Small Business Restructuring Process
With the increase in DPNs being issued by the ATO, companies operating small businesses are often faced with a difficult decision to make about whether to place their company into administration or liquidation.
Another avenue available to directors which is finding increasing favour is the small business restructuring process under the Corporations Act 2001.
This process can be suitable where the company is trading a small business viably but has a large outstanding tax debt, especially where the directors have been unable to negotiate a favourable payment arrangement with the ATO.
The main requirements are:
The maximum business debts do not exceed $1 million;
Employee entitlements are paid to date;
ATO lodgments have been made on time.
The restructuring practitioner works closely with the directors to make a proposal to creditors within 20 business days which is then voted on within a further 15 business days, so the duration is quite short. It is designed therefore to reduce costs and increase efficiencies.
The main advantage over administration or liquidation is that the directors retain control over the company during the process and their relationships with suppliers. Also, the process may have advantages for directors of building companies who might otherwise run afoul of the QBCC legislation.
If you have clients who find themselves in circumstances where the small business restructuring process may be useful, we are able to assist. Please feel free to contact Tony Scoglio on (07) 3833 2100 or info@scogliolaw.com.au to discuss.