ASIC releases new protections for small businesses
The Australian Securities and Investments Commission (ASIC) has released guidelines about new protections for small businesses from "unfair contract terms" with the new legislation set to be in force from 12 November this year.
ASIC Commissioner, Greg Tanzer, said the new provisions built on the success of unfair contract term protections extended to consumers — which are currently applied to standard form consumer contracts — and was a positive step for small businesses.
"Small businesses, like consumers, have limited market power and a reduced ability to vary ‘take it or leave it' standard form contracts," Tanzer said.
"The consumer unfair contract term protections get positive outcomes for consumers and ASIC anticipates being able to do the same for small business, once the protections are extended to them."
ASIC confirmed the protections already apply to standard form consumer contracts and will now apply to standard form small business contracts in addition to all standard form contracts entered into or renewed on or after 12 November 2016.
This will be enforced in situations where, at the time of entering into the contract, at least one party to the contract is a business employing less than 20 people and where the contract is worth up to $300,000 in a single year or $1 million if the contract runs for more than a year.
The protections will not cover insurance contracts or the constitutions of companies, managed investment schemes or other kinds of bodies.
Before the law comes into effect, ASIC confirmed it expects businesses to review their standard form small business contracts to remove any terms that could be considered "unfair" to ensure compliance.
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