A really interesting post, and one which shows how the SBR process can be of real value to businesses, directors, creditors and others in that businesses ecosystem. What this also shows is how Liquidators, (surely now an inappropriate title) should be the first people to call when a business is in difficulty.
Small Business Restructuring Specialist • Restructuring Practitioner • Registered Liquidator
2024: Year of the Small Business Restructure (SBR) Alares Systems publishes a list of the top 15 SBR practitioners each month. I thought I'd look at the ASIC numbers to see what's happening. Though the ASIC numbers vary from Alares', here’s the snapshot to late November 24. Why did SBRs get so popular? As the graph shows, SBRs were slow getting off the ground after their January 2021 introduction. "They're too hard", "there's not enough money in them", "companies aren't eligible"... but SBRs are reshaping how struggling businesses deal with financial distress. The benefits were obvious to us from the beginning, despite the practical difficulties to navigate in the early stages. The key benefits are: - Better returns for creditors: SBRs deliver far better outcomes for creditors than other insolvencies which are mostly nil returns, or otherwise in DOCAs (the equivalent before SBRs) the average return is apparently around 6c/$ compared to SBR creditor returns typically ranging from 25% to 50% (ATO have previously said average of 22% but that would have definitely increased). - High success rate: The ATO has stated previously they vote in favour of more than 90% of SBRs, enabling small businesses to restructure debt, improve cash flow, and overcome their financial challenges. - Best solution to phoenixing: voluntary administrations mostly don't work for small businesses due to costs and complexity. That means the only commercial option they had to survive before SBRs was a “legal phoenix”. It's surely better for business and the public for small business restructuring to occur in a regulated space, with integrity and creditors have full control. Business owners mostly want to do the right thing. SBRs provide a legitimate, transparent process for directors to address financial issues. All have paid super and ATO returns are lodged. The irony is, a business that phoenixes would actually pay less than in an SBR. SBR Practitioners are different. While many liquidators have begrudgingly tried them, or still wondering, others are getting it done. These 15 of 650 liquidators do over a third of all SBRs. Like heart surgery, where you only have one shot at life or death, you want an experienced specialist with a high success rate. Experienced SBR specialists: - Are committed to success - Understand the P&L and how to fix businesses - Understand how the ATO works - Are open and honest with directors, otherwise the SBR won't be approved The ATO his tightened up in the last month. It's rumoured to be rejecting 30%+ of SBR proposals, up from just 9% previously. It's reasonable to expect the ATO would let SBR practitioners know of policy changes. Unfortunately not, you only find out when they reject an SBR. Anyone can promise SBR success, but they may not deliver. It’s disappointing to see pre-insolvency advisors calling themselves SBR specialists or even SBR practitioners. Accordingly, for SBR success, experience matters more than ever.
