Small Business Restructuring (SBR) offers a unique opportunity to reduce company debt while maintaining control of your business. However, this control comes with specific obligations and responsibilities that you need to understand and manage carefully throughout the process.
Unlike traditional insolvency processes where you hand control to an external administrator, SBR lets you continue running your business. This arrangement requires you to balance your ongoing director duties with new responsibilities under the restructuring process. Understanding these obligations helps ensure you can navigate the process successfully while maintaining creditor confidence.
Your key obligations during SBR
When you enter Small Business Restructuring, several core obligations require your attention and compliance. Understanding these from the start helps ensure a smooth restructuring process and demonstrates your commitment to achieving the best possible outcome for all stakeholders.
Your primary duties include maintaining accurate records, acting in good faith, and making appropriate disclosures to your practitioner. Meeting these obligations helps build creditor confidence and supports a successful restructuring outcome. Many directors find that fulfilling these responsibilities actually strengthens their business management practices for the future.
During the restructuring period, you must:
Continue proper financial record-keeping
Make all required lodgements on time
Pay employee entitlements when due
Meet new trading obligations
Cooperate with your practitioner
Act honestly and transparently
Managing day-to-day operations
While undertaking SBR, you retain control of normal business operations. This continued control represents one of the key advantages of SBR over traditional insolvency processes, allowing you to maintain business momentum while addressing historical debt challenges.
Your operational control means you continue making key decisions about:
Staff management
Customer relationships
Supplier arrangements
Operational matters
Business development
Strategic planning
However, significant financial decisions require consultation with your practitioner. This oversight helps ensure actions align with your restructuring goals while protecting creditor interests. The balance between maintaining operational control and working with your practitioner often leads to better business practices and stronger financial management.
Financial management responsibilities
Proper financial management becomes particularly important during restructuring. Your practitioner will expect regular updates about the company's position and performance. This increased focus on financial management often helps directors develop stronger systems and controls that benefit their business long after restructuring concludes.
The financial obligations during SBR extend beyond normal business requirements. You'll need to maintain detailed records and provide regular updates to your practitioner, ensuring they can monitor progress and identify any potential issues early.
Record keeping
Maintaining comprehensive financial records proves crucial to restructuring success. Your records should cover all aspects of business operations:
All business transactions
Cash flow movements
Debtor collections
Creditor payments
Employee entitlements
Tax obligations
Reporting requirements
Regular communication with your practitioner helps maintain restructuring momentum. Be prepared to provide:
Regular financial updates
Performance reports
Cash flow forecasts
Budget variations
Business changes
Trading challenges
Working with your practitioner
Building a strong working relationship with your SBR practitioner helps ensure restructuring success. They rely on your knowledge and cooperation to develop and implement an effective plan. This collaborative approach often leads to better outcomes than working in isolation.
Your practitioner brings valuable expertise to the restructuring process, but they need your detailed knowledge of the business to create the most effective solutions. Regular communication helps them understand your business thoroughly and identify the best path forward.
They need to understand:
Business operations
Financial position
Trading patterns
Market conditions
Growth opportunities
Potential challenges
Be prepared to provide information promptly when requested. Quick responses help maintain momentum and demonstrate your commitment to the process. Many practitioners find that directors who engage actively achieve better restructuring outcomes.
Employee obligations
Managing employee obligations requires particular attention during SBR. Your team members often represent your most valuable asset, and maintaining their confidence through restructuring proves crucial to business success.
Proper management of employee entitlements not only meets legal requirements but also helps maintain team morale and productivity during restructuring. Remember that employee entitlements cannot be included in the restructuring plan.
You must ensure:
Wages are paid on time
Superannuation is current
Leave entitlements accrue
WorkCover remains valid
Safety standards continue
Training requirements are met
Trading responsibilities
Continuing to trade during restructuring brings specific responsibilities. Successfully managing these obligations helps build creditor confidence and supports your restructuring goals. Many businesses find that the discipline required during restructuring helps establish better business practices for the future.
New debts
All new trading debts incurred during restructuring must be paid when due. Meeting these obligations demonstrates your commitment to responsible business management:
Supplier invoices
Employee wages
Tax obligations
Lease payments
Insurance premiums
Operating expenses
Business conduct
Maintaining high professional standards during restructuring helps preserve business value:
Customer service
Product quality
Safety compliance
Environmental obligations
Industry regulations
Professional standards
Getting support
Meeting your obligations during SBR doesn't mean working in isolation. Professional support can help you navigate requirements effectively while maintaining focus on business operations and improvement opportunities.
Contact our team for guidance on:
Understanding obligations
Meeting requirements
Managing compliance
Improving systems
Maintaining records
Planning ahead
Remember: While director obligations during SBR might seem demanding, they support a successful restructuring outcome. Meeting these responsibilities helps build creditor confidence and increases your chances of achieving significant debt reduction while strengthening your business for the future.
Read next: Real SBR success stories: How Australian businesses bounced back
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