I consider that the definition of ‘small business’ in the 2019 Banking Code is too complicated and too confined in its reach. The definition advanced in the Khoury Review, which would have had the Banking Code govern loans to any business (or group) employing fewer than 100 full time equivalent employees, where the loan applied for was less than $5 million, is preferable to the three–part test now set out in the 2019 Banking Code. As it stands, satisfying the three-part test requires: annual turnover of less than $10 million, fewer than 100 full‑time employees, and less than $3 million total debt to all credit providers (including amounts undrawn under existing loans, any loan being applied for and the debt of all of its related entities that are businesses).[1] I see no reason to doubt Mr Khoury’s evidence that adopting the test he proposed would have a relatively small effect, extending coverage of the provisions to another 10,000 or 20,000 businesses.[2] I recommend that the ABA amend the definition of ‘small business’ in the 2019 Banking Code of Practice to adopt the definition proposed in the Khoury Review.
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Recommendation 1.10 – Definition of ‘small business’ The ABA should amend the definition of ‘small business’ in the Banking Code so that the Code applies to any business or group employing fewer than 100 full-time equivalent employees, where the loan applied for is less than $5 million. |
[1] 2019 Banking Code cl 1.
[2] Transcript, Philip Khoury, 21 May 2018, 2024–9.