In the ever-evolving world of business, small to medium enterprises (SMEs) often face financial challenges that can put their survival at stake. However, with the right resources and legal strategies, companies can navigate these troubled waters. One viable option for struggling SMEs is small business restructuring. In this blog post, New South Lawyers’ Restructuring & Insolvency Law team will explore the requirements for restructuring a small business and discuss the potential benefits it offers, according to ASIC (The Australian Securities and Investments Commission).

Requirements for Small Business Restructuring  

To initiate a successful restructuring process, small business owners must fulfill certain requirements. In Australia, the Australian Securities and Investments Commission (ASIC) provides guidelines and support for directors in navigating insolvency and restructuring.According to ASIC, a small business is eligible for restructuring if:Firstly, the company is incorporated in Australia and is not an exempt entity.Secondly, the total liabilities of the company, including contingent liabilities, do not exceed $1 million.Thirdly, the company is not subject to bankruptcy or liquidation proceedings.Finally, the directors have sought professional advice from a restructuring practitioner.

Status of the Company

During the restructuring process, the company's financial affairs are placed under the control of a restructuring practitioner. This practitioner assists in developing a restructuring plan, which must be approved by the company's creditors. The plan outlines how the business will continue its operations while addressing its financial challenges.

Benefits of Small Business Restructuring

Restructuring offers several advantages for struggling small businesses. Firstly, it provides an opportunity for the company to reduce its debts and reorganise its financial obligations. This may involve negotiating with creditors to restructure payment terms, extend deadlines, or reduce the overall debt burden. Additionally, small business restructuring can help preserve jobs and maintain relationships with suppliers, customers, and other stakeholders. By demonstrating a commitment to resolving financial difficulties, companies can build trust and credibility within their industry. Furthermore, restructuring enables businesses to implement operational and structural changes that promote long-term sustainability. It allows for a critical evaluation of the company's operations, identifying areas of improvement and efficiency.

Small Business Restructuring, according to ASIC: The Conclusion 

Small business restructuring can be a lifeline for companies facing financial hardships. By meeting the requirements outlined by ASIC and working with a restructuring practitioner, businesses can embark on a journey towards revitalisation. With a well-designed restructuring plan in place, companies can effectively manage their debts, preserve jobs, and pave the way for a brighter future. Embracing restructuring as a strategic solution can provide a fresh start and an opportunity for growth, allowing small businesses to emerge stronger and more resilient than ever before.

New South Lawyers’ communications are intended to provide commentary and general information. To that end, people should not rely on this communication as legal advice. Accordingly, they should seek formal legal advice for matters of interest arising from this communication.

To find out more, chat with a member of New South Lawyers' Restructuring & Insolvency Law Team today.