A significant uptake in small business restructurings (SBRs) over the past few years has been a key factor in the survival of otherwise struggling small businesses, according to a new report.
The Report 810 Review of Small Business Restructuring Process: 2022–24 published by Asic showed there were 3388 SBR appointments that commenced between July 1, 2022 and December 31, 2024, a significant increase from the 82 SBR appointments from January 1, 2021 to June 30, 2022.
From those 3388 appointments, 2820 transitioned to small business restructuring plans (SBR plans), while the majority of the remaining 568 appointments were terminated as a result of creditors rejecting the proposed plan.
Around half of all SBR appointments during the review period came from the construction (27 per cent) and accommodation and food services (23 per cent) industries.
In addition, the number of appointments continues to increase each year, with 448 appointments in 2022-23, 1,25 in 2023-24, and appointments for 2024-25 expected to be around 3000.
ASIC commissioner Kate O’Rourke commented: “After a slow start, the recent growth of SBRs and other data in our report shows that the SBR regime is starting to deliver on the intended policy objective of reducing the complexity and costs involved in insolvency processes for small businesses and ultimately helping them to survive.”
The SBR regime provides a streamlined process for directors of struggling small companies to restructure their debts, while remaining in control of the company.
“Safeguards against the misuse of the SBR process are important,” she said. “In addition to the statutory safeguards, where we can, Asic has tested questions raised by some stakeholders about the potential misuse of the SBR process. At this stage, we have not found evidence that indicates widespread misuse of the SBR process.”
There was over $101 million in dividends distributed to unsecured creditors from fulfilled SBR plans, with approximately 87 per cent (approximately $88 million) of these funds distributed as dividends to the Australian Taxation Office
“We will continue to monitor the uptake of SBRs and their effectiveness. We are committed to ensuring that the SBR regime provides a cost-effective restructuring option that supports the survival of small businesses while minimising the risk of misuse,” O’Rourke concluded.
