Linkedin
Facebook
Email
more
Many Australian disability service providers are struggling with increased costs, rising interest rates, cash flow issues and regulatory changes.
It should be no surprise that NDIS businesses are increasingly facing financial distress.
When facing financial challenges, it's crucial to seek effective solutions. The Small Business Restructure (SBR) process provides assistance to NDIS providers dealing with issues. It enables them to modify their operations, address financial difficulties, and continue providing essential support to NDIS participants.
Key highlights
- The Small Business Restructure (SBR) is a good option to support struggling NDIS providers.
- SBR offers a path for businesses facing financial distress to restructure their operations and repay debts.
- Strict eligibility criteria apply, including a $1m debt cap and up-to-date tax and employee entitlements.
- The process maintains business operations under director control with guidance from a Restructuring Practitioner.
- SBR offers a less severe alternative to liquidation, helping NDIS providers to continue delivering vital services.
What is a Small Business Restructure?
Small Business Restructuring (SBR) was implemented on January 1, 2021, as part of the federal government's response to the COVID-19 pandemic. It is designed to aid small and medium businesses experiencing financial difficulties.
SBR is a formal process that assists small businesses in resolving their financial issues. It provides eligible businesses with a structured approach to reorganise their debts and operations, enabling them to recover and stay operational.
The process involves appointing an SBR Practitioner, who is a registered insolvency practitioner, to assist in creating a plan to restructure debts while maintaining business operations.
Unlike liquidation, Small Business Restructuring allows businesses to continue operating under the control of their directors. They receive support from a Restructuring Practitioner, who develops a Restructuring Plan outlining how the business will repay its creditors, either in full or in part, typically within a three-year period.
How does an SBR help NDIS providers?
For NDIS providers, restructuring is crucial. The financial strain in this sector, coupled with the responsibility of caring for vulnerable individuals, underscores the importance of exploring all options before considering closure.
The NDIS Commission emphasised the significance of delivering high-quality disability support services as a registered NDIS provider. An effective restructuring plan can help maintain this level of quality. Taking prompt action to address financial challenges can provide stability for NDIS providers, ensuring that their services continue without major disruptions and that they can continue to support NDIS participants who rely on them.
Common misconceptions about SBR eligibility
Some common misconceptions need to be addressed.
Firstly, there's a misunderstanding that businesses with numerous employee entitlements cannot qualify for SBR. It's crucial to stay current with paying employee entitlements, but minor lapses may not disqualify you.
Another myth is that businesses with substantial ATO debt are ineligible. The ATO is often a major creditor in SBR situations and generally supports restructuring plans.
Lastly, many believe that seeking SBR implies admitting failure and leads to liquidation. This is false. SBR is designed to aid businesses in recovery, and many companies are able to restructure and continue operating.
What is involved in creating a Small Business Restructure plan for your NDIS business?
Starting the Small Business Restructure process includes several clear steps. It's important to know and follow these steps to make sure the restructure goes smoothly and is successful.
Being open with stakeholders and getting expert help during the process are key to getting the best results for both the NDIS provider and the people who depend on their services.
1. Initial conversation with your accountant or solicitor.
Navigating the legal and financial aspects of SBR requires thoughtful consideration and expert assistance. Your accountant or solicitor can help you review your current situation, and refer you to a qualified SBR practitioner.
2. Book a no-cost, no-obligation initial meeting with an SBR Practitioner, such as RSM.
It is crucial to speak with a qualified insolvency professional early in the process. There should be no cost or obligation to your first discussion. When you speak to RSM, we have a chat to understand your challenges and objectives and map out some high-level potential options for you, but you don’t have to move forward. It’s all about finding out whether SBR is right for you.
We will assess your business's financial distress, provide guidance on your eligibility, and assist you at every step along the way.
3. Engage RSM formally if you believe an SBR is the right choice for your NDIS business.
Make sure to inform your creditors that you have entered into an SBR. You and your restructuring practitioner will then have 20 business days to create a restructuring plan proposal and submit it to your creditors. You can continue operating your business as usual during this time. This is critical for NDIS providers, as it means care can continue without interruption for your clients during the restructuring period.
4. Your creditors have 15 business days to respond to the plan with an outcome.
Creditors are critically important in the SBR process, so it's crucial to collaborate closely with them to address their concerns in the restructuring plan proposal. Understanding how SBR impacts your existing contracts, leases, and agreements is also important. You should also consider its effect on relationships with key individuals, such as creditors, including the ATO. Good planning and clear communication are needed in these areas. If you don’t handle these parts well, it can make the restructuring process less effective.
5. Meet the company’s obligations under the restructuring plan.
Critically, this pertains to the payments/contributions specified in the plan. We have begun to notice several plans that feature a hybrid contribution structure. Essentially, this involves a one-time lump sum payment combined with monthly contributions that span a maximum of three years.
Impact of a restructure on NDIS service delivery
A key part of the SBR process for NDIS providers is reducing the possible effects on service delivery for NDIS participants. Restructuring is meant to enhance financial stability and keep the provider running for a long time. However, disruptions can occur during this time.
The NDIS provider must work to limit any negative impact on those who depend on their services. They should also ensure that care continues without interruption during the restructuring period.
Maintaining quality service during the transition
Maintaining NDIS quality service during a restructuring is very important. This means communicating clearly and openly with participants. You should explain what is happening and remind them that the organisation cares about their well-being.
It is also important to have backup plans in case there are any issues. These plans could include finding other support options or giving extra help to staff who may have more work. Regularly checking and updating care plans during the restructuring can help effectively meet the needs of participants.
Communicating changes to stakeholders
Clear and timely communication with all stakeholders is vital throughout the SBR process. This includes informing the NDIS Commission about the decision to restructure and providing regular updates. Transparency is equally important when communicating with employees, participants, and their families.
Maintaining open communication can alleviate concerns and build trust during uncertain times. Below is an example of how information might be shared.
Communication Method | Key Information to Convey | |
NDIS Commission | Formal notification, regular updates | Reasons for restructuring, the proposed plan, and any anticipated impact on services. |
Employees | Staff meetings, written communication | Details of the restructure, job security, and support services available to staff. |
Participants | Individual letters, family meetings | Reassurance about service continuity, any adjustments to care plans, and contact points. |
Frequently Asked Questions
Qualified professionals, such as insolvency practitioners, financial advisors, and insolvency lawyers, can help NDIS providers who are thinking about or going through an SBR. They ensure that these processes meet the law and are fair. This helps focus on NDIS quality and employee entitlements.
The time it takes for Small Business Restructuring depends on how complex the financial issues are, the plan made and talks with creditors. Usually, from the start to the end, the process lasts for several months. The goal is to create a clear way to fix insolvencies for the ATO and creditors.
A key idea of SBR is to let businesses keep running during the process. This helps keep operations and services smooth. It aims to uphold NDIS quality and stop job losses while also dealing with the organisation's debts and employee entitlements.
While there aren't many financial aid programs just for restructuring, there are still some options. You might find government grants, loans, or arrangements with creditors. It is important to look into all possible ways to get financial help. Talk to financial advisors who know about insolvency and the ATO
Compliance during and after the SBR process is very important. Working closely with the selected Restructuring Practitioner is key, as is following the approved Plan.
Ready for a free, confidential chat? RSM is here to help.
If your small or medium business is facing financial difficulties in the current economic environment, our team can help you understand your options so you can make informed decisions.
Contact us for a free, initial call.
If you or anyone you know is experiencing financial distress and needs mental health support, please contact:
- Lifeline on 13 11 14
- Beyond Blue on 1300 224 636
- Headspace on 1800 650 890
