The speech delivered an account of ASIC’s developments for small businesses including changes to the external dispute resolution (EDR) framework, unfair contract terms, the Banking Code of Practice Review and illegal phoenix activity.
ASIC’s small business strategy focuses on three key elements: engage, assist, and protect. It is through these mechanisms that ASIC helps small businesses to thrive in our economy.
Registry
As part of ASIC’s strategy, it is looking to cut down on the registry process for small business to minimise the time spent dealing with ASIC instead of conducting business activities. To assist in this, ASIC is establishing a single online portal for business and company registration. ASIC is currently seeking feedback on improvements the public would like to see to business registry services.
Changes to EDR framework
The existing EDR bodies (Financial Ombudsman Service and the Credit and Investment Ombudsman) are to be gradually replaced by the Australian Financial Complaints Authority (AFCA), set to launch on 1 July 2018. AFCA will be charged with making decisions regarding the EDR process, and ASIC will oversee the body. ASIC also intends to increase monetary limits for EDR claims to assist more small businesses avoid court.
Unfair contract terms and the Code of Banking Practice
There is no doubt that lenders usually hold the balance of power over small business when negotiating contracts. Lending contracts are often lengthy and time-poor small businesses often, through need for capital, accept loans without knowing the full extent of the contract. To combat this, changes to small business contracts offered by the big 4 banks have been in place since 12 November 2016. These changes include limiting the operation of indemnity clauses and restricting the ability of banks to vary contracts.
Combatting illegal phoenix activity
Illegal phoenix activity, from ASIC’s perspective, occurs where directors of a failed company deliberately deny any unsecured creditors access to the company’s assets. These creditors are usually small businesses and employees. This is of particular concern to ASIC due to the vulnerability of these parties. ASIC, as part of a government-wide approach to tackling illegal phoenix activity is undertaking surveillance projects and working with the insolvency profession to ensure small businesses and employees are protected.
ASIC’s commitment to small businesses is promising, and hopefully these changes will help to improve the small business culture in Australia.