What small business needs to know about ASIC’s corporate plan in 2019

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What small business needs to know about ASIC’s corporate plan in 2019

ASIC has recently released its Corporate Plan for 2018-19. The Prime document highlights just how important small business is to the regulator and to the economy. Making up more than 20% of gross domestic product and employing over 50% of the Australian workforce, small businesses are the backbone of the Australian economy. In 2017-18 more than 360,000 new business names and 244,000 new companies were registered in Australia.

In this article, we highlight some of the key areas that ASIC will focus on in the coming year to support and monitor this sector.

Ensuring the fair treatment of small business

ASIC aims to support small business by looking at ways to ensure they are protected from unfair practices. One of the biggest changes that has been introduced recently was to the unfair contract terms legislation, which came into effect on 12 November 2016. This legislation protects small businesses that enter into or renew any standard form contracts that are either valued at less than $300,000 if an up-front contract or $1 million if the contract operates for more than 12 months.

Under the legislation, unfair contract terms must be removed from the contract or operate as if they don’t exist. A term in a contract would be unfair if it:

  • Causes a significant imbalance between the parties’ rights and obligations
  • Isn’t reasonably necessary to protect the legitimate interests of the party that would benefit from it
  • Would cause financial or other detriment to a small business if it was relied upon

In its corporate plan, ASIC has indicated that it will be reviewing contracts with lenders, in particular, to make sure they’ve removed any unfair terms.

ASIC will also continue to investigate a range of other misconduct or wrongdoing that may negatively impact small businesses and proactively conduct surveillance.

Improving small business tools and resources

ASIC provides a wealth of information, tools and resources for small business and will continue to improve and upgrade these services in the coming year.

Its Small Business Hub covers a wide range of topics including:

  • What you need to know about structuring and setting up a small business
  • What legal and compliance obligations small businesses have
  • What things you need to do if your small business stops trading
  • Information about the obligations for directors of a small business
  • How to change the structure of your business from a sole trader to a company

The MoneySmart website is also a dedicated resource to provide free, independent guidance about money. While it has a lot of information that is helpful to individuals, it also has some tools that are specific to small business. Recently ASIC launched the First Business online modules and app on this platform. This is designed to help people who are thinking of setting up their first business understand if they’re ready for the challenge and to show them what legal compliance obligations it will involve. To help get small businesses started, the app also offers tips on how to develop business networks.

Improving registry services

ASIC manages the companies register, business names register and other corporate and professional registers. To make it easier for small business to use these services it has been streamlining and consolidating them into a single online portal that connects with the Australian Taxation Office. As part of this process, ASIC is committed to continuing to look at new ways to modernise the registries and forms to make it easier for businesses to interact with them.

ASIC estimates that this and other recent initiatives have reduced annual compliance costs for business by $455.7 million since 2013 and saved businesses over $209.8 million in registration fees since 2012.

Making sure small businesses are compliant

ASIC is committed to ensuring that small business meets its legal and compliance obligations. Some of the activities that it intends to pay particular attention to in the coming year include:

  • Illegal phoenixing: This involves directors who intentionally and dishonestly prevent employees and unsecured creditors from accessing their fair entitlements to a company’s assets. ASIC is working with the Government’s Phoenix Taskforce and Serious Financial Crime Taskforce to take action against directors who are involved in these activities.
  • Financial reporting obligations: This involves ensuring that companies are meeting all of their reporting obligations. In 2017-18 ASIC prosecuted 382 entities or individuals for 734 offences relating to their failure to keep books and records.
  • Director misconduct:  ASIC uses its significant power to take administrative, civil or even criminal action against directors or officeholders who do not meet their duties under the law. It has also initiated a campaign to identify and remove directors who have a dishonesty-related criminal conviction.

ASIC will also continue to approach small business compliance with a forward-looking lens through its Innovation Hub. Specifically for fintech startups (many of whom are small businesses), the hub will continue to allow them to develop and test their ideas in consultation with ASIC.

ASIC will continue to enforce the law throughout the year so it’s important to make sure your business remains compliant even during the Christmas break. While ASIC closes its office over the silly season, your review payments may still be due. When you’re arranging to pay your fees, make sure you check the due date and ensure that your payment reaches ASIC in time, especially if you’re sending a cheque. This is particularly important to avoid late payment fees.

CCASA can help take the worry out of your company compliance by managing all of your obligations with ASIC on your behalf. We’ll hold your hand through the process and advise you exactly what you need to do and when. If you’d like to learn more about how CCASA can take care of all your company compliance needs get in touch with us. We’d be happy to help.