SMEs, infected with a deadlier virus?

By Atty. Eduardo Reyes III

It is most regrettable that in the wake of the more than two (2) months of lockdown in most parts of the country; and still counting in Luzon, Laguna and Cebu areas, one of the most badly-hit by the mandatory closure of businesses and stay-at-home dictates are the small and medium-sized enterprises (SMEs).

The SMEs, post-lockdown, are hobbling to get back on their feet, no thanks to RA 11469 or the “Bayanihan to Heal as One Act” which did not provide for any deferment in the payment of commercial rents and loans which continued to tick during the lockdown. Nor was there any decree of subsidy enough for salaries of staff under the employ of SMEs whom they do not have the heart not to pay, after the DOLE amelioration had been expended. And worse, after finally getting to re-open their businesses, clients and customers of SME’s are missing under the so-called “new normal”. Everyone seems flabbergasted in trying to pick-up the pieces about which they do not even know where to start.

The sad truth is that many SMEs will fold-up and die as if they have been infected by a deadlier virus. The guidelines set forth for companies to put in place health protocols and safety measures to avoid transmission within the work premises, as a precondition for re-opening their businesses, without any program to buoy their business viability, would be akin to closing the barn after the horse has left.

But the irony does not end there. Folding-up is not as simple as closing the door and walking away scot-free. Closure is a convoluted process that would involve compliance with intricate laws lest the SMEs find themselves in a deeper legal quagmire than they were in, prior to deciding to close in the first place.

Among the many legal cobwebs to be cleared are: (1) the payment of equivalent to ½ month pay for every year of service as separation pay of the employees unless the closure is “due to serious business losses” which is quite a challenge to establish; (2) the formal notice to the Social Security System (SSS), PhilHealth, Pag-IBIG Fund , or other private insurance coverages, of the termination of employment for purposes of cessation of running of coverage and concomitant payment of premiums; (3) a notice to the Bureau of Internal Revenue (BIR) in regard to the closure of the business and the settlement of all kinds of taxes due and payable for the same; (4) if the SME is a partnership or corporation, compliance with dissolution, liquidation and distribution of remaining assets as required under pertinent laws; and (5) a notice of surrender of business permit, negotiation for pre-termination of lease contract and other business contracts that were meant to subsist for a duration of time but had been severely impacted by the lockdown.

Since non-compliance with the pertinent laws on closure could entail criminal, civil or administrative liabilities, getting in sync with the law on this matter would make a lot of business sense; for otherwise, dinginess could stalk the SME’s hopes of getting back to business in the future.

The economy is surely contracting on the heels of this pandemic and the paradox is starkest for the SMEs because of their modest beginnings propelled only by a healthy courage and an abundance of hope that their country and government will not let them down.

With the seemingly inevitable folding-up of many SMEs, it could be symptomatic of many failures in our system. May the SMEs follow the law on closures particularly the entitlement of their employees to their separation pay – and perhaps a little more to get by – because the law when complied with may be legal; but once coupled with a modicum of humanity, becomes noble.