Olvera
First
FAQs

General

How do we define small business?

The Australian Bureau of Statistics (ABS) defines a small business as a business employing fewer than 20 people. Categories of small businesses include:

  • Micro-businesses – these businesses employ between 1 and 4 people. This category includes non-employing businesses.
  • Other small businesses – these businesses employ between 5 and 19 employees.

How do I know if my company is insolvent?

A company is insolvent when it is not able to pay all the company’s debts when they become payable.

Warning signs that a company is insolvent include

  • accruing losses
  • cashflow difficulties,
  • overdue taxes and lodgments
  • legal issues
  • difficulty gaining access to new credit

How do I know if my business is eligible?

To be eligible, your business must:

  • Be a company (Not a sole trader)
  • Have less than $1m in debt

How do I start the process?

To begin the process, you will need to complete an application form – this form requires basic personal & company information.

Once the form has been submitted, an Olvera First advisor will in touch within 24hrs to discuss your business situation & eligibility.

 

Small Business Restructuring Process

What is the role of the small business restructuring practitioner?

The small business restructuring practitioner oversees the debt restructuring but the company’s directors remain in control of the business. The small business restructuring practitioner assists the company to:

  • prepare its restructuring plan and restructuring proposal statement; and
  • circulate the restructuring plan and restructuring proposal statement to creditors.

The practitioner must also certify to supplier that they believe the company is eligible for restructuring, and that the company is likely to be able to meet its obligations under the plan. They must take reasonable steps to verify this. Once a plan is made, the small business restructuring practitioner manages the disbursement of payments to the company’s creditors based on the terms set out in the plan.

How does the process commence?

An insolvent company engages a small business restructuring practitioner (SBRP) to assist with the process. The SBRP confirms the company is eligible to access the restructuring process, with the directors of the company then officially appointing the SBRP in writing.

A letter is sent to suppliers advising that the process has commenced which starts the protection period and a restructure plan is developed.

Who prepares the restructuring plan?

The directors of the company prepare the restructuring plan in the approved form with the assistance of the restructuring practitioner.

Contents of restructuring plan

The restructuring plan sets out how a company’s supplier would be repaid if the plan were made. For example, the plan could specify how suppliers will be repaid as a proportion of the debt owing to them, or what ‘cents in the dollar’ they will receive.

The plan is accompanied by a restructuring proposal statement, which includes a schedule setting out the company’s suppliers, and the amount they are owed by the company.

What debts are included in the plan?

All unsecured debts (debt that does not have any collateral attached) which were incurred prior to the company entering restructuring are included in the restructuring plan.
The exception is employee entitlements (including those not yet payable, like leave or redundancy entitlements), which are not included in the plan.
Debts incurred after the company enters restructuring are not part of the plan and must be paid off outside of the plan

Proposing a restructuring plan to suppliers

(1)  As soon as practicable after a company executes a restructuring plan, the restructuring practitioner for the company must do the following:

(a)  give to as many of the company’s affected suppliers as reasonably practicable a copy of:

(i)  the company’s restructuring plan; and

(ii)  the restructuring plan standard terms; and

(iii)  the company’s restructuring proposal statement; and

(iv)  the declaration prepared by the restructuring practitioner

(b)  ask each affected supplier to:

(i)  give a written statement setting out whether or not the restructuring plan should be accepted; and

(ii)  if the soppier agrees with the company’s assessment of the amount of the supplier’s admissible debts or claims—verify the supplier’s admissible debts or claims as set out in the schedule of debts and claims included with the restructuring proposal statement; and

(iii)  if the supplier disagrees with the company’s assessment of the amount of the supplier’s admissible debts or claims—notify the restructuring practitioner

(c)  inform each affected supplier of the person to whom the statement should be given and of the need to give the statement before the end of the acceptance period.

(2)  In this regulation:

acceptance period means:

(a)  the period of 15 business days beginning on the day the company’s restructuring practitioner gives documents; or

(b)  if suppliers are given a notice — the longer of:

(i)  the period of 15 business days beginning on the day the company’s restructuring practitioner gives documents; and

(ii)  the period beginning on the day the company’s restructuring practitioner gives documents and ending on the last day of the period of 5 business days after the day on which the notice is given; or

(c)  such other period as the Court orders

Suppliers may dispute schedule of debts and claims before restructuring plan is made

(1)  This regulation applies in relation to a person if:

(a)  the person is a supplier of a company that is proposing to make a restructuring plan; and

(b)  the plan has not been made; and

(c)  the person disagrees with the schedule of debts and claims included with the company’s restructuring proposal statement because:

(i)  the person’s admissible debts or claims are not specified; or

(ii)  the company’s assessment of the person’s admissible debts or claims is incorrect; or

(iii)  the person is incorrectly specified as an excluded supplier.

Supplier may notify restructuring practitioner of disagreement

(2)  The person may give written notice of the disagreement to the company’s restructuring practitioner.

(3)  The notice:

(a)  may be given:

(i)  if the person received a copy of the plan—within 5 business days after the day on which the person receives the plan; or

(ii)  if the person otherwise became aware of the plan—within 5 business days after the day on which the person becomes so aware; or

(iii)  after the period specified above, if the notice includes a statement setting out the person’s reasons for not giving the notice within that period; and

(b)  if the disagreement relates to the person’s admissible debts or claims:

(i)  must include detailed particulars of the debt or claim sought to be proved; and

(ii)  in the case of a debt, must include a statement of account; and

(iii)  must specify the vouchers (if any) by which the statement can be substantiated; and

(c)  if the disagreement relates to the person’s status as an excluded supplier—must include detail sufficient to resolve the disagreement.

(4)  The restructuring practitioner may, after receiving the notice, request that the person or the directors of the company:

(a)  give the restructuring practitioner information about the company’s business, property, affairs and financial circumstances; and

(b)  verify the information by statutory declaration.

Restructuring practitioner may refuse to consider disagreement

(5)  If the notice is given after the period specified in subparagraph (3)(a)(i) or (ii), the restructuring practitioner may refuse to consider the disagreement if the restructuring practitioner is satisfied that the person did not take all reasonable steps to give notice within that period.

(6)  If the restructuring practitioner refuses to consider the disagreement:

(a)  the restructuring practitioner is taken to have recommended that the schedule of debts and claims not be varied; and

(b)  the restructuring practitioner must give written notice to the company and the person setting out the restructuring practitioner’s reasons for the refusal

Restructuring practitioner must resolve disagreement as soon as practicable

(7)  If:

(a)  a person gives notice of a disagreement to the restructuring practitioner for a company; and

(b)  the restructuring practitioner has not refused to consider the disagreement

the restructuring practitioner must:

(c)  give written notice to the company and the person:

(i)  setting out the restructuring practitioner’s recommendations for resolving the disagreement; and

(ii)  giving reasons for the recommendations; and

(d)  if the restructuring practitioner recommends that the schedule of debts and claims be varied and is of the opinion that the variation is significant—give written notice to the company and as many of the company’s suppliers as reasonably practicable:

(i)  stating that fact; and

(ii)  outlining the suppliers’ rights.

(8)  If the restructuring practitioner recommends that the schedule of debts and claims be varied, the company must vary the schedule in accordance with the recommendation as soon as practicable.

Suppliers may change vote

(1)  This regulation applies if:

(a)  a company proposes to make a restructuring plan; and

(b)  an affected supplier of the company gave a statement in relation to the plan.

(2)  At any time before the end of the acceptance period, the supplier may:

(a)  withdraw the statement; and

(b)  give a new statement in relation to the plan.

(3)  A statement may be withdrawn, and a new statement may be given, more than once before the end of the acceptance period (the period of 15 business days beginning on the day of the restructuring plan)

Company under restructuring must do certain things

This regulation is satisfied in relation to a company under restructuring if:

(a)  the company has:

(i)  paid the entitlements of its employees that are payable; and

(ii)  given returns, notices, statements, applications or other documents as required by taxation laws (within the meaning of the Income Tax Assessment Act 1997); or

(b)  the company is substantially complying with the matter concerned

How a restructuring plan is made

If a company’s proposal to make a restructuring plan is accepted  the company is taken to have made the restructuring plan.

The restructuring plan is taken to have been made:

(a)  if the plan is expressed to be conditional on the occurrence of a specified event within a specified period and the event occurs within that period—on the day after the end of that period; and

(b)  otherwise—on the day after the end of the acceptance period.

A restructuring plan that has been made has the same force and validity as if it were a deed executed by each of the parties to the plan.

Standard terms for restructuring plans

(1) Restructuring plan made by a company is taken to include all of the following terms:

(a)  all admissible debts and claims rank equally;

(b)  if the total amount paid by the company under the plan in respect of those debts or claims is insufficient to meet those debts or claims in full, those debts or claims will be paid proportionately;

(c)  a creditor is not entitled to receive, in respect of an admissible debt or claim, more than the amount of the debt or claim;

(d)  the amount of an admissible debt or claim will be ascertained as at the time immediately before the restructuring began;

(e)  if a creditor is a secured creditor:

(i)  if the creditor does not realise the creditor’s security interest while the plan is in force, the creditor is taken, for the purposes of working out the amount payable to the creditor under the plan, to be a creditor only to the extent (if any) by which the amount of the creditor’s admissible debt or claim exceeds the value of the creditor’s security interest; and

(ii)  if the creditor realises the creditor’s security interest while the plan is in force, the creditor is taken, for the purposes of working out the amount payable to the creditor under the plan, to be a creditor only to the extent of any balance due to the creditor after deducting the net amount realised.

(2)  A restructuring plan is void to the extent that it is inconsistent with any of the matters.

Parties to restructuring plan

The parties to a restructuring plan are:

(a)  the company to which the plan relates; and

(b)  any person who has an admissible debt or claim in relation to the plan.

What action can suppliers take during the restructuring process?

When a company enters into restructuring, a moratorium is applied on unsecured creditor claims and some secured creditor claims. This means:

  • unsecured creditors cannot begin, continue or enforce their claims;
  • owners of property (other than perishable property) used or occupied by the company, or people who lease such property to the company, cannot recover their property;
  • secured creditors cannot enforce their security interest in the company’s assets in some circumstances;
  • a creditor holding a personal guarantee from the company’s director/s or their relatives cannot act under the personal guarantee without the court’s consent; and Ipso facto clauses (which are triggered during
    insolvency-related events) are stayed for some contracts.

What do I need to do before putting a restructuring plan to my suppliers?

Before you can put a plan to your suppliers, your company must be in substantial compliance with the following requirements:

  • Employee entitlements which are due and payable (that is, those which are outstanding and must be paid) have been paid. This excludes leave and other entitlements that are not currently due to be paid.
  • Tax lodgments are up to date. That means that all relevant tax returns and activity statements are lodged with the ATO. Tax debts do not need to be paid for a plan to be put to creditors.

How do suppliers vote on a restructuring plan?

The restructuring practitioner provides suppliers with the restructuring proposal statement and the restructuring plan. Once a plan is put to suppliers, they may vote to accept or reject the plan. They have 15 business days to vote to accept or reject the plan. The restructuring practitioner oversees the voting process.

During this ‘proposal period’, suppliers can seek to vary the debt the restructuring statement says they are owed if they believe it is not accurately reflected in the restructuring proposal statement.

A plan is accepted if more than 50 percent of the suppliers by value that vote, vote to accept the plan. To ensure integrity, related party suppliers (that is those linked to the company, its directors or its shareholders) are not entitled to vote on a restructuring plan.

How long does the restructuring process take?

The company must put a restructuring plan to its creditors within 20 business days of entering the process. The company’s small business restructuring practitioner can extend this period by up to 10 business days where an extension is reasonable in the circumstances. Once a plan is put to suppliers, they have 15 business days to vote to accept or reject the plan.

What happens once a plan is made?

Once a plan is made, payments must be disbursed to a company’s suppliers in accordance with the terms set out in the plan. All admissible debts and claims rank equally upon repayment of the plan. That means that all suppliers are paid the same ‘cents in the dollar’ and all are paid at the same time.

When a company pays off its obligations under the restructuring plan, it is released from all debts or claims that were admissible under the
plan.

A company ‘exits’ a plan if, for example, it fails to make payments under the plan. If this happens before its obligations are paid off, it remains liable for the original debt owed prior to the plan commencing, minus any repayments that occurred under the plan.

What happens if the restructuring plan is not accepted by suppliers?

The plan must be supported by more than 50 percent of the suppliers by value that vote.

If the restructuring plan is not accepted, the restructuring process ends. You remain in control of the company but suppliers are no longer prevented from enforcing their rights  and you are no longer protected from liability for insolvent trading.

You may wish to consider placing the company into liquidation. The Government’s reforms include a new simplified liquidation process which makes the liquidation process faster and cheaper. Further information on liquidation is available on the ASIC website and your small business restructuring practitioner may also be able to provide information

Ending the restructuring process

If a restructuring plan is accepted by suppliers, the debt restructuring process will be at an end.

However, the process can also be ended at any time, and for any reason, by a resolution of the company’s directors, and by the restructuring practitioner if the practitioner believes the company doesn’t meet the eligibility criteria, or that it would be in the interests of the suppliers for the restructuring to end.

The process will also be at an end if:

  • the company fails to propose a plan to its suppliers;
  • the suppliers vote against the plan;
  • the restructuring practitioner cancels a proposal to make a plan after becoming aware that relevant information has been omitted or was incorrect or there has been a material change in the company’s circumstances;
  • an administrator or liquidator is appointed to the company; or
  • the court orders that the process should end.

Information sourced from ASIC

Temporary restructuring relief

What is the temporary restructuring relief?

The temporary restructuring relief extends, to 31 March 2021, certain measures implemented by the government to assist companies continue to operate during the COVID- 19 pandemic.

The measures that have been extended include, for companies eligible for temporary restructuring relief:

  1. increasing the amount that must be owed to a creditor from $2,000 to $20,000 before the creditor can issue a statutory demand for payment on the company;
  2. increasing the time a company has to respond to a statutory demand from 21 days to 6 months; and
  3. providing a director with a temporary safe harbour from personal liability for insolvent trading for debts incurred in the ordinary course of business before any appointment of an administrator or liquidator of the company during the period of safe harbour protection.

When is the temporary restructuring relief available?

Directors must act before 31 March 2021 if they wish to access the temporary restructuring relief. 

How does my company access temporary restructuring relief?

A company can access temporary restructuring relief if, during the period 1 January 2021 to 31 March 2021, the company directors:

  • make the required declaration about the company’s eligibility for temporary restructuring relief; and
  • publish notice of the making of the declaration on the Published Notices Website.

To ensure the temporary restructuring relief does not cease, directors must also give ASIC a copy of their declaration no later than 5 business days after it is made.

When does the period of temporary relief begin?

The period of relief only begins when the directors have made a declaration about the company’s eligibility for temporary restructuring relief and published notice of making the declaration on the Published Notices Website.

So, if the directors do not make the declaration and publish the notice until (say) 21 January 2021, the company is not be eligible for temporary restructuring relief for the period 1 January 2021 to 20 January 2021. This means the safe harbour from personal liability for directors incurring debts in the ordinary course of business is not available for the directors between 1 January 2021 and 20 January 2021, and the increased thresholds and time periods for statutory demands does not apply during that period.

To ensure the temporary restructuring relief does not cease, directors must also give ASIC a copy of their declaration no later than 5 business days after it is made.

How long does the temporary restructuring relief last?

The temporary restructuring relief lasts for an initial period of three months after a declaration is made and notice of the declaration is first published on the Published Notices Website.

The initial temporary restructuring relief period can be extended for a further one month in some circumstances.

If not extended, the declaration will expire after the initial three-month period.

Can the period of temporary restructuring relief be extended?

Yes.

A company may extend the period of temporary relief if, before the initial three-month relief period expires, they:

  1. continue to have reasonable grounds to believe:
    1. the company is insolvent, or likely to become insolvent;
    2. the company has resolved that a restructuring practitioner for the company should be appointed;
    3. there is no external administrator appointed to the company (an external administrator includes a liquidator or provisional liquidator, administrator or administrator of a deed of company arrangement, or either another restructuring practitioner or restructuring practitioner for a restructuring plan made the company); and
  2. have taken all reasonable steps to appoint a restructuring practitioner but have been unable to do so; and
  3. make a further declaration about the company’s eligibility for temporary restructuring relief; and
  4. publish a notice on the Published Notices Website that the company has made a further declaration no later than two weeks before the initial three-month relief period expires; and
  5. give a copy of the further declaration with ASIC no later than 5 business days after publishing the notice on the Published Notices Website.

Does it cost anything to access the temporary restructuring relief?

No. There are no application fees or other fees to access the temporary restructuring relief.

The company may incur costs in seeking advice from a trusted adviser such as a financial adviser, accountant, registered liquidator or lawyer.

Is my company eligible for temporary restructuring relief?

A company is eligible for temporary restructuring relief if:

  1. the directors make a declaration (and publish notice of the declaration on the Published Notices Website) that there are reasonable grounds for the directors to believe that:
    1. the company is insolvent, or likely to become insolvent before the declaration expires; and
    2. the eligibility criteria for restructuring would be met if a restructuring practitioner were appointed on the day the declaration is published on the Published Notices Website, or on any day after that on which the declaration has not expired; and
    3. the board has resolved that a restructuring practitioner for the company should be appointed; and
    4. there is no external administrator appointed to the company (i.e there is no current appointment of a liquidator or provisional liquidator, administrator or administrator of a deed of company arrangement, or either another restructuring practitioner or restructuring practitioner for a restructuring plan made the company); and
  2. the declaration described at a) above has not expired; and
  3. the company has not otherwise ceased to be eligible for temporary restructuring relief; and
  4. the company has not previously been eligible for temporary restructuring relief that has ceased.

The directors must make a declaration about meeting the eligibility criteria for restructuring – what is the eligibility criteria?

The eligibility criteria for restructuring is, on the day on which a restructuring practitioner for the company is appointed:

  1. the total liabilities of the company do not exceed $1 million, with liabilities calculated based on any liability to pay an admissible debt or claim;
  2. no person who is a director of the company, or who has been a director the company within the 12 months before the appointment of the restructuring practitioner, has been a director of another company that has been under restructuring or subject to the simplified liquidation process within the period of the preceding 7 years. This criterion does not apply to:
    1. a related body corporate (Company A) of the company (Company B), if Company A is under restructuring and a restructuring practitioner was appointed no more than 20 business days before the day on which the eligibility criteria for Company B is to be met; or
    2. a related body corporate (Company A) of the company (Company B) if Company A began to follow the simplified liquidation process no more than 20 business days before the day on which the eligibility criteria for Company  B is to be met.
  3. the company has not been under restructuring or subject of a simplified liquidation process within the preceding 7 years.

When can a company appoint a restructuring practitioner?

A company may appoint a restructuring practitioner for the company if:

  1. the eligibility criteria for restricting are met in relation to the company on the day the appointment is made; and
  2. the board has resolved to the effect that, in its opinion, the company is insolvent or is likely to become insolvent at some future time, and that a restructuring practitioner should be appointed.

The company must appoint a restructuring practitioner in writing.

What is an admissible debt or claim?

An admissible debt or claim in relation to a company under restructuring is a debt or claim that would be admissible to proof against the company if:

  1. the company were wound up;
  2. the amount of the debt or claim is determined at the date a restructuring practitioner is appointed by the company;

but does not include:

  1. entitlements of an employee of the company (including superannuation contributions payable by the company) at the date a restructuring practitioner is appointed by the company ; or
  2. a debt or claim that is contingent on circumstances occurring after a restructuring practitioner is appointed by the company.

How do the directors make a declaration about the company’s eligibility for temporary restructuring relief?

From 1 January 2021, go to the ASIC website (www.asic.gov.au) and search for EX07 – Temporary restructuring relief documents. In the Related Information section of that page you will find a Declaration of eligibility for temporary relief template. This is not an ASIC approved form but directors can consider whether to use it to make the declaration

Directors can then complete, sign and date the declaration form.

How do I publish notice of the declaration on the Published Notices Website?

To publish a notice on the Published notices website the directors will need to go to the website (www.publishednotices.asic.gov.au) to create a user account.

Once you are registered and have a user account you can sign into the website and create and publish the notice. Use this guide to help you create and publish a notice.

There is no fee for publishing this notice.

How do I give a copy of the declaration to ASIC?

Directors can give a copy of the declaration to ASIC either:

  1. through the Company Portal, accessible from ASIC’s website (www.asic.gov.au); or
  2. it can be given by the company’s registered agent through the Registered Agents Portal.

You must be registered to use the Company Portal.  There is information on the ASIC website on registering and using the Company Portal – https://asic.gov.au/online-services/company-officeholders/

To give ASIC a copy of the declaration through the Company Portal:

  1. Access the Company Portal and log in using the company ACN, user ID and password
  2. Select “Start new form”
  3. From the screen select – “EX07 – Temporary restructuring relief documents”
  4. Select the type of declaration being given to ASIC – for initial relief select “Copy of declaration of eligibility for temporary restructuring relief (Initial Relief)
  5. Complete the other questions asked
  6. Attach a copy of the declaration
  7. Make the declaration and submit the form

How do the directors make a declaration about the company’s eligibility for extended temporary restructuring relief?

Directors must first resolve that the company is eligible for extended temporary restructuring relief.

From 1 January 2021, go to the ASIC website (www.asic.gov.au) and search for EX07 – Temporary restructuring relief documents. In the Related Information section of that page you will find a Declaration of eligibility for temporary relief template. This is not an ASIC approved form, so is not required to be used but directors may use it to make the declaration.

Directors can then complete, sign and date the declaration.

How do the directors give a copy of the declaration extending the temporary restructuring relief to ASIC?

Directors can give the declaration with ASIC either:

  1. through the ASIC Regulatory Portal accessible from ASIC’s website(www.asic.gov.au); or
  2. it can be given by the company’s registered agent through the Registered Agents Portal.

You must be registered to use the Company Portal.  There is information on the ASIC website on registering and using the Company Portal – https://asic.gov.au/online-services/company-officeholders/

To give ASIC a copy of the declaration through the Company Portal:

  1. Access the Company Portal and log in using the company ACN, user ID and password
  2. Select “Start new form”
  3. From the screen select – “EX07 – Temporary restructuring relief documents”
  4. Select the type of declaration being given to ASIC – for extended relief select “Copy of declaration of eligibility for temporary restructuring relief (Extended Relief)
  5. Complete the other questions asked
  6. Attach a copy of the declaration
  7. Make the declaration and submit the form

How do I publish notice of the declaration extending the temporary restructuring relief on the Published Notices Website?

Further information on how to do this will be provided in an update to this FAQ.

There is no fee for publishing this notice.

How does temporary restructuring relief end? How does temporary restructuring relief end?

A company ceases to be eligible for temporary restructuring relief if any of the following occurs:

  1. the initial declaration under which the company was eligible for temporary restructuring relief expires;
  2. the directors fail to give a copy of their declaration about the company’s eligibility for temporary restructuring relief to ASIC within 5 business days after making the declaration;
  3. a restructuring practitioner, voluntary administrator, liquidator or provisional liquidator is appointed to the company
  4. the directors make a declaration that the company is not eligible or should not be treated as eligible for temporary restructuring relief
  5. the court orders that the company is not to be treated as eligible for temporary restructuring relief.  A creditor or ASIC can apply to the court for this order or the court can make the order on its own initiative.

What must I do if I realise the company is no longer eligible for temporary restructuring relief?

If the directors have made a declaration that the company is eligible for temporary restructuring relief, and the declaration has not expired, and one or more of the company directors become aware that there are not reasonable grounds to believe:

  1. the company is insolvent or likely to become insolvent; and / or
  2. the eligibility criteria for restructuring would be met in relation to the company if a restructuring practitioner were appointed

the directors must, within 5 business days after one or more of the directors become aware of the matters at a) and b) above :

  1. make a declaration that the company is not eligible for temporary restructuring relief;
  2. publish notice of the declaration on the Published Notices Website; and
  3. give a copy of the declaration to ASIC .

A failure to take the steps set out at c) – e) above is a contravention of a civil penalty provision of the Corporations Act 2001.

The directors may also make a declaration that the company is not to be treated as eligible for temporary restructuring relief for any other reason. If they do, the directors must:

  1. publish notice of the declaration on the Published Notices Website; and
  2. give ASIC a copy of the declaration within 5 business days of making the declaration.

How do the directors make a declaration that the company is not eligible, or not to be treated as eligible temporary restructuring relief?

Both types of declarations must be in writing.

Early January 2021, ASIC will provide a template document that can be used for this purpose. This will not be an ASIC approved form, so is not required to be used, but directors may use it to make the declaration (when available).

Directors can then complete, sign and date the declaration.