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Small business legislative reforms and how they will affect your business.

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The State Government will legislate reforms to the small business sector.

These reforms to commence in 2011 include the introduction of a Small Business Commissioner and new legislation to protect franchisees.

The Minister’s press release announced “Good faith dealings and unconscionable conduct will be put into law in SA for the first time. If people act without good faith the franchisee will have a way of address through the laws. If a franchisee is bullied, is being coerced, because of a contract they have signed, now they have some redress”.

The new legislation will in part be based on the lapsed private members’ Franchising (South Australia) Bill 2009 introduced by Mr Tony Piccolo MP (“the Piccolo Bill”)

The definition of good faith may reflect the Piccolo Bill which defines it as “ to act fairly, honestly, reasonable and in a cooperative manner”.  A breach is likely to result in civil penalties.

The definition of good faith and unconscionable conduct will be broader than what currently appears in the Competition and Consumer Act 2010 (Cth).

To date, no legislature has passed a law defining ‘acting in good faith’. Courts have recognised that this is a complex issue as there are competing interests of the franchisee, franchisor, investors and other franchisees in the system.

The legislation will empower the Small Business Commissioner to issue fines and penalties in the enforcement of the small business laws and breaches of the  Franchising Code of Conduct.

Business owners must recognise the anticipated powers of the Small Business Commissioner and likely civil penalties, to conduct their dealings appropriately within the reforms.

DISCLAIMER: this newsletter is not intended as legal advice; no reliance is to be placed hereon.