Here is an explainer, as shared by a Legal Affairs Business Lawyer.

What is a Director Penalty Notice (DPN)?

A director penalty notice is issued by the Australian Taxation Office (ATO) to the director of a business that has failed to pay its tax bill (usually three months or more after the due date) or has not filled out the business’ Business Activity Statement (BAS) on time.

The DPN will tell the business director how much is owed and provide available payment options or other methods to resolve the matter.

It will also outline a new timeline for making repayments. Generally, it will present you with one of two conditions:

• A lockdown DPN: This will make you, as the Director, immediately financially responsible for repayment.
• A set time period to repay: In this instance, the most common time period is 21 days to make the relevant repayments.

What makes a DPN different and extremely important for company directors to know about is that it makes the director directly responsible for tax liabilities. That means that you, as the director, have to find the money or you will face consequences. The notice is arranged this way to ensure that company directors don’t simply dissolve companies to avoid tax debts.

You should also take note that a DPN is valid from the time it is delivered to either the registered business address of your company or your residential address. If you have recently moved, it makes no difference, the date it arrives at your previous address still stands.

Even if you are a former director and have left the company with the overdue tax debt, you could still be liable for the repayments. As a new director who has been in the role for more than 30 days, you may also be held personally responsible for unpaid tax money.

How to deal with a DPN

If you have received a DPN, don’t panic. There are still ways to resolve it.

The first and most obvious is to pay the debt in full, straight away. Maybe you just didn’t get around to paying the bill, or it got lost in a pile of paperwork. Pay it off ASAP and you can move on.

If it’s not feasible to pay the whole bill in one go, contact the ATO right away or ask your Legal Affairs business lawyer to do so on your behalf. More often than not, the tax office will allow you to pay the bill over time using an instalment plan. But before you do, you must get expert advice. If you enter a payment plan, your personal liability does not go away and there will be serious consequences if you chose this path and can’t meet the payment obligations.

Your other options are to:

• Put your company into administration or liquidation
• Work with a professional to restructure your business.
• Present the ATO with a valid reason for late payment

If you can convince the ATO that you had legitimate reasons for failing to pay, like serious illness or some other unavoidable issue, they might relax the DPN. You will still need to pay the money owed at some stage, though.

If you don’t take any of the steps above, you will become personally liable to repay the amount owed in full, and unfortunately, time is not on your side.

When it comes to DPNs, prevention is always better than cure. If you have a good accountant and bookkeeper, they should be able to help you ensure your tax-relevant payments are up to date.

What to do if you receive a DPN

The most important thing to do if you receive a DPN is to act quickly.

Get your paperwork in order as much as you can, then contact your Legal Affairs business lawyer and accountant as soon as possible. They will sit down with you to help work out the most suitable solution.

Need to know more about DPNs? Contact a Legal Affairs business lawyer today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

Many business owners assume that becoming insolvent means liquidating. When this happens, a liquidator is appointed to sell off assets and repay debt, and the company must stop trading while this all takes place.

The good news is there are alternatives, and you can solve insolvency without liquidating. Here’s a rundown of your different options to resolve your situation and stay in business.

Pay your creditors

If you have fallen behind but the business is turning around, you may be able to arrange to repay the providers you owe money to. You could take out a loan or you may be able to negotiate a payment plan with the tax office (be aware you may be charged interest on your tax debt).

With the tax office, it’s essential you reach out and set up a payment plan before you start receiving penalty notices as a result of not paying your bills.

If you decide to take out a loan to repay your creditors, make sure you can make the repayments before you commit. You may be able to secure the loan against some assets, which will minimise the risk for both you and the lender.

Find a way to consolidate your debt

Speaking of loans, if you have several different accounts and credit cards that are overdue, a loan from the bank or another lender may make everything more manageable and lighten the load thanks to a lower interest rate. This might be a good time to review your current credit situation with a finance broker.

Raise capital

If an injection of funds will put things on the right track, you may be able to ‘lend’ to the business from your personal funds or find an investor who is willing to contribute financially in return for part-ownership or other compensation.

With this being said, you need to have confidence that you’re not just digging a deeper hole for yourself. Work with your accountant and financial planners to do some forecasting so you have an idea of what’s actually possible.

Did you know Apple was on the brink of bankruptcy at one stage? It was Microsoft that saved the day, by investing quite a few million.

Review your income and expenses 

It is very easy to say ‘just earn more money’ but a lot less simple to do so. However, with a combination of strategy, great people, good market knowledge and a product or service people want, you can reinvent your business model and get back on top.

You may need to do some deep diving into your finances to figure out what has gone wrong. There could be expenses you can eliminate, and you might have to let some people go but recovery is never impossible. Sometimes growing the business is not profitably and scaling back will help increase profits.

Marvel was in a terrible position in the late 1990s before it started making movies off the back of its popular comic book titles. Its partnership with Disney means it’s one of the most successful brands in the world.

Find a buyer

Many brands avoid going from insolvency to liquidation by selling to a larger company. This may be an option, especially if you have IP or products that are in demand.

If you decide to sell to cover the cost of your debts, you don’t necessarily have to do so at a ‘bargain basement’ price. Work with a legal and accounting team so you sell for fair value and do so in accordance with the law.

The benefit of selling your business is being able to repay your debts while your staff keep their jobs. The purchaser will take the responsibility of restoring client relationships and getting cash flow back in shape.

Make sure you discuss your Capital Gains implications with your accountant prior to any sale.

Solving insolvency without liquidating

The best thing to do if you’re facing overwhelming business debt is to get the advice of a professional. A specialist insolvency lawyer can help you explore every option, make the right decisions and come up with a plan so you can side-step liquidation.

Need help to make a call around insolvency and liquidation? Reach out to Legal Affairs Lounge today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

Take a look at some of the options and steps involved with the insolvency process if you are a business.

How do you know if you are insolvent?

The signs you are insolvent are:

• If the number of overdue bills keeps building rather than dropping
• If the total of your business debts is higher than the value of the assets, you own
• If your sales figures and profits have been on a downward trend
• If you don’t have the cash flow to cover your regular expenses
• Your financial team is continually receiving phone calls and letters of demand from creditors

In some circumstances, multiple creditors may take action against a company that doesn’t repay its debts. This can result in what’s known as compulsory liquidation — and an order is issued by the court as a result of the creditors’ actions.

Otherwise, the company’s directors can start the insolvency process themselves, if they feel they need help to take stock of the situation and bring things under control.

Being insolvent doesn’t necessarily mean the end of the business. The first and most important step is to engage a team of legal professionals who are experienced in insolvency and can guide business directors through the process. Once someone is on board to help with the relevant steps and paperwork, here are the potential steps to move through:

Voluntary Administration

When a company goes into voluntary administration, the directors hand control to external administrators who start investigating financial details and working out how to deal with creditors. These experts are sometimes referred to as insolvency practitioners or receivers.

The company can continue trading during this time but there has to be a formal admission to the Australian Securities and Investments Commission, which will make a note that the company is in administration.

Once the administrators have completed their investigation, there will be a clearer picture of whether it is possible to pay creditors and move forward, or if liquidation is the best next step.

Receivership

If debts can be restructured, payment plans can be arranged and assets sold in order to pay off the creditors, or if the company can be acquired by another entity, it may be possible to get back on track and continue trading.

In these circumstances, a receiver is appointed to oversee the management of assets, potentially restructure the company and help take care of financial obligations.

Liquidation

The insolvency professionals you work with may determine liquidation as the best course of action if there is no way to escape the financial difficulties the business is facing.

Liquidation is also referred to as “winding up”. As part of this, items of value (assets) are sold to help repay debts, the company is closed, and it stops trading.

How to recover from insolvency

Recovering from insolvency is possible and many Australian companies have been able to do so. A positive outcome often depends on taking action sooner rather than later.

To avoid the threat of insolvency, careful financial management and a monetary ‘safety net’ are essential. It makes sense to work with a good accountant so you can be aware of spiralling costs before they are out of control.

Would you like more information about the steps to insolvency, contact Legal Affairs Lounge today to discuss your options.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

However, with the severe impacts of COVID diminishing, the Australian Tax Office is taking steps to start reducing the many billions (yes, billions) of dollars in tax debt. It will be looking to individuals, corporations and small businesses to recoup outstanding amounts.

As part of this, major credit reporting agencies have signed agreements with the ATO. The result of these agreements is that companies including CreditorWatch and Equifax will now be able to access and report tax default data.

What this means

Credit reporting companies are relied on by mortgage brokers and lending institutions like banks who want to assess an individual or business’s suitability for a loan.

These companies keep a ‘score’ on consumers and businesses, based on the amounts they owe, how many bills they have overdue and how often they make payments. When you apply for a loan, your credit score factors into the decision.

In the past, tax debt has not been included in credit scores. But this has now changed.

If you are a business owner who:

• Owes more than $100,000 in tax
• Has owed this amount for more than 90 days
• Is not engaging with the ATO to manage your tax debt
• Doesn’t have an active complaint with the Inspector-General of Taxation Ombudsman (IGTO)

It’s more than likely that lenders will be notified when you apply for a loan.

The types of business tax debt that will be captured into the tax debt disclosure threshold include:

• Income tax debts
• Activity statement debts
• Superannuation debts
• Fringe benefit debt
• Penalties and interest charges

As shared by Accountants Daily, “Equifax’s general manager commercial and property services Scott Mason said the data would be incredibly valuable to customers because tax debts were often the last “bill” that businesses paid.”

He added that, “Understanding a company’s tax information is a vital piece of the puzzle for organisations wanting to manage their credit risk in relation to new and existing customers.”

It does make sense for lenders to have access to a complete picture of existing debt when it comes to approving loans. Being better informed will reduce the risk of defaults and businesses ending up in additional financial strife.

What to do next

If your business has an outstanding tax debt of over $100,000 and you have been investigating the possibility of a loan, there are a few steps you can take.

If the amount you owe can’t be changed, you’ll need to engage with the ATO to work out a payment plan. Legal Affairs Lounge can negotiate this arrangement for you.  Having a plan in place will prevent the ATO from repeatedly following up with you, and you won’t end up with a default on your credit score.

Often, the ATO will treat tax debt like a loan. It will charge interest but be ok with you making monthly repayments. The challenge for you as a business owner is ensuring you’re not ‘kicking the can down the road’ and accumulating more tax debt while you try to pay off the outstanding amount. Again, having a good accountant can help you avoid this problem.

If your tax debt is out of control, you may need to investigate a restructure. The team at Legal Affairs Lounge can help you figure out the best way to reshape your business so your creditors are satisfied and you can continue to operate.

Don’t let tax debt impact your business. Get in touch with our team today.

Disclaimer: The content contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

There are a number of debt recovery options available to businesses in Australia. The most appropriate option will depend on the amount of debt owed, the debtor’s financial circumstances and your own business’ needs and preferences.

Take a look at some of the initial steps you can take, as shared by Legal Affairs Lounge’ team of debt recovery lawyers on the Legal Affairs :

Negotiate with the debtor

First things first, reach out and have a discussion. There may be a solution you can find between the two of you.

If you are considering negotiating with a debtor yourself, there are a few things to keep in mind. It is important to be firm but fair and to have a clear understanding of your legal rights as well as the debtor’s financial circumstances.

It’s better to be assertive, not aggressive. It is against the law to use intimidation tactics or threaten someone because they owe you money.

Send a letter of demand

You should first try to negotiate a payment plan or settlement. You could perhaps have your accountant or bookkeeper reach out on your behalf, or phone the account manager yourself to try to recover the funds.

If this doesn’t get results, you may send a letter of demand. The following tips will help you to write an effective letter:

– Make sure you are clear about the amount of money that is owed. Include any interest and legal costs that may be due.

– Give the debtor a reasonable timeframe to pay the debt. This will depend on the amount of money owed and the debtor’s financial circumstances.

It makes sense to work with a Legal Affairs debt recovery lawyer when creating a letter of demand. If the client has the money but is holding onto it, a letter like this can prompt rapid payment.

Apply for a court order

For an amount less than $25,000 your next step is a visit to the Queensland Civil and Administration Tribunal (QCAT). This was established to help businesses recover money owed without losing it to legal support costs.

If the amount is more than $25,000, you will need to work with a lawyer to handle the matter via the Magistrates, District or Supreme court.

Use a debt collection agency

Struggling to recover debt on your own? Working with a debt collection agency may be the best option for you. Your debt collector will follow some of the steps above but because they are familiar with the process they can be much more efficient and persistent.

If you are considering taking action to recover a debt, you should get advice from a debt recovery lawyer first.

If the debtor is insolvent

Many people believe that a company is absolved of its debts if it becomes insolvent or the Directors file for bankruptcy. This is not the case. In fact, part of the process a company must undergo to restructure or become insolvent involves negotiating with creditors. The business may need to sell some of its assets in order to resolve its debts and while you may not get every cent you are owed, at least you can recover some of the money.

It makes sense to work with a debt recovery lawyer if one of your clients is in financial difficulty and going through a restructuring period because it will help you resolve the issue with less stress.

Avoid bad debts

As much as possible, ask your creditors to pay for your services or products upfront. This will save you from having to chase unpaid funds.

In addition to this, make sure you have a clear contract in place or have your clients agree to terms and conditions in writing so bills are not disputed and you have a clear path to a legal claim.

Need help to recover business debts? Reach out to the Legal Affairs debt recovery lawyers at Legal Affairs Lounge today.

A business that has reached a point where it is experiencing significant financial trouble may have to go into administration. This happens to companies of all sizes every year, often because there are loans that can’t be paid off, suppliers who are owed money or because there is outstanding tax debt. The situation can be due to financial mismanagement or because something unexpected has happened to affect sales (which happened to many businesses during the pandemic).

If you put your business into administration voluntarily, it doesn’t necessarily mean the end of the road, just that someone independent has been brought in to investigate the financial situation in detail and make recommendations about the best way to move forward.

Take a look at the different types of administration and what happens when a company goes into administration.

Voluntary Administration

A company director or the board of a company can instigate the administration process themselves. This usually happens when debts are out of control and it is recognised that support is needed to identify the next best steps.

With voluntary administration, the Director or board will decide to appoint an administrator. The administrator will be brought in to:

• Meet with creditors (e.g. banks and lenders, suppliers, employees, contractors or the ATO)
• Analyse financial statements
• Review existing assets
• Go through relevant records and documents
• Prepare a report detailing the options to move forward

From there, the Director/s and board, if there is one, will make a decision to either sell the business, restructure, or liquidate and stop trading.

Involuntary administration

If a company owes a great deal of money to a number of secured creditors, these creditors can file an application in court that proves they are owed money and that the company is not paying its bills.

As part of this, ASIC (the Australian Securities and Investments Commission) must be notified.

After reviewing the case, the court will appoint an administrator. This moves the company’s directors ‘to the side’. They will no longer be able to make decisions relating to the financial matters of the company.

A liquidator will be appointed to itemise the company’s assets and determine their value before they are sold. Assets may include cars, vans, trucks, equipment and machinery, and property.

The resulting cash is used to repay the creditors. Following this, the company will no longer trade.

How to avoid involuntary administration

If your business is ‘solvent’, you are able to pay your bills on time and steadily reduce your debts.

The term ‘insolvent’ describes the opposite.

It makes sense for an insolvent business to go into administration voluntarily because this gives you more flexibility to make plans and recover. If a solution can’t be found to pay outstanding debts, liquidation may be the best answer. However, at least you will know you explored every option with the help of an administrator.

The benefits of going into administration voluntarily are:

• Directors are protected from legal action
• You can ‘buy time’ to figure out how to pay your creditors
• An administrator may be able to identify ways to recover
• You will be able to negotiate with creditors
• Your company can continue to trade

One of the first things to do if you are concerned your business is facing insolvency is to reach out to a lawyer who specialises in this area. If you’re on the Legal Affairs , get in touch with our team today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice.

However, starting and operating a business can be complicated. Many people find they have bitten off more than they can chew, especially when it comes to paying taxes.

If you are behind on tax obligations such as filing your BAS, paying GST, paying your staff super and handing over PAYG tax, things can catch up with you pretty quickly. What many business owners don’t realise is that the Australian Tax Office has the option to recover unpaid tax dollars from you personally.

The ATO will start the process to recover money owed by sending you a Director Penalty Notice.

What is a Director Penalty Notice?

A Director Penalty Notice (DPN) is a notice from the ATO that is sent to the director if a business has overdue tax bills (usually around three months after the due date has come and gone), or if Business Activity Statements (BAS) have not been filed on time.

The notice will outline the unpaid amounts and explain the options available to resolve the matter.

The DPN will have a date on it and will outline how long you have to pay the money. It may make you immediately personally liable (this is known as a lockdown DPN) or give you a set time period (usually 21 days) to satisfy the requirements of the notice before you become personally liable.

It’s worth noting that a Director Penalty Notice will be valid from the date of delivery to your registered business or residential address, even if you have recently moved.

You can still receive a DPN if you have left your position as director of a company. An incoming director who has been in the role for more than 30 days may also receive this type of notice.

One of the reasons DPNs exist is to prevent company directors from failing to meet their tax payment and reporting obligations, then dissolving the company and walking away without being personally liable.

What to do if you receive a DPN

If one of these notices makes its way to you, generally your options include the following:

• Pay off the debt in full
• Pay off the debt in instalments within the allocated time frame
• Put the company into administration or liquidation so you can find a way to recover the unpaid money
• Work with a specialist to restructure your business
• Share a valid defence that explains why you should not be liable for the business’s tax debts

If you fail to do any of the above, the amounts the business owes will fall to you personally to repay.

Of course, the easiest solution is to complete your reporting obligations and pay off your debts. If the DPN has been issued because you lost track of time and didn’t pay your bills, you could quickly resolve it by transferring the funds to the ATO. You can work with your accountant and bookkeeper to find the money, or potentially borrow funds to cover the costs, if you are certain you can handle the additional debt.

It gets more complicated when the money is not available to pay off the amounts owing. This is when you will need the help of a legal professional who will either:

• Help you to put your company into administration
• Help with a restructure so you can pay your debts
• Help you confirm that you did in fact take reasonable steps to avoid the situation
• Help you confirm that the reason for not lodging or failing to pay was due to illness or other unavoidable circumstances

Get support to resolve your DPN

The last thing you want is to be personally liable for your business’s GST, superannuation and PAYG debts as it can result in bankruptcy and a great deal of stress for your family.

Once you receive a DPN, you need to take action very quickly. Those 21 days can go very quickly and result in additional problems such as the ATO commencing court proceedings against you to recover the money.

One of the best things to do is immediately call a lawyer who specialises in areas including business, restructuring, bankruptcy and insolvency. This professional will be able to help you figure out the best way forward.

Before you get in touch with your lawyer, do your best to find records of your company’s recent tax payments and evidence of your current financial position. Then you can work together to resolve the situation.

Need help to resolve a Director Penalty Notice? If you’re on the Legal Affairs , contact Legal Affairs Lounge today.

Sometimes, despite all your best efforts and intentions, your financial situation can spiral out of control, leaving you facing bankruptcy.

If you have significant debt and are considering declaring bankruptcy, here are some quick facts you need to know:

1. Bankruptcy isn’t always the only option

Before you decide to declare bankruptcy, seek financial advice. There are free services available via the National Debt Helpline on 1800 007 007.

You may be able to avoid bankruptcy with a Part IX (9) debt agreement, which will allow you to pay a percentage of your debt over a period of time.

If you are a business owner, there could be the option to restructure your debts so they can be taken care of gradually. A Small Business Restructuring Practitioner (SBRP)  can help you with this process, which has become easier during COVID.

Bankruptcy is not an easy road so make sure you get some advice to rule out every alternative.

2. Bankruptcy has consequences

People declare bankruptcy when they owe a great deal of money and have no way of paying it back.

By declaring bankruptcy, you may think you’ll be able to walk away from your debts. However, there are quite a few steps involved and it’s not quite that simple. For example, once you have formally declared bankruptcy, a Trustee will be appointed to investigate your financial affairs. You can appoint your own or the Australian Financial Services Authority may appoint one for you at the request of the people who you owe money.

The Trustee will help you figure out if you have any assets that can be sold in order to give money to your creditors.

The main consequence of bankruptcy, other than the stress of going through the process, is that your credit rating is affected and it will be very difficult to borrow money for several years. In addition to this, you cannot act as Director of a business or own any assets over a certain value. Your ability to travel overseas may also be limited.

These consequences generally last for a period of three years and one day, although credit reporting agencies may keep records for five years and more. You may find you can’t borrow a significant amount without a guarantor to co-sign on a debt agreement.

3. Not all debts are absolved

Bankruptcy generally clears the following debts:

• Credit cards
• Store cards
• Unsecured business and personal loans
• Trade creditors
• Payday loans
• Utility bills

You cannot walk away from every debt when you are bankrupt. You will still be expected to pay for things including child support, HECS/HELP fees, court fines and your mortgage (your bank will probably arrange to sell your house so you can settle this debt).

4. You can still work and earn money while you’re bankrupt

There’s no time like the present to start fresh. Even though you won’t be able to borrow money while you’re bankrupt, you can still take the necessary steps to support your living requirements.

However, once you reach a certain amount of income (starting from around $54,000), a percentage of the money may be claimed to return to the people and businesses you still owe. This amount will vary depending on your circumstances, for example you will have a higher earning threshold if you are supporting one or more children.

5. A lawyer can help

Bankruptcy is a highly stressful situation for anyone and it doesn’t always happen because of bad habits or mismanagement. Sometimes you can be in debt without realising, or things can go wrong so suddenly that you don’t have time to get in control of your finances.

When you enlist the support of a bankruptcy lawyer, you’ll have the benefit of advice and assistance in all matters related to your personal debt. Pre and post-bankruptcy advice can help you with all or some of the following:

• Creating and signing debt agreements
• Guiding you through bankruptcy proceedings
• Making you aware of your rights and the risks involved with your decisions
• Sharing advice about bankruptcy notices and how to respond to one
• Presenting a petition for bankruptcy to the Australian Financial Services Authority (AFSA)
• Negotiating your debt settlement agreements
• Sharing advice about your rights and obligations
• Securing an early release from bankruptcy
• Defending you against bankruptcy proceedings

If you’re facing bankruptcy but feel unsure about the next best steps, reach out to an experienced bankruptcy lawyer on the Legal Affairs . Legal Affairs Lounge specialise in the following:

• Bankruptcy legal advice
• Rights and obligations
• Early release from bankruptcy
• Personal insolvency
• Bankruptcy litigation

Get in touch to find out more.

If you’ve had money difficulties but want to hold on to your business and feel like there is hope for a positive outcome, one solution can be to press ‘pause’ and get help to restructure your debt.

Here’s an explainer of simplified debt restructuring for Australian small businesses.

How does restructuring help to save businesses from insolvency ?

In the past, Australian businesses facing insolvency have had no choice but to be placed in the hands of a liquidator. Updates made to the law in 2021 mean that if your business has less than $1 million in debt, you have more options and the ability to stay in control while you figure out your next steps.

Referred to as ‘simplified debt restructuring’, this process requires your business to appoint a Small Business Restructuring Practitioner (SBRP) to help restructure your unsecured debts (outside of what you owe your employees) so you can avoid insolvency. If your company is in trouble, this practitioner will work with you and your creditors to come up with a plan that will take care of and relieve debts.

To be eligible for debt restructuring, your business must:

• Have less than $1 million in liabilities (not including employee entitlements)
• Be either insolvent or likely to become insolvent at some future time
• Be up to date with the payment of employee entitlements
• Be up to date with all tax lodgements (not necessarily tax debt)
• Not be under other restructuring or administration including a Deed of Company Arrangement or liquidation.

It’s also important that none of the business directors have gone through a similar process in the last seven years (your SBRP will check to ensure you meet all the requirements during your initial discussions).

If you are eligible for debt restructuring and your creditors agree to the proposal put forward, your business can continue to trade and avoid insolvency.

Your restructuring plan

Your SBRP will have 20 days to come up with a way to pay back the money you owe or absolve you of your debts. You’ll need to share all your financial information so this person can identify the best way to move forward.

Your plan may specify ‘cents in the dollar’ that you will repay or detail how you will return money to your creditors. It’s worth noting that additional debts incurred after you have enlisted the help of a restructuring expert will not be included in your plan.

Working closely with your SBRP, you’ll create a restructuring proposal statement, which includes a schedule setting out the company’s creditors, and the amount they are owed by your company.

Throughout the process, you’ll stay in control of your company and be able to trade. Once you have a debt restructuring plan, a proposal will be put to your creditors, who have 15 business days to accept or reject your suggestions.

Why restructure your debts?

It’s never a great feeling to reach out for support but if your company is in financial trouble, you can undergo the debt restructuring process and have temporary relief from the fear that your creditors can enforce their claims against you.

If more than 50 per cent of voters agree to the terms you put forward, your company can continue to trade and you can pay off your debts according to the plan.

How does a small business restructuring practitioner help?

The rules and process for restructuring debt are complex, which is why it’s mandated that you reach out for the support of a registered specialist.

Your SBRP will firstly confirm you are eligible for debt restructuring. Then they will get to know your business, prepare your plan and circulate it to your creditors, confirming at the same time that they believe you will be able to meet your obligations.

Once a plan is made, shared and agreed on, your small business restructuring practitioner manages the disbursement of payments to your creditors, based on the terms set out in the plan.

While simplified debt restructuring has saved many small businesses since 2021, there is fine print to be aware of. You can read more at treasury.gov.au or reach out to Legal Affairs Lounge for more information.

Disclaimer: The content contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice.