2020 is over – and good riddance!
While we’re all ready for a fresh start, it doesn’t mean that 2021 is going to be a walk in the park for small businesses. In fact, as the nation becomes more prepared to deal with COVID-19, the regulatory and financial landscape for small businesses will get very different. Temporary measures put in place to sustain businesses in 2020 have come to an end, and it’s essential to stay proactive and be aware of any legal issues that could likely impact your business and employees. Read on for the top 5 things small businesses should be aware of this year.
- Any pause on ASIC enforcement will be short-lived
‘It is time for us to simply get on with it.’
These were the words by ASIC Chairman Karen Chester in late November 2020. What Chester means is that in 2021 ASIC will be cracking down on any corporate misconduct and vowing to employ its ‘why not litigate’ approach.
ASIC released its 2020 – 2024 Plan in August 2020. The key points for small businesses are:
- ASIC will be focusing on misconduct that took advantage of the pandemic environment, such as poor claims handling, superannuation issues, predatory lending, misconduct and product mis-selling;
- ASIC will resume many of its activities that were temporarily suspended during COVID-19, such as implementing the recommendations of the Banking Royal Commission; and
- ASIC will be cracking down on individual liability.
With the corporate watchdog resuming its heavy hand over businesses, it’s essential that small businesses ensure their compliance with ASIC. Our Checklist of ASIC and ATO Compliance for Small Businesses for more information on this topic.
- 2020’s insolvency relief laws have changed
It was big news early on during the COVID crisis that under S 588GAAA of the Corporations Act, the Government introduced a safe harbour provision from personal liability for any debts incurred by a company while insolvent. This relief expired on 31 December 2020, and was replaced by a two-tier system.
Under this two-tier system, small businesses with liabilities under $1M may continue trading under the control of directors as they develop a plan to present to creditors. While the plan is being developed, unsecured creditors and some secured creditors cannot take enforcement action against the business.
While this gives small businesses a lifeline, there are many steps small businesses must comply with under this two-tier system, such as:
- engaging a Small Business Restructuring Practitioner (SBPR) to certify the plan and to oversee disbursement and distributions to creditors;
- preparing and presenting the plan to creditors in 20 business days;
- implementing the plan only when over 50% of the creditors vote in support of the plan; and
- ensuring any outstanding employee entitlements are paid out in full before the plan is voted on by creditors.
- COVID-19 is not going away
There’s talk of vaccines, there’s talk of new laws and a ‘new normal’ – but there’s no guarantee that COVID-19 is going away any time soon. For small businesses, preparing for a sudden outbreak or lockdown is essential, as is having a COVID-safe plan. Coming into 2021, these contingency plans should be thorough and all employees and relevant parties should know of them in detail.
On another note, it’s essential to build COVID-safe measurements into your service offering for both your employees and customers. Develop and implement sustainable measures that enforce social distancing, cleanliness and contact-free trade where possible.
- Review your contracts
Most businesses are probably already well-aware of any contractual issues that arose as a result of the pandemic. However, it is essential that you review all your contracts and ensure you are clear on your own rights and obligations, as well as what you can expect from other parties. This essentially requires you to review any agreement you have between yourself and another party. Ultimately, you don’t want to start the New Year unable to enforce your rights against debtors who can’t pay. At the same time, if you anticipate any changes to your workplace that will impact your contractual commitments, it’s important to get clear on these and if necessary speak to the other party about re-negotiating.
- Review your lease agreements
Just as it’s important to review your rights and obligations under contracts, it’s crucial you review your lease agreements. When doing so, be sure to pay attention as to whether you could be excused from paying your lease, and speak to your landlord if you envision difficulties making rent in 2021. Understand your legal rights and obligations in the event that you can’t pay and put in place a step-by-step enforcement or re-negotiation plan well in advance. We can’t know what 2021 will hold – but we can use 2020 as a reminder to be vigilant over every document we’ve signed.
How Green & Associates can help
Without a doubt small businesses handled the brunt of the burden that was coronavirus, with two thirds of Australian businesses suffering severe revenue decreases.
At Green & Associates, we are experienced in helping the local Potts Point and Kings Cross business community with a broad range of business and other disputes. Businesses continue to hurt, and we continue to help businesses of all sizes protect their legal interests during these difficult times. If your business is struggling, or you want some advice on any legal obligations, don’t hesitate to get in touch.
+1 (02) 8080-7585.