One of the safest and most controlled pathways to exit a business is the combination of a Small Business Restructure (SBR) followed by a Members Voluntary Liquidation (MVL).
This pathway provides a structured way to settle debts, restore solvency, and then close the company without exposing the director to the risks that usually come with insolvency appointments.
Why this pathway is so safe for directors
A traditional external administration puts an insolvency practitioner in control. That means every decision they make can flow back on the director if issues or disputes arise. Claims around insolvent trading, unreasonable director related transactions, or creditor actions can quickly escalate.
The SBR-plus-MVL structure avoids all of that.
The director stays in control throughout the SBR. You propose the plan. You present the numbers. You keep the business trading during the process.
If creditors approve the plan, all eligible debts are compromised under binding terms. Once the plan is completed, the business becomes solvent again.
A licensed practitioner then oversees an MVL to formally close the solvent company. Because the company is solvent at the point of liquidation, there is no basis for any claims that would normally arise in insolvent appointments.
For the director, this results in a clean exit with effectively no risk of an insolvency practitioner pursuing actions against you.
How the process works
If the company meets all SBR eligibility criteria, the pathway generally unfolds in three stages.
1. Restructure proposal
The company uses the SBR framework to make a formal offer to creditors. This usually involves a fixed amount funded from future trading, a lump-sum contribution, or third-party support. The goal is to deliver a commercial outcome for creditors that is better than liquidation.
2. Creditor approval and completion
Creditors, including the ATO, vote on the proposal. If approved, you complete the agreed terms. Once the plan is finalised, the company is solvent again.
3. Members Voluntary Liquidation
Now that the company is solvent, an MVL is used to formally wind up the business. The liquidator distributes remaining assets, finalises tax accounts, and closes the company in good order.
Because it is a solvent liquidation, the appointment carries minimal risk for directors.
The challenge: creditor approval
While this pathway is one of the strongest risk-management tools for directors, it is not guaranteed. Creditors, especially the ATO, apply strict criteria when deciding whether to support an SBR plan.
In practice, they look for signs that the business has shown genuine attempts to comply despite the financial distress. This can include consistent lodgement history, reasonable payment behaviour, and a clear narrative about what caused the distress and why the proposal is fair.
For this reason, SBRs can be a gamble. Even a well-constructed restructuring plan can be rejected if a key creditor believes the business has not acted as best it could in the circumstances.
When this pathway is a good option
This approach is ideal when:
- There are funds available to resolve a reduced debt
- The debts are manageable within SBR thresholds
- The company has a clean lodgement history or a clear explanation for past issues
- The director wants the lowest-risk formal pathway with maximum control
- There is no appetite for trading on through a turnaround
- There is a desire to protect personal assets and avoid uncertainty
Why directors choose this pathway
For many directors, this route provides something rare during financial distress: certainty. You control the process, you minimise risk, and you exit in a way that preserves dignity and stops the spiral.
It will not suit every business, but when the conditions are right, an SBR followed by an MVL can deliver one of the safest and cleanest outcomes available.
Think this may be a pathway for you?
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