Throw small business a legal as well as a funding lifeline

Sydney Morning Herald
by Mark Carnegie
19 March 2020

The government is working on a second stimulus package which will dwarf the first, and it needs to if we are to come out of this crisis with a viable, competitive small- and medium-sized business community.

The size of the shock to the economy is unprecedented and a group of industries: tourism, hospitality and education, along with artistic, sporting and industry-based event organisers, are all being stopped dead.

Business has a lot of problems ahead of it but very few people ever thought that they would have to jump the hurdles that the laws provide to deal with the prospect of insolvency in the circumstances the world faces now.

These are unprecedented times for the vast majority of small- and medium-sized business owners because their customers have been asked to stop coming for the good of the nation and its citizens. The numbers are terrifying, money through the till has halved or more for tens of thousands of Australian enterprises.

The central test for anyone who runs a company about whether you can continue to trade or have to close down is whether you have a reasonable belief that you will be able to pay your debts as and when they fall due. But how you can they form a reasonable belief about this if they are involved in tourism or hospitality.

Our laws relating to how you conduct yourself in these circumstances rely on the criminal code far more than a lot of other countries. Other parts of the world often rely on civil penalties, while we threaten possible jail sentences.

Now fraud is fraud and people should be punished for it but what are small business people to do over the next several months? File for bankruptcy as a business even though many who do so could lose their homes as well? That is the prospect because the security of the family home supports so many business loans.

For the next few months Australian business is going to need a lot more help and a lot less threats.

As it stands at the moment, businesses contemplating closing even for a week are going to have to face some very tricky questions about such things as solvency and whether the law requires them to make the temporary situation permanent.

The threat of the criminal code hanging over their heads is going to make it much harder to push on and wait for the world to get healthy and maintain the energy and optimism required to run a business through these tough times.

The government needs to move, and move quickly, to take some of that pressure off businesses in this situation. We have to let these people trade though a business Armageddon. We need to change the law to say "you were being reasonable when you tried your best and had a go". That is truly the Australian way.

If the government doesn't act now a lot of companies are going close and never reopen or the directors and management are going to get into trouble through no fault of their own and without a skerrick of criminal or unethical intent. These people shouldn’t need to spend tens of thousands of dollars on lawyers and accountants to get opinions on whether the law allows them to push on. We need them to focus on working hard to reopen or work though for all our sakes.

No doubt there are shysters out there who will take advantage of a temporary moderation of the law but until the world returns to normal, we need to be thinking more about the great bulk of “good people” working their fingers to the bone and worried sick for their business, their employees and their families, who are the best of Australia and the bedrock of what makes us able to withstand adversity and bounce back.

There is going to be a lot more that the government has to do in terms of financial help. For instance, the Germans have promised their business community unlimited funding. That might be too big a fish for the Australian government to fry, but we all know the government will have to dig far deeper into its coffers if we are going to weather this storm.

It is important, though, that while they are finding the money that they also attend to the laws that might make life impossible for so many small- and medium-sized business owners in circumstances that are completely unprecedented.