There has been a significant uptake in small business restructurings over the last few years, according to a newly released report by corporate watchdog ASIC.
The report reviewed the small business restructuring (SBR) process between 2022 and 2024, which showed 3,388 SBR appointments commenced between July 1, 2022 and December 3, 2024.
This is a significant increase from the 82 SBR appointments from January 1, 2021 to June 30, 2022.
The small business restructuring process was enacted in January 2021 by the Australian Government to help struggling businesses, particularly amid the COVID-19 pandemic that upended the way businesses operated.
The number of appointments continues to increase each year, with 448 appointments in 2022-23, 1,425 in 2023-24, and appointments for 2024-25 expected to be around 3,000.
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.
SBR appointments in retail were relatively lower, making up 4 per cent. This is behind other services and professional, scientific and technical services (both 9 per cent), admin and support at 5 per cent, and manufacturing and healthcare on, both on 4 per centt
Of the total 3,388 SBR appointments from mid-2022 to 2024 end, 2,820 transitioned to small business restructuring plans (SBR plans), while the majority of the remaining 568 appointments were terminated, with creditors rejecting the proposed plan.
According to ASIC, the SBR regime provides a streamlined process for directors of struggling small companies to restructure their debts, while remaining in control of the company. Those with liabilities of less than $1 million can access the scheme.
“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,” ASIC commissioner Kate O’Rourke said.
“Safeguards against the misuse of the SBR process are important. 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.”
O’Rourke said she and her team 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 business while minimising the risk of misuse.”
The report also confirmed that over $101 million in dividends were distributed to unsecured creditors from fulfilled SBR plans. Approximately 87 per cent (around $88 million) of these funds were distributed as dividends to the Australian Taxation Office.
The median remuneration paid for the restructuring process remained stable overall during the review period at $21,998, similar to the $22,055 reported in the previous reporting period.