Responding to the impacts of Coronavirus is difficult for both businesses and governments around the world.
In Australia, there have been a series of legislative changes that impact the way businesses engage with their employees, work with their customers and ensure that business operations will be stable during this period.
To assist you with keeping up to date, we will be summarising the effects of the legislative changes on a weekly basis. Clyde & Co also has a dedicated Coronavirus Information Hub (COVID-19) which hosts many articles from around the world that provide different perspectives and in-depth analysis on many of these issues.
Guarantee of Lending to Small and Medium Enterprises
The Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Act 2020 (Cth) (Guarantee of Lending Act) aims to provide financial support and relief to SMEs.
Under this Act, the Treasurer, on behalf of the Commonwealth, can guarantee a loan made by a financial institution to SME entities, if the Treasurer is satisfied that doing so will assist in dealing with the economic impacts of the coronavirus.
Where there is a loan default under the measure, the government will compensate the lender for an agreed proportion of the losses. The total amount that the government can appropriate in order to meet liabilities under the guarantee is capped at $20 billion.
Australian Business Growth Fund
The Australian Business Growth Fund (Coronavirus Economic Response Package) Act 2020 (Cth) (the Business Growth Fund Act) authorises an investment by the government in the Australian Business Growth Fund (the Growth Fund).
The Australian Growth Fund's purpose will be to offer growing established companies patient equity capital and strategic support to assist them to reach their growth potential. Businesses seeking support can be from across Australia and from a range of industries.
Established Australian businesses will be eligible for long-term equity capital investments between $5 million and $15 million where they can demonstrate three years of revenue growth and profitability and a clear growth vision.
Cash Flow Boost Act
The Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 (Cth) (the Cash Flow Boost Act) provides for two payments to support employers to encourage the retention of employees and maintain operations through cash boost payments.
The measures will provide between $20,000 and $100,000 to eligible businesses and not-for-profits, including charities. The Treasurer, in his second reading speech, estimated that approximately 690,000 businesses and 30,000 not-for-profits will receive these benefits.
Key Points for SMEs and their Insurers
The legislation is intended to provide cash flow assistance to help SMEs to stay in business, keep their employees and retain apprentices and trainees.
The Growth Fund also authorises the Commonwealth to participate in forming and acquiring shares in or debentures of the Australian Growth Fund and appropriates $100M for that purpose. SMEs will have access to a significant funding regime through the Growth Fund. It is noted that the Growth Fund has operated in the UK with significant success. The Growth Fund was first launched in November 2019.
Although these actions will provide some relief to SMEs, insurers are likely to remain concerned about the ability for SMEs to weather the storm. There remains significant risks to SMEs both from the supply side and the creditors side.
Equally, there will be many SMEs which need to pivot their business in order to respond to the changed COVID-19 landscape, and for many SMEs the business that come out at the other end of the COVID-19 crisis may be very different to the business which operated before the crisis, and which formed part of the proposal which was assessed, risk rated and underwritten by the insurer.
As asserted by the Government, "the economic shock [of COVID-19] is likely to be significant", we are hopeful that the government's "front loaded" package can alleviate the pressure on SMEs and the Australian economy and assist businesses get to the other side and with sufficient cash to allow them to rebuild.
In NSW, the Environmental Planning and Assessment Act 1979 (NSW) has been amended to give the Minister emergency powers to make orders to grant planning consent, or to override an existing planning consent, without the usual requirement for detailed impact assessment. The Minister must be satisfied the Order is necessary to protect the health, safety and welfare of members of the public during the COVID-19 pandemic. Already, a number of orders have been made, including to: extend or allow greater flexibility for hours of construction works, hours of operation for certain retail and home industries, and altering the arrangements for retail of food and drinks. Similar amendments have been made to planning legislation in other states including Western Australia and Queensland. Businesses impacted by COVID-19 should confirm whether any relaxations of planning rules or approvals have been made in relation to their industry.
Residential Tenancies and Retail Leases
There have been amendments to the Residential Tenancies Act 2010 (NSW) and the Retail Leases Act 1994 (NSW) so the Minister can recommend to the Governor that regulations be made under any relevant Act, in response to the public health emergency caused by COVID-19,
to prohibit a landlord from recovering possession of premises from a tenant or resident;
to prohibit a landlord from terminating a lease, tenancy, residential tenancy agreement, occupancy agreement or site agreement;
to regulate or prevent the exercise or enforcement of another right of a landlord, owner or community operator under the relevant Act or agreement relating to the premises or land; and
to exempt a tenant, resident or home owner (or class of any of these) from the operation of a provision of the relevant Act or any agreement relating to leasing or licensing the premises or land;
for the Minister to make such a recommendation, Parliament must not be currently sitting and is not likely to sit within two weeks after the day the regulations are made, and the Minister must be of the opinion that the regulations are reasonable to protect the health, safety and welfare of tenants under the relevant Act; and
the "relevant Act" includes the Agricultural Tenancies Act 1990 (NSW), Retail Leases Act 1994 (NSW), Boarding Houses Act 2012 (NSW), Residential (Land Lease) Communities Act 2013 (NSW), Residential Tenancies Act 2010 (NSW) and any other Act relating to leasing premises or land for commercial or residential purposes
The National Cabinet has agreed to a National Code of Conduct for SME Commercial Leasing arrangements. This Code of Conduct is still to be legislated by each State and Territory. Under this Code of Conduct, landlords and SME tenants (defined as those with an annual turnover of less than $50 million that are also eligible for the JobKeeper payment) suffering from COVID-19 related financial hardship are to negotiate temporary amendments to their leasing arrangements.
These temporary amendments must include a moratorium on the eviction of commercial SME tenants for the duration of COVID-19 and a reasonable recovery period thereafter. The parties are to negotiate towards agreeing to a reduction in rent during this period (through the use of rent waivers and deferrals) that are proportionate to the tenant's reduction in trade. At least half of that reduction in rent must be in the form of rent waivers (unless agreed) with rental deferrals to be capitalised over the greater of the remainder of the lease or 24 months. No fees, charges or interest can be charged by the landlord and the landlord is prohibited from drawing on any security bond.
Under the Biosecurity (Human Biosecurity Emergency) (Human Coronavirus with Pandemic Potential) (Essential Goods) Determination 2020 (the Biosecurity Determination), the Federal Government has provided further clarification about the ways in which a company or organisation may engage in “price gouging” behaviour and has provided new enforcement powers to the ACCC to prevent and deter such behaviour from taking place.
Under Australian legislation, “price gouging” is not illegal in and of itself. Instead, depending on its nature and particular circumstances, price gouging may amount to breaches of the Competition and Consumer Act 2010 (Cth) if it amounts to either misleading and deceptive, or unconscionable, conduct.
Pursuant to provisions of the Biosecurity Determination, price gouging of ‘essential goods’ will be founded if:
Biosecurity Determination defines ‘essential goods’ to include:
The Australian Competition and Consumer Commission (ACCC) is the federal agency responsible for enforcing the Competition and Consumer Act 2010 (Cth) and associated legislation, as well as the general competition, fair trading and regulation of national infrastructure around corporations and businesses. Biosecurity Determination gives various enforcement powers to the ACCC as well as law enforcement offers which includes requirements for persons to surrender ‘essential goods’ if the law enforcement officer suspects that the person has been engaged, or intends to engage, in price gouging. If the goods are surrendered, they will be destroyed or given away within 21 days unless the person satisfies the law enforcement officer that they are not engaged in price gouging.
The ACCC has established an internal COVID-19 Taskforce which is already communicating with businesses to educate them on cancellation, refunds and suspension of services during COVID-19. It is expected that the price gouging powers under the Biosecurity Determination will also now form a part of the Taskforce’s general investigatory and enforcement mandate.
Ultimately, the introduction of the Biosecurity Determination (amongst many others), is designed to ensure that the Australian economy remains competitive in which seeking to address any behaviour by businesses that seeks to exploit the crisis either to enhance their commercial profitability or to harm consumers.
Private hospitals and health care facilities in New South Wales are accredited and licensed under the Private Health Facilities Act 2007 (NSW) (PHFA).
PHFA defines these premises as being places where patients are admitted, provided with medical, surgical or other prescribed treatment and then discharged. PHFA does not apply to any public institutions such as hospitals and nursing homes.
There are currently 19 prescribed classes of health services which private health facilities can provide. These range from general medical and emergency services to mental health and radiotherapy services.
The Bill allows the Secretary to grant certain exemptions to the licensees of Private Health Facilities. These include an exemption from complying with licencing conditions (such as with the appointment of an appropriately constituted medical advisory committee, insurance provisions, and other regulations) as well as from the requirement to maintain a medical advisory committee of at least 5 medical practitioners.
The bases upon which the Secretary can grant an exemption can only be satisfied if the Secretary considers that:
The amendments to PHFA will remain in place for a period of 12 months. Thereafter, they will be automatically repealed, subject to further amendment.
Public Health Act 2010 (NSW)
The Bill also amends various provisions of the Public Health Act 2010 (NSW) (Public Health Act).
The Pucblic Health Act provides that public health orders made by an authorised medical practitioner can last beyond the automatic expiry period of three days.
In addition the Public Health Act also permits police officers to arrest any person if the officer suspects that the person is contravening a public health order related to the COVID-19 pandemic.
As with the amendments to the PHFA, the amendments to the Public Health Act will remain in place for 12 months before being automatically repealed.
The Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 (Cth), introduced into Parliament on 8 April 2020 will introduce a $1,500 a fortnight JobKeeper payment per employee to support businesses to retain employees. The payments are designed to subsidise the wages of full time, part time and casual employees (who have been employed on a regular basis for longer than 12 months) that were employed as at 1 March 2020. This includes employees who have subsequently been stood down. This will also extend to cover certain categories of visa holders. Under the JobKeeper program, businesses will be eligible to receive the payment where:
the business has a turnover of less than $1 billion and suffers a 30% drop in turnover for at least a month; or
the business has a turnover of more than $1 billion and suffers a 50% drop in turnover for at least a month; and
the business is not subject to a Major Bank Levy.
Registered charities will also be eligible for the program if they have suffered a 15% reduction in their turnover.
The Coronavirus Economic Response Package Omnibus Act 2020 (Cth) provides a temporary amendment to Australia's bankruptcy and insolvency regime. Between 25 March 2020 and at least 25 September 2020, these amendments provide a temporary increase to the monetary thresholds required for a creditor to issue a statutory demand against a company and a bankruptcy notice against an individual to AUD20,000. The time period in which a company and individual must respond to these notices has also been increased from 21 days to 6 months. The failure to respond to these notices is considered a presumption of insolvency in the case of companies, while allowing bankruptcy proceedings to be commenced against individuals.
The Coronavirus Economic Response Package Omnibus Act 2020 (Cth) also provides a temporary 6 months 'safe haven' from insolvent trading liabilities for directors that cause a company to incur a debt in the "ordinary course of the company's business" while insolvent (provided the debt was incurred honestly and to help continue operations through this period).
The amendments allowed the Minister for Local Government to postpone council elections in NSW scheduled for September until September 2021. This postponement, which did not happen in Queensland, will reduce the risks for both Councils and also the hosts of polling booths e.g. schools (including private ones) of potential liability if voters are exposed to COVID-19 in the course of voting, as well as eliminating the risk of exposed persons spreading COVID-19 in the course of voting. It also eliminates the potential personal liability of infected persons passing on COVID-19.
The amendments enabling council members to hold council meetings by audio visual link and for the public, where required, to be able to attend by a webcast, are also designed to reduce the risks. To be reviewed in six months.
The decisions made by the Prime Minister, all State and Territory Premiers, and the Chief Ministers (National Cabinet) are implemented by the State and Territory governments in their own regulatory arrangements. The States and Territories have made these orders and directions under their respective public health legislation. South Australia is an exception to this, as their directions are made under the Emergency Management Act 2004 (SA). Generally, these orders and directions implement the following (noting that this is not an exhaustive list):
Requirements for individuals not to leave their place of residence, subject to an exemption (such as attending work or accessing essential services);
Requirements for owners or occupiers of premises not to allow a density quotient of more than one person per 4 square metres of floor space;
Closures of certain non-essential businesses and limitations on recreational, cultural and entertainment activities;
Limitations on the number of people who can be present in an indoor or outdoor gathering;
Requirements for certain individuals to be subject to a mandatory 14 day quarantine (such as those who have returned from overseas, newly arrived interstate, or were diagnosed with COVID-19); and
Restrictions on domestic travel (such as regional travel within a State).
Unfortunately, the position is not consistent across the States and Territories, with different requirements and exemptions across the jurisdictions. This adds a layer of complexity for businesses operating nationally. Further, the States and Territories have been rapidly revoking and updating these orders and directions. New orders and directions may be passed at midnight, taking effect immediately. Businesses need to ensure that they are reviewing them frequently, if not on a daily basis, to ensure that they understand the impact these orders and directions may have on their operations.
The orders and directions can be accessed at the following State and Territory websites (as at 8 April 2020):
Finally, many States and Territories have also made amendments to their public health legislation in order to give effect to the above orders and directions. By way of example, Tasmania has expanded its laws relating to police powers for those who contravene certain provisions under the Public Health Act 1997 (Tas). Another example is Western Australia's introduction of electronic monitoring for certain people in quarantine and enhancement of the enforcement powers of authorised officers. Western Australia has also set down maximum terms of imprisonment for COVID-19 related offences. The Australian Capital Territory has similarly made provision for the issuance of fines under infringement notices that can be given for certain offences under the Public Health Act 1997 (ACT). These examples highlight the evolving regulatory response by the States and Territories to ensure that the orders and directions are enforced.
The Biosecurity (Human Biosecurity Emergency) (Human Coronavirus with Pandemic Potential) (Emergency Requirements) Amendment Determination (No. 1) 2020 (Cth)(Determination) aims to prevent the spread of COVID-19 by preventing the docking and disembarkment of passengers from cruise ships in Australian territory. The Determination took effect from 27 March 2020 and achieves this goal by directing that all foreign cruise ship leave Australian territorial waters.
They need to do so, so far as reasonably possible bearing in mind any safety concerns or the need to refuel or reprovision. They may not return before 15 June 2020.
Cruise ships may be exempted from the requirement to leave Australia by the Commissioner of Australian Border Force, but no such exemptions have been granted. One cruise ship operator has contested the requirement to leave before the Courts.