Business restructuring appointments surge as experts welcome SME “lifeline”

Restructuring appointments are surging compared to 2022 levels, data from Australia’s corporate regulator shows; one accountant describes being “overwhelmed” by rising interest among struggling SMEs.

Data from the Australian Securities and Investment Commission, released last week, shows 341 restructuring practitioner appointments were made in the 2022-23 financial year to May 7.

Even though the full financial year is not yet through, that figure is nearly five times the 70 restructuring appointments confirmed through 2021-22.

Some 138 businesses applied to restructure in the March quarter of 2022-23 alone, with figures remaining high through the month of April.

The filing of restructuring plans is also on the rise: 63 have been accepted in the June quarter to date, compared to 77 in the March quarter.

Those rising figures broadly mirror voluntary administration statistics, with this financial year’s total — 1,059 so far — on track to double the 676 registered in 2021-22.

Interest rising as Australian Taxation Office steps in

The surge in restructuring interest suggests SMEs across the map are turning to small business restructuring in the face of old tax debts and new economic pressures.

Jarvis Archer, head of business restructuring and insolvency at Revive Financial, outlined two key contributors to the increase in restructuring appointments.

The Australian Taxation Office is “very actively” issuing statutory notices and director penalty notices to encourage entrepreneurs to pay down their debts, Archer told SmartCompany.

As a result, businesses are increasingly turning to restructuring schemes that can protect from debt recovery action from the ATO or other creditors, and provide a way for businesses to deal collectively with their creditors.

Second, and perhaps more encouraging for small business, is an increasing awareness of the dedicated small business restructuring scheme among business advisors.

“Accountants are becoming more aware of the small business restructuring process and are recommending it to their clients,” Archer said.

“There’s still a very low level of awareness about the process in the business community, but this is changing as progressive insolvency firms, and ASIC’s report earlier this year, highlight the benefits and success of the small business restructuring process.”

Domenic Calabretta, CEO, founder and managing partner of Mackay Goodwin, agreed that accountants are increasingly aware of the alternatives to voluntary administration for small businesses.

“I have noticed an increases in small businesses taking up [small business restructures],” he said.

“I think, in part, this is due to a greater awareness from company directors and accountants about the process.”

Revive Financial has been “overwhelmed by the level of interest in small business restructures,” Jarvis added.

Although some experts in the insolvency and turnaround space have criticised the simplified small business restructuring scheme for being too difficult to administer, Jarvis voiced a warmer opinion of current restructuring pathways and the “lifeline” they can provide.

“It’s exciting for those of us in the insolvency sector interested in better outcomes for business owners, creditors and our staff who are involved in delivering these positive outcomes,” he said.