07 October 2020

PRESS RELEASE: Stimulus and regulation risk creating complacency for small business

A combination of Government stimulus and regulation risk many small businesses not properly preparing for a COVID-19 driven economic downturn, warns Bartier Perry.

Head of Commercial Disputes, Gavin Stuart said an environment has developed where small businesses were daily being warned of economic carnage but many had yet to see a significant or direct impact.

Mr Stuart said the combination of stimulus and regulation designed to protect small business was necessary and welcome but risked owners and directors becoming complacent.

“Clearly many small businesses have already had a torrid time from the fall-out of COVID-19 but be it rental regulation, Jobkeeper or new insolvency laws, there is a risk of small businesses assuming the Government will always intervene,” said Mr Stuart.

We are in a situation where many directors risk getting caught out by saying, ‘well how bad can it really get?’”

Mr Stuart cited the new Federal Government insolvency regime for small business announced this month.

“That announcement is a very welcome step in the right direction. But some have questioned whether it is a good thing to have a debtor in possession model in place where often it can be said that it is the directors who caused the issue in the first place.

While we are yet to see the actual legislation, the Government has been clear it’s trying to get business back on its feet, not provide a never-ending timeline of support”.

Mr Stuart said it was critical for often busy small business owners to understand now the changes happening in insolvency regulation to best prepare for the next 12-18 months ahead.

“Financial and regulatory props are soon to be taken away or severely reduced. Directors who have not taken steps now will expose both themselves and their businesses to potentially dire consequences later,” he said. He cited the example of temporary relief from insolvent trading
for directors only applying if companies are placed into administration or liquidation before 31 December 2020.

Mr Stuart said the firm had put together a publication ‘Demystifying Insolvency’ to help smaller companies understand and step through their options.