By Ben Sewell -
Snapshot
- The small business restructuring process was introduced in 2021 to offer small businesses a cheaper faster alternative to voluntary administration. Initially slow to take off, it’s now booming—making up 20 per cent of all insolvency appointments.
- The regime empowers directors, improves creditor returns and is largely shaped by the ATO, which plays a gatekeeping role.
- While concerns like phoenixing and fairness have emerged, the data so far suggests that small business restructuring is helping viable small businesses survive insolvency better than previous options.
Restructuring under Part 5.3B of the Corporations Act 2001 (Cth) (‘Act’), commonly known as small business restructuring (‘SBR’), is a procedure that has now been available to eligible insolvent businesses for over four years. While the procedure got off to a slow start (82 SBRs in the first 18 months), it has taken off over the past two years (approximately 4000), so now is a useful time to review the performance of the SBR regime and address some of the criticisms that are starting to arise. Drawing on my experience in the SBR regime, both as a solicitor and a restructuring practitioner, this article reflects on the current development of the procedure.
Why was the SBR procedure introduced?
SBR, also known as ‘simplified debt restructuring’, came into operation on 1 January 2021 through the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth). According to the regulatory impact statement, its introduction was a response to long-standing concerns that existing business turnaround procedures were not fit for purpose, as well as the immediate fear that COVID would result in an economic wipeout of small businesses.
