Date posted: 06/09/2023

Not-for-profits: seeking access to the small business restructuring process

We have raised a concern that incorporated associations do not have access to small business restructuring process when facing financial difficulties.

In brief

  • Access to insolvency options varies in each State and Territory.
  • Currently, access to a voluntary administration or liquidation is available.
  • Access to small business restructuring may allow viable associations to continue.

In discussions with our Not-for-Profit Committee, the combination of constrained income from households suffering the cost-of-living pressures, increased operating costs and reduced volunteer availability- is having a significant impact on many incorporated associations.

When facing financial stress, each State and Territory enables access to some insolvency processes in the Corporations Act 2001. This varies between each jurisdiction but is limited to voluntary administration and/or liquidation.

Our Insolvency Management Committee had also raised their concerns that the limited options available has meant viable incorporated association being wound up or incurring the high costs of a voluntary administration.

Our letter seeks consideration of also establishing access to the SBR process for incorporated associations. This would expand the options available to incorporated associations when seeking to address financial pressures.

Where an SBR is the best option, the incorporated association will be able to continue to operate under the day-to-day control of its board, whilst the registered liquidator manages the plan approved by creditors to deal with the debts accrued at the time of their appointment.

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