Businesses in distress now have a new option that can help them avoid liquidation and recover the business. Here’s a summary of how business restructuring works.

In Australia, a new small business restructuring process was introduced as part of the Corporations Amendment (Corporate Insolvency Reforms) Act 2020. This process is intended to provide a more efficient and cost-effective way for small businesses to restructure and avoid going into formal liquidation.

Under the new process, small businesses with liabilities of less than $1 million are eligible to apply for a restructuring plan, which is a legally binding agreement that can be used to restructure the business and its debts. The plan must be approved by a majority of the company’s creditors, and can include measures such as the sale of assets, the renegotiation of leases and contracts, and the alteration of the company’s capital structure.

The small business restructuring process is intended to be less formal and less expensive than traditional insolvency options such as voluntary administration or liquidation. It also allows small businesses to continue trading while the restructuring plan is being implemented, which can help to preserve jobs and maintain continuity of supply to customers.

The process is also designed to be more accessible to small businesses, as it can be initiated by the company’s directors, rather than requiring a court process. Additionally, a small business restructuring practitioner can be appointed to assist the company in preparing and implementing the restructuring plan.

The small business restructuring process is a new option for small businesses in Australia facing financial distress and is intended to provide them with a more viable alternative to formal liquidation, while preserving jobs and maintaining continuity of supply to customers.

The first thing that owners of distressed businesses should do is seek advice and guidance early from their accountant. The later it’s left the more difficult it is achieving an outcome that leaves the business owner in the best possible position. At Infuse we have an experienced panel of liquidators that we refer distressed businesses to. Please contact us to find out how working with us will have a positive impact upon your business.