6. Defining Insolvency Terms

Small business restructuring (SBR)

Making a SBR Plan

The eligibility criteria for a company wanting to use the Small Business Restructuring Process has been discussed in an earlier post, but essentially, the company must have debts less than $1m.

Crucially however, before appointing a restructuring practitioner, directors should consider whether, at the time a restructuring plan is to be proposed to creditors (which is 20 business days after signing up to the process) the company will have (or substantially complied with the requirement to have):

  • paid the entitlements of employees that are due and payable which includes superannuation guarantee owing to the ATO; and
  • given returns, notices, statements, applications or other documents as required by taxation laws (within the meaning of the Income Tax Assessment Act 1997).

Unless the two criteria above have been satisfied the company cannot propose a restructuring plan.

The above criteria exclude employee entitlements that are not currently due to be paid. Tax debts do not need to be paid – only the required returns made.