ASIC Class Order [CO 05/542]

Overview

The ASIC Class Order [CO 05/542], enacted in 2005, serves to address the need for clarity and certainty in the certification requirements for legal practitioners when companies enter into deeds of cross guarantee. This order is a variation of Class Order 98/1418, which originally relieved wholly-owned companies from the obligation to prepare and lodge audited financial statements under the Corporations Act 2001, provided certain conditions were met, including the execution of a certificate by a legal practitioner. The primary objective of Class Order 05/542 is to refine the criteria for the legal practitioner's certificate to ensure it is both clear and practical, thereby assisting lawyers in discharging their duties accurately. This class order was made by the Australian Securities and Investments Commission under the authority granted by the Corporations Act 2001, and it does not involve stakeholder consultation due to its minor and procedural nature.

Scope and Application

The ASIC Class Order [CO 05/542] pertains to a specified class of companies, registered schemes, and disclosing entities that may be relieved from certain requirements under the Corporations Act 2001. This order specifically targets wholly-owned entities that enter into deeds of cross guarantee with their parent entities and meet certain conditions. The primary aim of the order is to modify the level of certification required from legal practitioners when certifying the execution of such deeds. The Class Order applies to the legal practitioners providing certification for the execution of deeds of cross guarantee, particularly those involving wholly-owned entities. Geographically, the order applies across Australia, given that it is a class order made by the Australian Securities and Investments Commission under the Corporations Act 2001, which has national jurisdiction. The order does not explicitly state any exclusions, but it is inherently limited to the specified class of entities as outlined in the Act and the order itself. The scope of the order can potentially be extended through subordinate instruments, though this particular order is machinery in nature and no consultation with stakeholders was undertaken before it was made.

Key Provisions

The main operative sections of the ASIC Class Order [CO 05/542] focus on modifying the certification requirements for legal practitioners when companies enter into deeds of cross guarantee. Specifically, subsections 341(1) of the Corporations Act 2001 empower ASIC to create orders that relieve certain entities, their directors, and auditors from specified requirements under Parts 2M.2, 2M.3, or 2M.4 of the Act. This class order, 05/542, varies the previous Class Order 98/1418 to clarify the certification process for legal practitioners involved in deeds of cross guarantee. The order mandates that legal practitioners certify the due execution of the deeds, with different standards for companies and non-companies. Under the order, a legal practitioner must certify that for each company party, the deed appears to be signed or sealed in accordance with section 127 of the Corporations Act, and the practitioner has no reason to suspect improper execution. For non-company parties, the practitioner must, after making reasonable inquiries, form an opinion that the deed has been properly executed by each party. This clarification aims to reduce ambiguity and provide certainty for legal professionals executing these certificates. The obligations imposed by the Class Order [CO 05/542] on the parties and entities it governs include ensuring that any new deed of cross guarantee or assumption deed is accompanied by a certificate from a legal practitioner. This certificate must meet the specific criteria outlined in the order. For companies, the certification process is relatively straightforward, requiring the practitioner to verify the deed's compliance with section 127 of the Act. For non-companies, the practitioner must conduct reasonable inquiries to be satisfied that the deed has been properly executed by all non-company parties. The consequences for non-compliance with the provisions of the Class Order [CO 05/542] are not explicitly detailed in the explanatory statement. However, given the nature of ASIC's regulatory oversight and the Corporations Act's broad enforcement mechanisms, breaches could lead to various civil or criminal penalties. The specific penalties would depend on the nature and severity of the breach, but they could include fines, legal action, or other regulatory sanctions. The explanatory statement does not specify maximum penalties, but such details would typically be found in the relevant sections of the Corporations Act.