Small Business Restructuring is a process by which an insolvent company can settle its debts.  With the process mostly being used to settle ATO debts.  This is an example of how we have used Small Business Restructuring to help a client in the restaurant industry.

What were the client’s circumstances?

We were referred a restaurant business by their accountant.  The business had tax debts of around $150,000 and limited other creditors.  When we met with the client we informed them that their options were:

• Contribute funds to pay the company’s tax debt.
• Liquidation which would mean shutting down the business.
• Small Business Restructuring with a view to saving the business and continuing trading.

The client decided to appoint as Small Business Restructuring Practitioners.

What was our role and what was the process?

When we were appointed as Small Business Restructuring Practitioners we worked with the client to formulate a proposal to creditors (the ATO) to settle the company’s debts.  This proposal had to be put to creditors within 20 business days.

The company’s directors ultimately decided to put forward a proposal whereby they would contribute $60,000 via funds the directors personally borrowed in full settlement of the company’s debts.  We then issued a required report to creditors including providing a summary of the client’s circumstances, what would happen in the company was placed in liquidation and the estimated returns in liquidation and Small Business Restructuring.

We determined as part of this process that creditors would receive no return in liquidation, however, they would receive a return of more than 30 cents in the dollar if the Small Business Restructuring proposal was accepted and complied with.

What was the outcome?

Creditors (the ATO) voted FOR the proposal and the directors paid the required amount of $60,000 and the company’s debts were settled.  The directors then had a company with no debts and which could trade profitably in the future.

One of the reasons which the ATO voted FOR the proposal was that the company had always lodged its tax lodgments on time and had always sought to engage with the ATO when it could not pay its debts and had always sought payment arrangements.   This “compliance” helped the directors with achieving a settlement proposal and also likely contributed to the amount the ATO was willing to accept whereas they may have required a greater return for a less compliant taxpayer.

Contact us for assistance

If your business has unmanaged debts but is otherwise profitable, contact us at our Brisbane or Gold Coast offices for a free no-obligation consultation. Our team is led by members of the Australian Restructuring Insolvency and Turnaround Association (ARITA) who are also small Liquidators who can act as Small Business Restructuring Practitioners. We are well equipped to provide you with the necessary advice to ensure you, as a director, are well protected.