by Jeff Shute28.11.22


When a business is facing a restructuring strategy, it is typically due to deteriorating financial capacity that affects debt and employee entitlement payments when earnings are not exceeding output. This can come from a multitude of factors, including non-competitiveness in the market, a declining industry, highly competitive industry, or simply mismanagement of funds. It can also come as a result of a merger or acquisition of one company by another. There are two primary types of restructuring that can occur, depending on the circumstances around its requirement. 

Operational restructuring

An underperforming business doesn’t happen in a vacuum. There are a number of factors, typically, that are contributing to the same decreased performance outcome. With that, operational restructuring identifies operational pitfalls and develops strategies to improve processes, efficiency, productivity and financial incomings and outgoings to mitigate threat of insolvency. 

This type of restructuring does not deal with the financial or capital structure of a company, but rather examines operational profitability in the areas of:

  • Product
  • Resources
  • Marketing
  • Tech
  • Employment
  • Organisation
  • Processes

These improvements are designed to eliminate or mitigate gaps in management and operational dead weight, and capitalise on strong or strengthened skills, resources and processes to increase cash flow and profit, and avoid insolvency. 

Financial restructuring

Financial restructuring, as the name suggests, is a reorganisation of the financial assets, debt and capital to create a strategy that better benefits the business’s viability. This type of restructuring typically involves substantial changes to the financial structure of a company, ownership and portfolio to support increased value and eliminate or mitigate areas of low or no profitability. 

A business will engage in a financial restructuring strategy if they need to restore solvency for cash flow and profit, balancing capital structure and the projected cash flow. 

What is the Small Business Restructuring Process?

As at 2021, the Small Business Restructuring Process (SBRP) was set up to assist financially distressed small businesses restructure their debt. This provides eligible businesses, and their directors, time to plan repayment of liabilities, including debt, in an agreed upon time frame (though not exceeding three years) to help with insolvency, or imminent insolvency.

There are eligibility criteria, however, and it is not a one-size-fits-all solution. To be eligible, the business must:

  • Have less than $1m in proven liabilities (exc. employee entitlement)

  • Be insolvent or imminently facing insolvency (discretionary on a case by case basis)

  • Be up to date with employee entitlements

  • Be up to date with tax lodgements (though not tax debt)

  • Ensure current business directors and business directors of the previous 12 month period have not gone through simplified liquidation or the SBRP in the last seven days

  • Not have been under other restructuring or administration. 

The goal of the SBRP is to create as beneficial an outcome during the insolvency transition to solvency, to help troubled businesses survive. 

Being insolvent, or becoming insolvent, can be an extremely daunting and overwhelming experience that creates serious and understandable stress. However, there are pathways out there that work to support you through the process, even seeing you out of it, that Shaw Gidley is highly knowledgeable on. Lift some of the burden off your shoulders by picking up your phone today, and giving our professional team a call. Let’s get you on a more sustainable and positive path.