ASIC CLASS ORDER [CO 05/0638]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
Subsections 341(1) - Order
Subsections 341(1) of the Corporations Act 2001 (the Act) provides that the Australian Securities and Investments Commission (ASIC) may make an order in respect of a specified class of companies, registered schemes or disclosing entities that relieves the entities in question, their directors and/or auditors from specified requirements of Parts 2M.2, 2M.3 or 2M.4 (other than Division 4) of the Act.
1. Background - grandfathering
Under ss.319(4) to (6) of the Corporations Law (as preserved in the Corporations Act through the transition provision in the table in s.1408(7) of the Act), certain large proprietary companies are not required to lodge financial reports with ASIC if they meet certain conditions. Commonly referred to as “grandfathered” large proprietary companies, these companies are required to have their financial reports audited before the reporting deadlines specified in Chapter 2M of the Act in order to maintain their exemption from lodging financial reports.
2. Background – adoption of AIFRS
Financial reports of companies, registered schemes and disclosing entities under Chapter 2M of the Act will be required to be prepared in accordance with the Australian equivalents of International Financial Reporting Standards ("AIFRS") for the first time for years commencing on or after 1 January 2005.
Class Order [CO 05/0637] “Additional month for first financial reports under AIFRS” pursuant to s.341(1) of the Act allows non-disclosing entities (other than small proprietary companies that prepare financial reports pursuant to a shareholder direction under s.293) an additional month to distribute their financial report for a year commencing from 1 January 2005 to 31 December 2005 (inclusive) to members and lodge it with ASIC.
In the absence of further ASIC relief, “grandfathered” companies that take advantage of [CO 05/637] would not meet a condition for retaining their “grandfathered” status. They would then be required to lodge its financial reports in the year concerned and all future years.
4. Class Order [CO 05/0638] “Anomalies preventing certain large proprietary companies from being grandfathered”
Class Order [CO 05/0638] “Anomalies preventing certain large proprietary companies from being grandfathered” replaces Class Order [CO 98/0099] “Anomalies preventing certain large proprietary companies from being grandfathered”. [CO 05/0638] replicates and continues the relief provided by [CO 98/0099] to allow certain large proprietary companies to retain their "grandfathered" status despite not having met the "grandfathering" conditions in particular circumstances.
In addition, [CO 05/0638] provides minor and machinery relief to allow companies to retain their "grandfathered" status despite taking advantage of ASIC relief providing an additional month to complete their financial reporting obligations for a year commencing from 1 January 2005 to 31 December 2005 inclusive.
5. Consultation
As [CO 05/0638] is minor and machinery in nature, ASIC did not undertake any consultation with stakeholders before that class order was made.