SBRP – Small Business Restructuring Practitioner

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Enter the new SBRP – Small Business Restructuring Practitioner…

The Australian Government has announced the reforms introducing a new debt restructuring and simplified liquidation process for small businesses. These reforms are aimed at providing small businesses with the assistance to survive, or where a restructure is not possible, to maximise returns to creditors and employees by reducing the complexity, time and costs involved in liquidating a company.

The legislation, which comes into effect from 1 January 2021, will make it easier for small businesses to restructure or wind up and are in line with the Ombudsman’s Insolvency Practices Inquiry final report released in July.

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has welcomed the passage of legislation, overhauling the national insolvency framework.

We know the pandemic, which followed a devastating season of natural disasters, has driven many small businesses to the brink…

These landmark reforms will give otherwise viable small businesses a chance to recover and prevent a wave of unnecessary insolvencies…

It’s an absolute game-changer for small businesses, particularly those that have been heavily impacted by the COVID crisis.

Kate Carnell, ABSFEO

Directors of a company will be able to appoint a “Small Business Restructuring Practitioner” (SBRP) to assist in developing and implementing a simplified restructuring plan.

The impact of the appointment of a SBRP shares some common elements with the consequences of a company entering into voluntary administration, including familiar restrictions on third party property rights, a stay on legal proceedings involving the company’s property and a stay on enforcement rights under ipso facto clauses, subject to certain exceptions. There’s even a moratorium on enforcing personal guarantees given by directors, spouses or relatives (which is limited…).

Instead of finding themselves on an express train to winding up with no control over the process, these changes will ensure small businesses have the option to turn their business around, giving them a fighting chance to survive.

Kate Carnell, ASBFEO

A new category of registered liquidator permitted to practise as a SBRP – Small Business Restructuring Practitioner. The usual committee must take into account the following in making their determination:

  • — recognition as an accountant (a member of CAANZ being a CA or FCA, a member of CPA Australia being a CPA or FCPA or a member of the IPA being an FIPA or MIPA)
  • — has demonstrated the capacity to perform satisfactorily the functions and duties of an SBRP
  • — is able to satisfy any conditions to be imposed under the Insolvency Practice Schedule (Corporations). 

As noted above, the proposed changes will come into effect on 1 January 2021 so it is expected that there will be a mad dash for insolvency practitioners to familiarise themselves with and train their staff on the new laws.  

The Government has recognised that it will take time for directors, accountants and other professionals to get up to speed on these reforms and, to ensure that eligible small businesses don’t miss out on using these reforms (as well as the temporary relief in relation to insolvent trading and the amended statutory demand process), eligible small businesses will be able to declare their intention to use the Small Business Restructuring Practitioner process, after which time the directors of the company will then be afforded up to a further three months of temporary relief from insolvent trading liability through to 31 March 2021 and (for the first seven months of 2021) the company will continue to have six months to comply with statutory demands (as opposed to 21 days). This declaration must be lodged with ASIC.

Eligibility is limited to companies (incorporated entities) with total liabilities of less than AU$1 million.

A company must also:

  • — be substantially compliant with payment of employee entitlements and required tax lodgements (lodgements, but not payments of tax liability) although inclusion of the term “substantially complying” has already raised concerns that it is ambiguous
  • — not have any of its directors (appointed within a 12-month period) to have engaged in a formal insolvency process for another company of which they hold office within a seven year period (subject to certain reasonable carve out scenarios).

A useful starting point for directors is to seek out a business viability review.

Using the ABRT Professional Directory, you can be sure to find an appropriately qualified adviser.