Small business simplified debt restructuring and the Uniform Law

The purpose of SBSDR is to provide directors and the company time to put forward a plan to creditors to pay off their liabilities, in full or in part, within a period not exceeding 3 years. This may involve restructuring debt, reducing waste and costs, selling assets, and changing the organisation’s structure.

Practitioners who are considering SBSDR are reminded to consider the potential impacts the process may have on their obligations under the NSW legal profession legislation.

Although coined a ‘simplified’ process, this is a complex area of law, and practitioners should consider engaging a suitably qualified advisor, such as a lawyer or an accountant, to understand the intricacies of the process.

To assist practitioners in understanding the potential impacts, this article summarises aspects of the SBSDR process that are relevant to the Legal Profession Uniform Law (NSW) (Uniform Law) and discusses relevant Uniform Law provisions.

Who is eligible to participate in SBSDR?

A company is eligible to participate in the SBSDR if: ^[1]

• it is incorporated under the Corporations Act;
• its total liabilities do not exceed $1 million on the day the company enters the process, excluding employee entitlements;
• it resolves that it is insolvent or likely to become insolvent at some future time;
• it appoints a Restructuring Practitioner to oversee the restructuring process, including developing a debt restructuring plan approved by the ATO and other creditors and restructuring proposal statement;
• neither the company nor any of its directors (current and in the previous 12 months) have been engaged in a restructuring process nor have been the subject of simplified liquidation process within the preceding seven years; and
• before putting the debt restructuring plan to the creditors, all employees’ entitlements have been paid, and all tax lodgements are up to date.

The SBSDR process

The process begins when the directors of a company resolve that the company is insolvent or is likely to become insolvent at some future time and appoints a Restructuring Practitioner.

After commencement of the process, the company has 20 business days to develop a Restructuring Plan and a restructuring proposal statement (with the assistance of the Restructuring Practitioner) and put the Plan and statement to its creditors. [2] During this time, there is a moratorium on most types of security enforcement against the company.^[3]

Following this, the creditors have 15 business days to vote on the Plan. The Plan is only approved if it gains the support of more than 50% in value of unrelated creditors.^[4]

Approving the Plan allows the company to continue to trade in the ordinary course of business while the Plan is administered by the Restructuring Practitioner. The Plan must operate for no more than three years.^[5]

The role of the Restructuring Practitioner

During the process, the Restructuring Practitioner acts as the company’s agent.^[6] It is important to note that the Practitioner does not take control of the day-to-day affairs of the company;^[7] this remains with the directors of the company, and the company may undertake transactions that are in the ordinary course of business.^[8]

The role of the Restructuring Practitioner is to, among other things:^[9]

• provide advice to the company about the restructuring;
• certify to creditors that they believe the company is eligible for restructuring, and that the company is likely to be able to meet its obligations under the plan (the Practitioner must take reasonable steps to verify this);
• perform other functions, duties and powers given under the Corporations Act, including:
  • whether to terminate the restructuring;
  • give consent to transactions or dealings outside the ordinary course of business;
  • resolve disputes over the amount of a creditor’s debt or claim disclosed in the restructuring proposal statement; and
• manage the disbursement of payments to the company’s creditors based on the terms set out in the Restructuring Plan.

Considerations under the Uniform Law

For any solicitor who is or was a director of a company, including an ILP, it is important to ensure you consider whether the SBSDR process triggers any obligations under the Uniform Law and associated Rules.

Disclosure obligations

Under the Uniform Law, solicitors have an obligation to notify the NSW Law Society of certain events. This obligation is set out in section 51 of the Uniform Law, which is a statutory condition of every practising certificate, and rule 12 of the Legal Profession Uniform General Rules 2015 (General Rules).

In essence, solicitors who are or have been directors of a company, including any principal/director of an ILP, need to consider whether any matters arising from the SBSDR process triggers a reporting obligation to the NSW Law Society, which either requires:

• notification in writing to the NSW Law Society Council within 7 days of the event occurring; or
• disclosure as part of an application for grant or renewal of a practising certificate.

Events that are reportable under the Uniform Law, and which may be relevant to the SBSDR process, include:

• a bankruptcy related event
• a solicitor who is or has been an insolvent under administration
• a director or principal of an incorporated legal practice while the legal practice is or was insolvent
• a director of a company while the company is or was insolvent whether, under an Australian law relating to the legal profession or a law of the Commonwealth, a supervisor, manager or receiver, however described, is, or has been, appointed in relation to any legal practice engaged in by the applicant
• a trust accounting irregularity

The NSW Law Society’s Professional Standards Department has written an article on solicitors’ disclosure obligations under Uniform Law – What do I need to disclose. Practitioners are encouraged to consider this guidance to understand the reporting requirements and process.

Remember that a solicitor’s disclosure obligations, as set out in the Uniform Law and the General Rules, should be considered in the context of rule 43 of the Australian Solicitors’ Conduct Rules. Rule 43 says that “subject only to his or her duty to the client, a solicitor must be timely, open and frank in his or her dealings with a regulatory authority.”

A failure to comply with a disclosure obligation may result in disciplinary action.

Power of the NSW Law Society to intervene and conduct audits

Under schedule 2 (Division 5-15 and 5-20) of the Corporations Act, a company that is under restructure or has entered into a SBSDR Restructuring Plan is under external administration.

The NSW Law Society, as the designated local regulatory authority under section 108 of the Uniform Law, is entitled to intervene in the external administration proceedings concerning a corporation that is or was an ILP. Further, if the Law Society is concerned about the financial management of an ILP generally, as it relates to trust monies, it is able to conduct audits and appoint external managers.^[10]

Further, where a solicitor is a director of any company that goes into administration or liquidation, the NSW Law Society is able to consider the solicitor’s conduct as a director when determining whether they are a fit and proper person to hold a practising certificate.^[11] This may mean that the Law Society is able to request reports from the relevant Administrator/Liquidator to determine whether there has been insolvent trading or any other contravention by the director/solicitor that led to the administration/liquidation of the company.

Key takeaways

In summary, practitioners considering SBSDR should:

• Seek independent legal and financial advice before deciding to participate in the process due to its consequences and implications, including in relation to the Uniform Law.
• Be aware of how the SBSDR process may impact their reporting obligations under Uniform Law and General Rules.
• Make all necessary disclosures to the NSW Law Society.

Further guidance and support

Practitioners who would like further guidance on their reporting obligations under the Uniform Law and General Rules can contact the  Professional Support Unit (PSU) by emailing regulatory.compliance@lawsociety.com.au or calling (02) 9926 0115. PSU provides free and confidential guidance to legal practitioners in the areas of AML/CTF, costs, ethics and regulatory compliance.

The Law Society also provides support to solicitors who are or may be subject to disciplinary proceedings (including complaints, show cause events and trust accounting issues) through the Professional Conduct Advisory Panel. The assistance is confidential and independent of the regulatory authorities.

We would also like to remind practitioners that NSW solicitors can contact the Law Society’s Solicitor Outreach Serviceon 1800 592 296 for access to:

• Up to three psychology counselling sessions per financial year
• 24/7 telephone crisis counselling with a psychologist

---

Endnotes

[1] Australian Securities Investment Commission, Small business restructuring and the restructuring plan, https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors/small-business-restructuring-and-the-restructuring-plan/ (accessed 24 July 2025).

[2] Australian Government The Treasury, Simplified debt restructuring: a factsheet for small business, https://treasury.gov.au/sites/default/files/2020-12/simplified-debt-restructuring-fact-sheet_0.pdf (accessed on 24 July 2025).

[3] SV Partners, Small Business Restructuring Process, https://svpartners.com.au/services/solutions-for-businesses/small-business-restructure-process/ (accessed 30 July 2025)

[4] Australian Securities Investment Commission, Small business restructuring and the restructuring plan, https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors/small-business-restructuring-and-the-restructuring-plan/ (accessed 24 July 2025).

[5] Corporations Act 2001 ss 453K and 453P.

[6] Australian Securities Investment Commission, Small business restructuring and the restructuring plan, https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors/small-business-restructuring-and-the-restructuring-plan/ (accessed 24 July 2025).

[7] Ibid.

[8] Australian Government The Treasury, Simplified debt restructuring: a factsheet for small business, https://treasury.gov.au/sites/default/files/2020-12/simplified-debt-restructuring-fact-sheet_0.pdf (accessed on 24 July 2025).

[9] Australian Securities Investment Commission, Small business restructuring and the restructuring plan, https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors/small-business-restructuring-and-the-restructuring-plan/ (accessed 24 July 2025).

[10] Legal Profession Uniform Law (NSW) ss256, 334 and 370.

[11] Legal Profession Uniform General Rules 2015 (NSW) r 13(1)(b).