Dominic Cantone

dominic.cantone@oracleis.com.au

ASIC’s initial review of the SBR insolvency process reveals that it is now a popular and effective procedure for eligible companies to address insolvency concerns.

The Australian Securities & Investments Commission (“ASIC”) has published a report regarding small business restructurings (“SBR”) for the initial period since SBRs commenced, being 1 January 2021 – 30 June 2022 (the “Review Period”).

 

For context, SBRs were introduced as a simplified debt restructuring process for eligible small businesses and a new type of registered liquidator, introduced largely in response to the adverse impact that the COVID-19 pandemic had on Australian small businesses. The key distinguishing factor between this process as opposed to other formal insolvency appointments, is that SBRs leaves the control of the company in the hands of the directors and not the appointed administrator.

 

The process of SBR can be summarised as follows:

 

• a Registered Liquidator is appointed as the restructuring practitioner for a company, and;
• the directors of the company appoint a restructuring practitioner if the company meets the eligibility criteria and the directors resolve that the company is insolvent or likely to be insolvent, and that a restructuring practitioner should be appointed; and
• a restructuring proposal period of 20 business days commences where the company proposes a restructuring plan; and
• the company enters into a restructuring plan if it is approved by the creditors.

 

ASIC’s key findings as outlined in their report are as follows:

 

Appointments

 

There were 82 restructuring practitioners appointed during the Review Period.  From these appointments;

 

78 proposals were sent to affected creditors, of which 72 transitioned to restructuring plans;

The remaining 10 appointments were either terminated because the company was not eligible or creditors rejected the proposed plan.

 

By State, there were 36 appointments of restructuring practitioners during the Review Period, in NSW, 28 in VIC, 10 in QLD, 5 in WA, 2 in SA, and 0 in NT and TAS.

 

Creditor response

 

ASIC found that creditors approved the majority, being 72 of the 78 proposed restructuring plans sent to affected creditors, equating to 92%.

 

It was also found that the Australian Taxation Office was a creditor for 89% of companies which entered a restructuring plan and was the major creditor in 79% of these occasions.

 

Restructuring Plan execution

 

ASIC reported that where a restructuring plan was accepted, 47 plans were effectuated (65%), 1 plan was terminated (2%), and 24 plans were still ongoing (33%).  It was further found that the majority of companies where a restructuring plan was effectuated or was ongoing, appeared to be continuing to operate their business (66%).

 

Industries

 

The main industry groups that accessed small business restructuring during the Review Period were accommodation and food services at 21%, construction at 20%, and retail trade at 16%.

 

 

Though the number of companies involved in the SBR process, in the initial period since its introduction was small, ASIC’s findings suggest that the process was largely successful.

 

Further the number of SBR appointments has significantly increased since ASIC’s initial Review Period, demonstrating that SBR is now a popular and effective procedure for eligible companies to address insolvency concerns.

 

Each of Oracle Insolvency Services’ partners are Registered Liquidators and therefore qualified to act as Small Business Restructuring Practitioners.

 

If you have a client in need of insolvency advice, you are welcome to contact us for an initial complimentary and no-obligation assessment of their options.