range of restructuring options before the position deteriorates further.
At Halo Advisory, we work for you — the director. Financial expert Greg Bartels offers a no-obligation, consultation to help you understand where you stand, what risks exist, and what options are realistically available before deadlines reduce control. Get in touch today.
FAQs
Can a company go directly into liquidation instead of VA or SBR?
Yes.
In some situations, directors may decide liquidation is more appropriate than attempting restructuring through VA or SBR, particularly where the business is no longer viable.
What is the main difference between voluntary administration and small business restructuring?
The main difference between VA and SBR is who is in control of the company.
VA requires handing complete operational control over to an independent external administrator. During the Small Business Restructuring process, directors retain control of the company and continue to manage its operations, subject to the approval of the Restructuring Practitioner.
Also, voluntary administration is typically used for larger or more complex businesses, while small business restructuring is designed specifically for small businesses facing financial difficulties.
Every company’s position is different. Before deciding between VA and SBR, directors should understand how viable the business remains, how serious creditor pressure has become, and whether the company still qualifies for restructuring options.
Do directors lose control during voluntary administration?
Yes. Once a voluntary administrator is appointed, directors’ powers are suspended while the administrator manages the company and assesses its future.
More on this: Voluntary Administration Process
Can directors stay in control during small business restructuring?
Yes. In an SBR process, directors continue trading the business while working with a restructuring practitioner to propose a restructuring plan to creditors.
However, certain transactions outside the ordinary course of business may still require the restructuring practitioner’s consent.
Can secured creditors still enforce during SBR?
In some situations, yes.
Small business restructuring can provide protection while a restructuring plan is proposed, but secured creditors may still retain enforcement rights depending on the security held, the company property involved, and the company’s financial circumstances.
What happens if an SBR plan is rejected?
If creditors reject the proposed plan, the restructuring process ends and the company may later enter other formal insolvency options, including voluntary administration or liquidation.
This is more likely where the company cannot restructure debt, repay creditors, or manage ongoing creditor claims and insolvency proceedings.
Which process provides more protection from creditors?
Voluntary administration provides broader protection from creditor recovery action, legal proceedings and enforcement pressure.
Small business restructuring can also provide protection mechanisms, but it is usually better suited to situations where creditor pressure remains manageable.
Further reading:
Is small business restructuring better than voluntary administration?
Not necessarily.
Small business restructuring is often more suitable for eligible smaller businesses that remain viable and want to continue trading under director control.
Voluntary administration is more appropriate where the company is facing significant creditor pressure, legal risk or operational complexity.
Can a company move from SBR into voluntary administration?
Yes.
If an SBR process fails or the company’s financial position deteriorates further, the company may later enter voluntary administration or liquidation.
What happens to creditors in voluntary administration?
In voluntary administration, creditors ultimately vote on the company’s future.
Creditors may decide whether the company:
- Enters a DOCA,
- Goes into liquidation, or
- Returns to the directors.
What happens to creditors in small business restructuring?
In SBR, creditors vote on the proposed restructuring plan.
If creditors accept the proposed plan and the required majority approves the restructuring plan proposed, unsecured creditors are bound by its terms.
What happens if voluntary administration fails?
If voluntary administration does not result in a successful restructuring or DOCA, the company will often move into liquidation.
This may involve asset sales, investigations and formal winding up of the company.
What happens if small business restructuring fails?
If an SBR plan is rejected or the restructuring is unsuccessful, the company may later enter:
- Voluntary administration,
- Liquidation, or
- Another restructuring process.
Is voluntary administration more expensive than SBR?
Generally, yes.
Voluntary administration is often more complex and involves greater investigation, reporting and creditor engagement. Small business restructuring is designed to be more streamlined and cost-effective for eligible small businesses.
Does the ATO vote on a small business restructuring plan?
Yes.
If the company owes tax debts, the ATO may participate as a creditor and vote on the proposed restructuring plan.
What happens to employees in VA vs SBR?
Employee entitlements remain important in both processes.
In many cases, unpaid employee entitlements can affect:
- Eligibility for SBR,
- Creditor negotiations, and
- The viability of a restructuring proposal.
More on this: Voluntary Administration Employee Entitlements
