These times are unprecedented and the business environment seems to change with each day passing and create more uncertainty for businesses. As businesses we like to plan and do what we can do to manoeuvre through the challenges presented to us. We wish all the best for your business and set out a checklist of matters you may wish to consider now to help your planning.
Employees
• Work health and safety – have you conducted a review of your practices to ensure that your workers are not unnecessarily exposed to the Coronavirus or employees who have been exposed to the Coronavirus. You should review your hygiene and work practices and instructions to staff – this may require you developing a work policy. You may require certain employees to work from home if practical to do so.
• Annual Leave – where your business wholly or partly needs to temporarily shut you may require employees to take paid leave.
• Stand down of employees – where you wish to require employees to take unpaid leave indefinitely, you will need to review your rights to do so under the enterprise agreement or employment contract. Where there is stoppage of work where an employee cannot be usefully employed in their role or another role, you may be able to stand down an employee.
• Redundancies – If it becomes clear to you that your business will not recover to allow an employee to return to work, then you will need to consider redundancies. You must ensure that the role is no longer required and that you comply with statutory, award and contractual obligations for implementation and payment of redundancy.
• Sick leave – sick leave is only available to employees who are ill or exhibiting symptoms of the illness, and not for those who choose to stay away from the workplace.
• Carers leave – an employee may take carers leave if they are required to provide care and support of an immediate family member due to illness or for example, will need to take care of a child due to school closure.
• Boosting cashflow for Employers – Small and medium-sized business entities with aggregated annual turnover under $50 million and that employ workers are eligible for up to $100,000.00 from Government to credit against wages and salary withheld for payment to the ATO. Claims will be made by lodgement of the activity statement. We recommend contacting your accountant for all Government assistance programs for businesses.
Contractual Obligations, Payments and Creditors
• Contractual Payment Terms – if you or your customers are at risk of defaulting on payment please review your contractual payment terms to understand your legal position and consequences of non-payment. Consequences may include termination, default interest and incurring of recovery fees and charges. If your business affected by the pandemic, you should immediately contact your landlord and/or bank to negotiate a delay in payment terms or temporary reduction in payments. A business that is forced to wind up is not an attractive prospect for landlords or banks either.
• Financially Distressed Businesses – The Government is increasing the threshold to issue a statutory demand from $2,000.00 to $20,000. It has also extended the time to respond to a demand from 21 days to 6 months. There are similar changes for personal bankruptcy notices. Directors will not be personally liable for insolvent trading and consequently debts incurred by the company for a period of 6 months during the crisis. You may also need to consider your options regarding voluntary administration, entering into schemes of arrangement or liquidation.
• Delays or Non-performance – you will need to consider the delay in performance of suppliers or anticipated non-performance as result of the pandemic. In these cases, you may choose to renegotiate payment terms if you are required to pay in advance or withhold payment until the product has been supplied or services performed. Where you may be delayed in performing your obligations, you will need to consider your contract terms which may relieve you of liability for delay or check that time is not of the essence – also see below regarding force majeure.
• Force Majeure – your supplier or customer contracts may include a force majeure clause which deals with “acts of god” or circumstances beyond your control. Where the Government has forced a business to close then this circumstance would constitute a force majeure event. Simply not being able to afford a service would not usually be a force majeure event. You should review this clause carefully as it may give rights to you or a party contracted to you to avoid liability under the contract. This may help you where you are unable to deliver your good or services or there may be a delay in doing so. This may also be a problem for you if you cannot enforce your own rights to have services or goods delivered to you especially where you have paid in advance.
• Termination – Where supplies cannot be made or are delayed you will need to consider the ability for you or the other party to terminate a contract. The right to terminate will be contained in the written contract or terms of sale. If there is no written contract, the right to terminate will depend if goods have been delivered or payments are made, or otherwise determined by conduct. It is important that you consider your rights to terminate or cancel, or your customers’ right to do so, so that you can manage your cashflow and plan ahead. The right to refund will depend on the contract or may be subject to consumer law.
While the uncertainty and deteriorating business conditions will be tough, this pandemic has a finite end and we know business will be resilient and bounce back, particularly if we support each other through these times.
Adrian Fong
Director – Corporate and Commercial
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A+F Commercial Lawyers offers specialist legal advice to assist in the establishment, expansion, operation and divestment and acquisition of businesses and corporate groups.
www.afcomlaw.com.au