Small business restructure vs Voluntary administration - Understanding the difference
Jun 02 2026
A small business restructure is a formal process for eligible businesses to restructure and deal with unmanageable debt, during which directors retain control and continue to operate the company’s business whilst formulating and proposing a plan to compromise outstanding debts with creditors.
A voluntary administration is also a formal procedure for companies whereby a Voluntary Administrator is appointed (being a Registered Liquidator) who takes full control of a company which is or is likely to become insolvent. The Voluntary Administrator continues to operate the company’s business, investigates its affairs and consults with the company’s director to formulate and propose a Deed of Company Arrangement, which compromises the outstanding debts of creditors.
A Voluntary Administration and a Small Business Restructure are similar however, there are some key differences to note which would assist the choice for Directors between the two options when facing the insolvency of a company.
The key difference is that to enter into the Small Business Restructure process, a company needs to be eligible to do so. To be eligible, a company must:
- Be up to date with all required tax lodgements (i.e. BAS, monthly business activity statements, income tax returns etc.)
- Be up to date with the payments of all outstanding employee entitlements
- Have less than $1 million dollars in total liabilities
- Have not previously entered into a Small Business Restructure process or Simplified Liquidation in the past seven (7) years.
To enter into a Voluntary Administration process, there are no eligibility criteria other than the company is insolvent or likely to become insolvent at some future time.
A director of a company which is eligible for either procedure, has other considerations, which include the following:
- In a Voluntary Administration, directors may assist the appointed Voluntary Administrator to manage and operate a company's business however full control and responsibility for the company's affairs rests with the Voluntary Administrator. Directors lose all control over the company's business once a Voluntary Administrator is appointed.
- During the Small Business Restructuring process, there is minimal disruption to the company's business, as control and responsibility of managing the company's affairs remains with the Directors during the process. A Director is only required to obtain the consent of the Small Business Restructuring Practitioner should they wish to enter into a transaction which falls outside the ordinary course of the company's business.
- It is not uncommon for related parties to be creditors of a company when it is struggling to pay its debts. Although these creditors do not have the opportunity to vote on a proposed Plan in a Small Business Restructure, their debt may not be subordinated. However, in a proposal for a Deed of Company Arrangement in a Voluntary Administration, it is not unusual and is often expected that related party creditors subordinate their debts to allow a greater return to unrelated third party creditors.
- A Small Business Restructuring practitioner is remunerated on an agreed fixed price for the process and if the plan is accepted, the practitioner is remunerated at an agreed percentage rate of the amount paid out to creditors. As a consequence, there are ordinarily lower costs involved when compared to the Voluntary Administration process. The Voluntary Administrator will usually charge their fees on an hourly basis for time spent in managing the company's business and affairs during the process. These costs are ordinarily substantially higher as the fees are not fixed, however, they must be approved by creditors before being drawn.
- Related parties are unable to vote on the company's future in the Small Business Restructure. However, related party creditors are able to vote on any proposed Deed of Company Arrangement in a Voluntary Administration.
- The acceptance of a Plan in a Small Business Restructure is decided by a majority in dollar value of eligible creditors who vote. In a Voluntary Administration, the decision to accept a proposed Deed of Company Arrangement is decided by a majority in number and value of creditors voting who have claims admitted for voting purposes.
- In a Voluntary Administration, there are multiple possible outcomes at a meeting of creditors to decide the company's future i.e. accepting a proposed Deed of Company Arrangement, Liquidation or returning control of the company to its Director. In a Small Business Restructure, there are two options, accepting a proposed plan or not. If the plan is not accepted, the company returns to its original financial situation.
- A Deed of Company Arrangement which has been proposed may be varied with creditors' approval even at the meeting of creditors to decide the company's future and even after it has been accepted. A plan for a Small Business Restructure may not be varied without an application to Court.
Prior to deciding which alternative is a better fit, it is important to consider all of the above differences at a minimum before proceeding with an appointment, as it may affect the outcome that you or your client is hoping to achieve.