Additional CTH Coronavirus Acts: Lending, Business Growth Fund, Support Measures

The Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Bill 2020 (Cth), Australian Business Growth Fund (Coronavirus Economic Response Package) Bill 2020 (Cth), Assistance for Severely Affected Regions (Special Appropriation) (Coronavirus Economic Response Package) Bill 2020 (Cth) and Structured Finance Support (Coronavirus Economic Response Package) Bill 2020 (Cth) were first introduced on 23 March 2020 by Federal Treasurer Josh Frydenberg, as part of a package of bills aimed to support the Australian community and economy affected by the Coronavirus.

The bills passed both houses of Parliament on the same day they were introduced, and received assent on 24 March 2020.

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 small and medium-sized enterprises (“SME entities”). Under this Act, the Treasurer, on behalf of the Commonwealth, can guarantee a loan made by a financial institution to SME entities.

In granting the guarantee the Treasurer must be satisfied that doing so will assist in dealing with the economic impacts of the coronavirus. The guarantee must also only be given to a loaning financial institution that is defined as either:

• An authorised deposit-taking institution (“ADI”) for the purposes of the Banking Act 1959 (Cth), or
• A non-ADI lender within the meaning of the Banking Act 1959 (Cth)

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.

The Treasurer also has powers under section 8 of the Guarantee of Lending Act to release new legislative rules in order to prescribe additional matters to give effect to these measures. The legislative rules will include matters such as:

• Defining eligible SME entities
• Defining eligible financial institutions
• Proportion of risk to be taken on by the government
• Eligible types and terms of loans
• Maximum amount of an individual eligible loan

The 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”).

As explained in section 9 of the Business Growth Fund Act:

A Corporations Act company is defined under section 5 to be an incorporated company, as per the meaning of the Corporations Act 2001 (Cth). The amount to be invested into the Growth Fund is $100 million.

The purpose of the Growth Fund will be to offer:

• Patient equity capital to growing established companies
• Strategic support to companies to help their reach their growth potential

Established Australian businesses will be eligible for capital investments by the Growth Fund ranging between $5 million to $15 million, if they can demonstrate three years of revenue growth and profitability, as well as a clear growth vision.

Assistance for Severely Affected Regions

The Assistance for Severely Affected Regions (Special Appropriation) (Coronavirus Economic Response Package) Act 2020 (Cth) (“the Assistance Act”) allocates $1 billion in funds to support regions, communities, and industry sectors that are most severely affected by the coronavirus. The funds are to focus regions and industries that are heavily reliant on tourism, agriculture, and education, which are predicted to be most severely impacted by the coronavirus.

Payments can be made in to support things such as:

• Programs to help businesses identify alternative export markets or supplies
• Promoting tourism
• Support and recovery for affected communities, regions, and industries
• Reimbursing various Commonwealth entities for fees and charges that have been waived, such as the Great Barrier Reef Marine Park Authority

Government spending made under the Assistance Act requires written agreement between the recipient and the Commonwealth, and requires the recipient to comply with the terms and conditions of the agreement.

Section 7 of the Assistance Act extends powers to the Treasurer to make legislative rules to prescribe for additional matters for the operation of the act. The legislative rules may also provide for the following:

• The circumstances in which the Commonwealth releases funds under the Assistance Act
• Amounts to be released to recipients

Support for Lending Markets

The Structured Finance Support (Coronavirus Economic Response Package) Act 2020 (Cth) (“the SFS Act”) establishes the Structured Finance Support (Coronavirus Economic Response) Fund (“the SFS Fund”) and the Structured Finance Support (Coronavirus Economic Response) Fund Special Account (“the Special Account”). The SFS Act credits the Special Account with $15 billion at the commencement of the Act, with section 13 allowing for additional credits to be made into the Special account in future.

The SFS Fund aims to ensure continued access to funding markets, and promote competition in consumer and business lending markets. The Government will be making targeted investments within the structured finance markets in order to ensure that smaller lenders can maintain access to funding during the coronavirus pandemic. The SFS Fund’s investments will focus on securitised loans, including residential mortgages written by smaller lenders.

However, the SFS Fund can invest in any authorised debt security, or any other investment to be prescribed by additional rules under the SFS Act. An authorised debt security is defined in section 12(4) of the SFS Act as:

Section 20 of the SFS Act extends powers to the Treasurer to make legislative rules to prescribe for additional matters for the operation of the act.

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Assistance for Severely Affected Regions (Special Appropriation) (Coronavirus Economic Response Package) Act 2020 (Cth), Bill and supporting documents available from TimeBase’s LawOne Service

Australian Business Growth Fund (Coronavirus Economic Response Package) Act 2020 (Cth), Bill and supporting documents available from TimeBase’s LawOne Service

Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Act 2020 (Cth), Bill and supporting documents available from TimeBase’s LawOne Service

Structured Finance Support (Coronavirus Economic Response Package) Act 2020 (Cth), Bill and supporting documents available from TimeBase’s LawOne Service