THE LAW COUNCIL of Australia has welcomed the Federal Government's tabling of the Australian Law Reform Commission's (ALRC) review of the nation's corporate criminal responsibility regime, but is urging the Parliament to take a cautious approach when considering fundamental principles of criminal law.

Contained in the ALRC review are recommendations that would make a corporate accused guilty if any officer, employee, or agent of the corporation committed an offence, while acting within the actual or apparent scope of their authority. The Law Council said under the recommendations, the person need not hold office as a director or a ‘high managerial agent’, whose responsibilities may be fairly assumed to represent the body corporate’s policy, as is presently required. 

Unless the corporation could prove that it took reasonable precautions to prevent the individual officer from committing the crime, it would be guilty.

Law Council of Australia president Pauline Wright said policymakers should approach this recommendation with caution.

"Criminal convictions carry serious consequences, both for bodies corporate and the people who work within them," Ms Wright said.

"The ALRC’s recommendations in this area are not consistent with the general criminal law principles applicable to the most serious offences, including that an intention to commit the crime must be proven. The Law Council urges caution in fundamental changes to general principles of criminal responsibility governing corporate attribution.

"If these recommendations were accepted by Parliament it could lead to corporations attracting criminal convictions for the misdeeds of relatively junior employees, which could have severe, unintended, and unnecessary consequences for many innocent parties.

"It is important to note these recommended amendments would not only touch the large corporations at the top end of town. They may place a disproportionate burden on small businesses and charities, many of which operate as corporations," Ms Wright said.

"A guiding principle of the Australian Criminal Code was that corporations should be treated no more or less favourably than natural persons, and that principles of corporate criminal responsibility should be as close as possible to the general principles that underpin the criminal law as it applies to natural persons. The Law Council continues to support that principle."

www.lawcouncil.asn.au

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THE CHANGE to the JobKeeper reference date from March 1 to July 1, 2020, effective from August 3, will require all enrolled employers for JobKeeper to retest employee eligibility, warns the Institute of Public Accountants (IPA).

“Some employees did not meet the previous criteria but may now be eligible,” IPA chief executive officer, Andrew Conway said.

“The ‘one-in, all-in’ rule, compels employers to include any new employees, engaged after March 1, but before July 1, 2020, that meet the other eligibility conditions as part of the JobKeeper scheme. 

“The IPA is urging employers to very quickly assess potential new eligible employees, send nomination forms, and importantly, top-up employees’ wages where necessary to meet the established wage condition of $1,500 per fortnight.  This means employers must have the cash to pay. 

"Failure to do so will leave those employers exposed to significant penalties under the Fair Work Act because of the ‘one-in, all-in’ rule.

Potential candidate employees who may now be eligible include:

• Non-casuals (full-time or part-time employees) who are on the books before July 1, 2020;
• Casuals who did not meet the definition of a long-term casual employee by March 1, but have since become long-term casual employees by July 1;
• Employees who did not qualify on March 1, due to their age or visa status but have since become 16 to 18 years of age and meet the independence criteria and study or have obtained the necessary visa.

“Employees that became eligible from July 1, 2020, require an employer on the JobKeeper scheme to provide notice to those new employees (per the existing notice requirements within seven days of the commencement of the legislative instrument which commenced on August 15, 2020). This effectively means giving employers until this coming Friday, with no time to waste.

“The good news, however, is that for the fortnights commencing on 3 and 17 August 2020, employers have until August 31, 2020, to meet the wage condition for new eligible employees under the July 1, eligibility test.

“The clock is already ticking, so impacted employers must act now; doing nothing is definitely not an option,” Mr Conway said.

www.publicaccountants.org.au

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THE INSTITUTE of Public Accountants (IPA) has welcomed the Insolvency Inquiry Report released by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) and hopes the Federal Government will accept the 10 key recommendations and moves quickly in its implementation.

“We know that small business is doing it tough and faces huge challenges, particularly in this current COVID-19 environment,” IPA chief executive officer, Andrew Conway said.

“It is therefore critical for the survival of small business that a new regime is implemented which encourages small businesses to assess their position and execute a turnaround with specialist advice from their chosen trusted advisers.

“One of the most pertinent recommendations in the report is that of a Small Business Viability Review, where a voucher worth up to $3,000 is provided to obtain tailored advice to improve their business operations. If the business is assessed as unviable then another $2,000 would be provided to aid in the winding-up process, making the support a total of up to $5,000," Mr Conway said.

“In the latter circumstances, the ASBFEO report recognises that a restructure of business affairs managed by the small business owner, and with approval from a registered liquidator, may have more positive outcomes beyond what is the current norm, including greater returns to creditors.

“To help facilitate this, it has been recommended that a Directors Insolvency Agreement be established where the small business owner can provide a proposal to a registered liquidator on the best way to manage the business.  The proposal may seek a restructure or the winding up of the business, with the retention of the existing company and a sale of the business and/or its assets to an unrelated party. 

“Another key aspect of the report relates to the accessibility of information, including for the small business owner and for creditors.  The report recommends that a modernised approach be taken to information, including simplification, use of plain language, using fact sheets, limiting the volume to relevant information and greater use of electronic means.   The IPA agrees that we need to demystify the process to enable more informed choices and better outcomes.

“The IPA is fully supportive of the recommendations and urges the government to implement them as soon as possible,” Mr Conway said.

www.publicaccountants.org.au

About the Institute of Public Accountants

The IPA, formed in 1923, is one of Australia’s three legally recognised professional accounting bodies.  In late 2014, the IPA acquired the Institute of Financial Accountants in the UK and formed the IPA Group, with more than 38,000 members and students in over 80 countries.  The IPA Group is the largest SME focused accountancy organisation in the world. The IPA is a member of the International Federation of Accountants, the Accounting Professional and Ethical Standards Board and the Confederation of Asian and Pacific Accountants.

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AUSTRALIAN Small Business and Family Enterprise Ombudsman Kate Carnell said the just-released Insolvency Practices Inquiry final report exposes the many systemic failures that have harmed small and family businesses, ahead of a predicted ‘tsunami’ of insolvencies to come.

The report, released by the Ombudsman yesterday, details a suite of recommended changes to current insolvency practices that aim to achieve the best possible outcomes for small businesses in financial trouble. 

Ms Carnell said the report comes at a critical time, given the COVID-19 pandemic – which has come on the back of devastating natural disasters – "will likely trigger a wave of insolvencies in the coming months".

“Sadly, many small businesses have been driven to the brink by factors outside of their control, such as the COVID crisis,” Ms Carnell said.

“The reality is that Australia is now in the grip of a recession. Trading conditions are the worst we’ve seen since the Great Depression and many small businesses won’t survive.

“Our inquiry has found that the system as it stands does not work for small businesses," she said.

“Small businesses that have been through the liquidation process have told us their experience was so traumatic they will never fully recover, let alone try to start a new business down the track. 

“Instead of getting the support they need to turn it around, small businesses too often find themselves on an express train to winding up with no control over the process," Ms Carnell said.

“The system needs to change dramatically so that small business owners are given the chance to make important decisions about the future of their business, without being pushed into outcomes they don’t want – like losing their family home.”

The report recommends establishing a Small Business Viability Review program where small business owners experiencing significant financial stress can obtain a voucher of up to $5,000 to access a tailored plan from their trusted, accredited financial adviser.

“We know the sooner a small business seeks help, the more likely it is they can achieve a restructure or turnaround,” Ms Carnell said.

“But cash flow issues, compounded by falling revenue, may mean those small business can’t afford the professional financial advice they need. The ramifications of this could be devastating, both for the business and its owner and family, down the line.”

Another key recommendation is the establishment of a small business debt hibernation instrument when a state, territory or federal government declares a systemic shock such as a pandemic or significant economic downturn.

“COVID-19 has shown that businesses need a mechanism where they can take stock of their situation and prepare for the re-opening of trade,” Ms Carnell said.

“The minimum hibernation period would be 90 days, during which payments on loans, rent, tax and other outgoings could be deferred.”

The Ombudsman’s report recommends establishing a Directors’ Insolvency Agreement where a small business owner can provide a registered liquidator with a proposal on the best way to manage the business.

“External administrations are focused on maximising the benefit to creditors, while the small business owner’s expertise and knowledge is often brushed aside, Ms Carnell said.

“Small businesses have spoken of stock being sold at a low point in the market, assets being put up for sale in publications that aren’t relevant to their industry and thousands being spent by registered liquidators to chase down payments worth far less than the amount spent.

“If the small business owner, with the approval of a registered liquidator, could restructure their affairs, it would likely lead to more positive outcomes, including a greater return to creditors.”

Ms Carnell said the cost of insolvency should be capped for small businesses, particularly given the majority of small businesses entering liquidation have assets of less than $10,000.

“Throughout the course of this Inquiry, we have spoken with a range of registered liquidators who have indicated the minimum cost of a straightforward voluntary administration is about $12,000, while the average is closer to $50,000,” Ms Carnell said.

“For businesses that need to wind up, it is critical that the process be cost effective, quick and dignified.

“Ultimately if implemented, our Insolvency Practices Inquiry recommendations will go a long way to ensuring the Australian small business community retains its fighting spirit.”

www.asbfeo.gov.au

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