Small business restructuring

The process is only available to corporations that comply with the following criteria on the day the restructuring practitioner is appointed:

• total liabilities are $1 million or less
• none of the directors at the time of appointment, or within 12 months before appointment, have been the director of another corporation that has been restructured or subject to the simplified liquidation process within the previous 7 years (unless exempt)
• the corporation must not have undergone restructuring or simplified liquidation within the previous 7 years.

Exemption: 

An exemption may apply if the other corporation (that has been restructured or subject to the simplified liquidation process) is: 

• related to the corporation seeking restructuring, and 
• is or has been the subject of restructuring or simplified liquidation for no more than 20 business days before the restructuring of the corporation. 

Yes. A corporation cannot be restructured if:

• the corporation is under special administration
• the Registrar has given the corporation a show cause notice (unless the Registrar has agreed in writing that the corporation can be restructured)
• the corporation is already under restructuring or has made a restructuring plan that has not been terminated
• the corporation is under voluntary administration
• the corporation has executed a deed of company arrangement that has not ended, or
• a liquidator, provisional liquidator or administrator has been appointed to the corporation. 

A person who is approved in writing as a liquidator by the Registrar.

The directors.

Hold a meeting of directors. At that meeting, the directors must:

• resolve that the corporation is insolvent or likely to overcome insolvency at some time in the future, and
• resolve that a small business restructuring practitioner be appointed, and
• appoint a small business restructuring practitioner to oversee the restructuring process. 

The restructuring practitioner will work with the directors to develop a debt restructuring plan and restructuring proposal statement. 

Once the plan and proposal have been prepared, they are sent to all creditors who have 15 business days to accept or reject the plan. At least 50% of the creditors by value must vote in favour for the plan to be accepted. 

Yes. They have control of the corporation’s business, property and affairs. The directors can enter into transactions or dealings with corporation assets in the ordinary course of business. 

20 business days unless it is ended earlier or extended.

The restructuring practitioner can extend the process by no more than 10 business days.

The court can extend the process on application by the corporation. 
 

All payments must be made to creditors in accordance with the terms of the plan. 

When all creditors have been paid in accordance with the terms of the plan the corporation is released from all debts or claims that were admissible under the plan. 

The plan will end and the corporation will be liable for all debts owed prior to the plan being made, less any repayments made during the course of the plan. 

The restructuring process ends.

The directors remain in control of the corporation but are no longer protected from liability for insolvent trading.

Creditors can take steps to enforce their rights. 

The restructuring will end if:

• the directors declare that the restructuring is to end on a specific day for any reason
• the corporation fails to propose a restructuring plan within 20 business days or at the end of any extension
• the proposal is not accepted by creditors
• the restructuring practitioner cancels the proposal
• the restructuring practitioner ends the proposal if they consider any of the following to be true:
  • The corporation does not meet the eligibility criteria
  • it is not in the interests of creditors to make a plan
  • it is in the interests of creditors for the restructuring to end
  • it would be in the interests of the creditors for the corporation to be wound-up.
• the court orders that the restructuring is to end
• a voluntary administrator, liquidator or provisional liquidator is appointed
• a special administrator is appointed when the restructuring plan is still being prepared, the restructuring will end on the day of appointment of the special administrator.

If a special administrator is appointed after a plan has been accepted, the Registrar, special administrator or any other interested parties may apply to the court for the plan to be terminated.