Can You Keep Trading During Small Business Restructuring

One of the first things business owners ask us about the Small Business Restructuring Process (SBRP) is whether they can keep trading.

The good news is that yes, you can. In fact, continuing to operate is a central feature of the process.

As your guide to the process, we’ll explain what that actually looks like day to day, including what stays the same, what changes, and what obligations you carry while your restructuring plan is being developed and approved.

What Is the Small Business Restructuring Process?

The Small Business Restructuring Process (SBRP) allows eligible companies to propose a debt repayment plan to creditors while the directors remain in control of the business.

The process runs in four stages. During the first stage, you appoint a registered restructuring practitioner and enter a restructuring period of up to 20 business days (extendable to 30).

You work with the practitioner to develop a plan that outlines how creditors will be repaid.

In the second stage, creditors vote on the plan over 15 business days. If the plan is accepted, you execute it over a period of up to three years, and finally, your plan is terminated once all conditions are met. 

Eligibility at a glance:

• Total liabilities under $1 million (excluding employee entitlements)
• Insolvent or likely to become insolvent
• All employee entitlements currently due must be paid, including superannuation
• All tax lodgements must be up to date (tax debts do not need to be paid)
• Neither the company nor any current or recent directors can have used SBR or simplified liquidation in the past seven years

If you’re unsure whether you qualify, reach out to our team to see whether SBRP is the right path for you. 

Can You Continue Trading During Small Business Restructuring?

The short answer: yes, you can trade. 

The SBRP operates on a “debtor-in-possession” model where directors retain full day-to-day control throughout the process.

You continue to manage your business, pay your staff, purchase stock, and fulfil customer orders exactly as you did before.

This is an important difference between small business restructuring and other insolvency options.

In a voluntary administration, an external administrator takes over management of your company. In SBR, the restructuring practitioner is there to help you build a credible plan, not to run your business. 

What does continued trading actually protect?

• Your revenue: Your business keeps generating income while the restructuring plan is being developed, rather than bleeding value during a freeze.
• Your staff: Employees continue to work and get paid during an already uncertain period.
• Your customer relationships: You fulfil orders and maintain service levels. Most customers will not know you are in a formal restructuring process unless you tell them.
• Creditor confidence: Businesses that continue operating during restructuring achieve significantly better outcomes than those forced into immediate liquidation.
• A moratorium on enforcement: Once SBR commences, most unsecured creditor actions are paused. This gives you some breathing space to develop your plan without the immediate threat of legal proceedings.

What You Can’t Do While Trading During the SBRP

It’s not business as usual in all respects.

There are a few things you’ll need to check with your practitioner before doing.

You can’t pay off debts that existed before SBR started, sell parts of the business, or pay dividends without their sign-off.

Anything outside the ordinary course of business requires approval.

If you are unsure whether a transaction requires consent, ask your practitioner before proceeding.

New debts incurred during SBR

You can continue incurring ordinary trading debts like supplier invoices and wages during the restructuring period.

However, these new debts must be paid when they fall due. If you incur debts you cannot pay, you expose yourself to personal liability for insolvent trading.

This is one of the most important practical realities of trading during SBR.

The process gives you protection for pre-existing debts, but it does not give you licence to accumulate new ones you cannot service.

Your Obligations While Trading

Running your business during the SBRP comes with some firm obligations.

What Happens to Existing Contracts and Supplier Relationships?

One of the questions we hear most often is whether entering SBR will affect existing contracts.

While the moratorium that applies during the process generally prevents creditors from enforcing debts or taking legal action against you, it doesn’t automatically terminate contracts.

Supply agreements, leases, and service contracts continue unless the counterparty exercises any specific termination clauses in their contract.

In reality, the impact on supplier relationships depends on how you manage communication.

Suppliers who are kept informed and who can see a credible plan being developed are far more likely to continue doing business with you than those who find out through a formal notice with no prior conversation.

Your restructuring practitioner can advise you on how and when to communicate with key suppliers.

Outcomes, Risks and Next Steps

What happens if your plan is approved

When creditors approve your plan, it becomes legally binding on both your company and your creditors.

You make payments to an account managed by your restructuring practitioner, who distributes funds to creditors.

All creditors receive the same return at the same time.

What happens if your plan is rejected

If creditors reject your plan, the SBR process ends immediately, and creditors can resume enforcement action.

You retain control of your company but lose the protection from insolvent trading liability that SBR provides.

Rejection is not the end of the road. You may be able to revise your proposal, explore voluntary administration, or consider an orderly liquidation.

However, your options narrow and the urgency increases once a plan has been rejected, which is why we suggest speaking to a professional team to get the right advice before starting the process. 

Common reasons plans are rejected 

Understanding why plans fail is as important as knowing how they succeed.

The ATO, which is a creditor in the vast majority of SBR cases, is increasingly scrutinising proposals before voting. Plans are commonly rejected for:

• Poor tax compliance history prior to SBR
• Non-repayment of director loan accounts
• Plans that appear to give the restructured company an unfair commercial advantage over competitors who have met their obligations in full
• Plans where there is no credible evidence that the underlying business can trade profitably once legacy debt is removed

A well-constructed plan addresses these concerns directly.

Get the Right Advice

Small business restructuring is a powerful process, and the directors who achieve the best outcomes are those who engage early and work with an experienced practitioner to develop a credible plan. 

At Business Savers, we specialise in guiding small businesses through the SBRP, helping you develop a plan that holds up under creditor scrutiny and supporting you through the voting process and beyond.

If you’re facing financial pressure and want to understand whether SBR is the right option for your business, book a confidential consultation with our team. The earlier you act, the more options you have.