ASIC today published a report on small business restructurings for the period 1 January 2021 to 30 June 2022 (review period).

The report (REP 756) outlines the findings from ASIC’s review of the ASIC company register and ASIC lodgements data for all 82 small business restructuring practitioner appointments which commenced in the review period, and the outcomes of those restructurings to 30 September 2022.

This is ASIC’s first report since reforms were introduced on 1 January 2021 to create a new simplified debt restructuring process for eligible small businesses and a new type of registered liquidator. Importantly, the new small business restructuring was the first type of formal insolvency appointment which left the control of the insolvent company in the hands of the directors – not the appointed registered liquidator.

The key observations from the report include:

• There were 82 restructuring practitioner appointments during the review period. From those appointments, 72 transitioned to restructuring plans from the 78 proposed. The balance of 10 appointments were either terminated on the basis the company was not eligible, creditors rejected the proposed plan or the directors ended the restructuring appointment.
• All the registered liquidators appointed as restructuring practitioners during the review period were those registered to practise as external administrators of companies (including as restructuring practitioners), receivers and receivers and managers. To date, one person has been registered as a registered liquidator to practise only as a restructuring practitioner for a company or for a restructuring plan.
• Based on information reviewed to 30 September 2022, ASIC identified:
• creditors approved the majority (72) of the 78 sent to affected creditors (92%)
• where a restructuring plan was accepted, 47 plans were effectuated (65%), one plan was terminated (2%) and 24 plans were ongoing as at 30 September 2022 (33%)
• the majority of companies where a restructuring plan was effectuated or was ongoing appear to be continuing to operate their business (66%)
• the ATO was a creditor in 89% of companies which entered a restructuring plan and was a major creditor in 79% of those companies.

Background

In 2020, the Australian Government introduced legislation which changed Australia’s insolvency framework for small businesses from 1 January 2021.

As a result, small business restructurings now occur in two phases:

• Appointment of a registered liquidator as the restructuring practitioner
• directors of a company appoint a restructuring practitioner if the company meets the eligibility criteria and the directors resolve that the company is insolvent or likely to be insolvent and that a restructuring practitioner should be appointed
• a restructuring proposal period of 20 business days commences where the company proposes a restructuring plan
• Entering into a restructuring plan (if one is approved).