Small business restructuring grew faster than any other corporateinsolvency process in Australia after it commenced on 1 January 2021.Appointments rose from 82 in the first 18 months to 30 June 2022 to 448 in 2022-23, 1,425 in 2023-24, and around 3,000 in 2024-25. ASIC's Report 810, published 27 June 2025, examined the 3,388 appointments made between 1 July 2022 and 31 December 2024 and is the main evidence base for what follows. At its peak the process ran at about a fifth of all corporate insolvency appointments, 20.1% of first time company insolvency appointments for the yearto 31 May 2025.

In FY2025-26 that share fell sharply, to about 12.2% of first-timeexternal administration and controller appointments for the year to 31 May 2026,with the count down from 2,697 to 1,569 first time appointments, more than 40% lower. Total corporate insolvencies stayed elevated over the same period, so the decline is specific to restructuring, not a broader recovery. The question is no longer why uptake climbs, it is why it stalled, and what that says about creditor scrutiny and about directors leaving their run too late.

Under Part 5.3B of the Corporations Act, an eligible company appoints are structuring practitioner while its directors stay in control, which resultsin a debtor-in-possession feature that Australian law had previously notoffered small companies. A 20 business day proposal period follows, extendable once by up to 10 business days, during which the company puts a plan to affected creditors, which is typically a compromised return in full and final settlement. Directors keep trading and the costs and stigma of administration are avoided, whilst creditors receive a defined outcome rather than theuncertainty of liquidation.

At the date of appointment of the small business restructuring practitioner, the company's total liabilities must not exceed $1 million. No current director, and no person who was a director in the preceding 12 months, may have been a director of another company under restructuring or simplified liquidation in the preceding seven years, and the company itself must not have used either process in the preceding seven years.

Payment of employee entitlements that are due and payable and compliance with tax lodgement obligations must be met, or substantially met, before the plan is given to affected creditors, not at appointment. If a plan is put to creditors with those obligations outstanding, then the restructuring will terminate. For any director considering the small business restructuring regime, they must stay on top of their lodgements, employee entitlements and superannuation payments.

Once the plan issues, affected creditors have 15 business days to vote, and if accepted by more than 50% of the responding creditors in total value, the plan is adopted. Related creditors are bound but cannot vote, which stops a director's associates carrying a proposal. Secured creditor rights are not altered, and a plan can run for up to three years. That simplicity is what keeps the process fast and cheap relative to voluntary administration.

ASIC Report 810, of the 3,388 appointments, 3,227 had a plan sent to creditors and 87% were approved. Two years after commencement, 75% of plans had been fulfilled, 6% terminated and 19% were ongoing. The report suggested that surviving the restructuring process looks solid, with 96% of companies remaining registered 6 after completing a plan, 92% at one year, and 93% on ASIC's April 2025 snapshot. ASIC was careful to note it cannot tell whether those companie sare still trading, so read this as short term viability, not proof of recovery.

The Australian Taxation Office is often the largest creditor in the small business restructuring process and from 2025, it has publicly hardened its stance, declining plans with poor compliance histories, plans that treat it less favourably than other creditors, or plans that do not demonstrate post plan viability. Since the ATO's vote so often decides the outcome, its expectation snow shape which plans are worth proposing.

On fulfilled plans the median dividend was 20 cents in the dollar and the average 21 cents, against median admissible unsecured claims of $359,082 and amedian of two creditors. More than $101 million was distributed to unsecured creditors, roughly 87% of it, about $88 million, to the ATO. The mediac ost of running the process was $21,998.

What Role Does Private Credit Play in SBR’s?

A restructuring reduces what the company owes, but it does not change how the company trades. Where the operating problem that caused the debt remains, the shortfall returns, and the eligibility rules bar a second restructuring for seven years. That is where the falling approval rate meets a funding question, and where a private credit lender has a defined role.

An insolvency practitioner must certify that the company is likely to beable to meet its obligations under the plan, and creditors, the ATO inparticular, are increasingly unwilling to carry instalment risk across 3 years when an earlier lump sum is available. A committed facility changes the calculus as plan contributions can be funded from borrowings, converting a speculative instalment plan into a funded lump sum proposal, improving the odds of approval and strengthening the practitioner's certifying declaration.

With liabilities capped at $1 million and a median dividend near 20 cents, the funding requirement is modest for most lenders, but sizing and structuring it well takes commercial judgement and a working understanding ofthe insolvency regime.

Secured creditor rights are untouched, the stay on ipso facto rights protects key contracts, and directors keep trading, so the going concern valueand asset base stay intact through the process. During the restructuring, though, transactions must be in the ordinary course of business, authorised by the practitioner, or made under a court order. Granting new security is not ordinary course, so it needs the practitioner's authorisation or an order of the court.

Lenders and practitioners should be talking before the plan is drafted, not after it is rejected. The credit decision has to rest on whether the business can service its debt once the plan ends, not on whether the plan clears its creditor vote. Funding a company whose operating model has not changed only delays the failure, and the falling approval rate shows creditors are less willing to accept plans that do no more than defer it.

 

Sources

●     ASIC, REP810 Review of small business restructuring process 2022-24 (27 June 2025):https://www.asic.gov.au/regulatory-resources/find-a-document/reports/rep-810-review-of-small-business-restructuring-process-2022-24/

●     ASIC mediarelease 25-111MR, ASIC report suggests small business restructurings arekeeping struggling companies afloat (27 June 2025):https://www.asic.gov.au/about-asic/news-centre/find-a-media-release/2025-releases/25-111mr-asic-report-suggests-small-business-restructurings-are-keeping-struggling-companies-afloat/

●     ASIC, Insolvency statistics: Series 1, companies entering external administration andcontroller appointments, figures for the year to 31 May 2026:https://www.asic.gov.au/about-asic/corporate-publications/statistics/insolvency-statistics/

●     ASIC, Corporate Insolvency Update Issue 36, for the 20.1 per cent FY2024-25 figure:https://www.asic.gov.au/about-asic/corporate-publications/newsletters/asic-corporate-insolvency-update/asic-corporate-insolvency-update-issue-36/

●     ASIC, Smallbusiness restructuring and the restructuring plan, regulatory guidance for theprocess mechanics:https://www.asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors/small-business-restructuring-and-the-restructuring-plan/

●     CorporationsRegulations 2001 (Cth) reg 5.3B.24, for the tax lodgement and employeeentitlement requirements:https://www5.austlii.edu.au/au/legis/cth/consol_reg/cr2001281/s5.3b.24.html

●     AustralianTaxation Office, Small business restructuring:https://www.ato.gov.au/tax-and-super-professionals/for-tax-professionals/your-practice/insolvency-practitioners/insolvency-processes-that-support-small-business/small-business-restructuring

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