Tuesday 17 July 2007 LAWFUEL – The Legal Newswire – The Australian Securities and Investments Commission (ASIC) today announced additional relief from the requirement to prepare and lodge financial reports for some companies. ASIC Class Order [CO 07/505] Variation and revocation of financial reporting instruments amends existing ASIC relief to reflect recent changes in the ‘large/small test’. The ‘large/small test’ is the basis for determining which proprietary companies are required to prepare and lodge financial reports under the Corporations Act (the Act).
The changes made by [CO 07/505] affect certain small proprietary companies controlled by foreign companies and registered foreign companies. Background A proprietary company that is large for a financial year is generally required to prepare and lodge financial reports under Chapter 2M of the Act.
Following amendments made by the Corporations Legislation Amendment (Simpler Regulatory System) Act (SRS Act), a company is large if it meets at least two of three criteria: (a) consolidated revenue for the financial year of the company and the entities it controls (if any) is $25 million or more; (b) the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls (if any) is $12.5 million or more; (c) the company and the entities it controls (if any) have 50 or more employees at the end of the financial year. A proprietary company that does not meet at least two of these criteria is considered small. The company generally is not required to prepare and lodge financial reports unless it is controlled by a foreign company. The revenue and asset criteria were previously $10 million and $5 million, respectively. The increases in these criteria reduce the number of proprietary companies that are required to prepare and lodge financial reports. Small proprietary companies controlled by a foreign company ASIC Class Order [CO 98/0098] Small proprietary companies which are controlled by a foreign company but which are not part of a large group relieves small proprietary companies that are controlled by a foreign company from the requirement to prepare and lodge a financial report provided that it is not part of a ‘large group’. The ‘large group’ test applies the amounts from the ‘large/small test’ to an aggregation of a proprietary company, its’ siblings in Australia and their controlled entities. Class Order [CO 07/0505] revises the amounts in the ‘large group’ test, consistent with the changes made to the ‘large/small test’ by the SRS Act.
Page 2 of 2 Relief under [CO 98/0098] is normally only available where the directors have resolved to take advantage of the relief no more than three months before the commencement of the financial year and notice of that resolution has been lodged for the public record before the commencement of the financial year using Form 384. For financial years ending 28 June 2007 to 30 June 2008, Class Order [CO 07/0505] allows Form 384 to be lodged by four months after year end or 31 October 2007, whichever occurs first. Registered foreign companies ASIC Declaration [CO 02/1432] Registered foreign companies – financial reporting requirements relieves a small registered foreign company that is subject to similar restrictions to an Australian proprietary company from the requirement to lodge financial statements with ASIC provided that: (a) it is not part of a large group; or (b) it is controlled by a parent which consolidates the registered foreign company for the entire financial year and lodges its financial statements with ASIC. Relief is only available if the registered foreign company is not required to prepare financial statements in its place of origin. The ‘large group’ test is the same as the test in Class Order [CO 98/0098]. The test has been amended by Class Order [CO 07/0505], consistent with the corresponding changes in amounts under the SRS Act. Declaration [CO 02/1432] contains no conditions concerning directors’ resolutions or lodgement of a notice prior to commencement of the financial year. The amended relief will be available where a financial report has not yet been lodged for the 2007 calendar year and all of the conditions of [CO 02/1432] are met. Other consequential changes With the change in the large/small test, [CO 07/505] also makes some consequential amendments have also been to ASIC Class Order [CO 98/0096] Synchronisation of financial year with foreign parent company.
Class Orders [CO 05/0083] Timing of auditor’s independence declaration and [CO 05/0910] Auditor’s independence declaration — exemption have been revoked as the relief they provided has been incorporated into the Act by the SRS Act. Other matters Class Order [07/505] commences once it has been registered under the Legislative Instruments Act 2003 and has been gazetted. This is expected to occur within the next couple of weeks from the publication of this information release. Class Order [CO 07/505] is available from the ASIC website at www.asic.gov.au or from ASIC’s Infoline by calling 1300 300 630. For further information contact: Doug Niven Deputy Chief Accountant Telephone: 02 9911 2079 Mobile: 0411 549 278 Danielle Huck ASIC Media Unit Telephone: 03 9280 3407 Mobile: 0417 540 769