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The Small Business Restructuring (SBR) framework has become an essential tool for viable small businesses facing financial pressure. When used correctly, it gives owners room to stabilise operations, retain employees, and move forward with a sustainable plan.
However, a growing number of business owners are entering the process without fully understanding their personal exposure, particularly around personal guarantees, expired Director Penalty Notices (DPNs), and secured business loans. Much of this confusion stems from poor or unqualified advice.
A Common Scenario: Paying for Bad Advice
- A recent caller to our team, a business owner in the therapeutic beauty industry, had paid an online, unregulated “pre-insolvency adviser” $10,000 for help with an SBR. She was then handed off to a registered Small Business Restructuring Practitioner who charged another $10,000 plus the standard 15% plan fee.What she did not receive was proper guidance about:
- how an SBR works,
- what it does not fix,
- personal guarantees,
- expired DPNs, and
- what liabilities remain personal regardless of the restructure.
Only after completing the process did she learn that creditors with a personal guarantee could still pursue her for the shortfall and that an expired DPN remains a personal debt outside the restructure.
Key Misunderstandings About the SBR Process Works
- Personal guarantees remain enforceable.
An SBR restructures the company’s debt only. If you have provided a personal guarantee, creditors can still pursue you personally for any unpaid balance. - Expired DPNs are not extinguished.
If a DPN has expired before the SBR begins, the director becomes personally liable. An SBR cannot remove or compromise that liability. - “Unsecured loans” are often not unsecured.
Many lending agreements include security clauses over personal property. These survive the restructure. - More borrowing is not the solution to ongoing losses.
Many small business owners seek fast cash from non-bank lenders without addressing core issues such as pricing, profitability, and operational processes.
When an SBR Works Well
An SBR is effective when the business is viable and the financial pressure relates to historic debt rather than ongoing losses. With correct advice, it can be a valuable tool for preserving operations.
Get Advice From a Regulated Professional
Only a registered Small Business Restructuring Practitioner (a type of liquidator) can legally administer an SBR. Unregulated online operators are not permitted to provide restructuring advice and their involvement often leads to costly mistakes.
Before committing to a restructure, ensure your adviser is qualified, regulated, and transparent about the benefits and the limitations of all available options.
If you are concerned about your client’s business, the directors personal exposure, or options for 2026, the team at Rapsey Griffiths can help you assess your position clearly and confidentially.