ASIC CLASS ORDER [CO 07/822]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Class Order [CO 07/822] under section 341 of the Corporations Act 2001 (the Act).
Section 341 provides that ASIC may make an order in writing in respect of a specified class of companies, registered schemes or disclosing entities, relieving any of the following persons from all or specified requirements of Parts 2M.2, 2M.3 and 2M.4 (other than Division 4) of the Act:
(a) directors;
(b) the companies, registered schemes or disclosing entities themselves;
(c) auditors of the companies, registered schemes or disclosing entities.
1. Background
Class Order [CO 07/822] amends Class Order [CO 98/98] (“the principal class order”).
The principal class order provides relief to foreign-controlled small proprietary companies which are not part of a “large group” (as defined in the principal class order) from the requirement under paragraph 292(2)(b) of the Act to prepare and lodge audited financial reports and directors’ reports with ASIC.
The principal class order currently requires companies to lodge Form 384 with ASIC for each financial year in which they apply the relief available under the class order.
2. Purpose of the class order
The new terms of the principal class order are intended to reduce the administrative burden on companies relying on the relief to lodge forms with ASIC every year.
3. Operation of the class order
Under the new terms of the principal class order:
(a) a company only needs to lodge Form 384 for each first financial year in which they start to apply the relief under the principal class order, rather than for each consecutive financial year in which they apply the relief under the class order; and
(b) a company that has applied the relief under the principal class order must lodge Form 394 when it ceases to apply the relief under the class order, except where they lodge a financial report for the financial year in which they first ceased to take advantage of the relief under the class order.
Companies will only be required to lodge Form 384 with ASIC in a financial year that does not follow a financial year in which they applied the relief. The only companies that would need to lodge Form 384 would be:
(a) a company in its first financial year which was applying the relief in that year;
(b) a company that had not applied the relief in previous financial years and was applying the relief for the first time; and
(c) a company that had applied the relief in previous financial years, but had ceased to apply the relief for a particular period and was applying the relief again for the first financial year following that period of non-application.
4. Consultation
ASIC did not engage in consultation with external parties. The changes are considered to be of a minor or machinery nature. The changes reduce the burden on companies to provide information to ASIC without affecting the quality of publicly available information.
Overview
The ASIC Class Order [CO 07/822], enacted in 2007, was introduced to streamline the administrative processes for certain companies under the Corporations Act 2001. This class order was made by the Australian Securities and Investments Commission (ASIC) under section 341 of the Act, allowing for the relief of specified requirements for a class of companies, registered schemes or disclosing entities. The primary purpose of this class order is to alleviate the administrative burden on companies by modifying the requirements for lodging forms with ASIC. Specifically, it reduces the frequency with which companies must lodge Form 384, which pertains to the relief from preparing and lodging audited financial reports and directors' reports, by requiring it only in the first financial year of applying the relief and when resuming application after a period of non-application. This change is intended to simplify compliance without compromising the quality of publicly available information.
Scope and Application
The ASIC Class Order [CO 07/822], made under section 341 of the Corporations Act 2001, applies to a specified class of companies, registered schemes, and disclosing entities that are foreign-controlled small proprietary companies not part of a "large group." The primary objective of this class order is to alleviate the administrative burden on these entities by modifying the requirements for lodging reports with the Australian Securities and Investments Commission (ASIC). Specifically, the order reduces the need for companies to lodge Form 384 annually; instead, it mandates the lodging of this form only for the initial financial year in which the relief is applied. Furthermore, companies must lodge Form 394 when they cease to apply the relief, unless they lodge a financial report for the financial year in which they first ceased to take advantage of the relief. The geographic reach of this class order is national, as it pertains to companies registered under the Corporations Act 2001 throughout Australia. There are no stated exclusions or exemptions, but the relief is specifically tailored for foreign-controlled small proprietary companies that meet the defined criteria. Subordinate instruments may further detail or extend the application of this class order as necessary.
Key Provisions
ASIC Class Order [CO 07/822], made under section 341 of the Corporations Act 2001, amends Class Order [CO 98/98] to provide relief from certain reporting requirements for foreign-controlled small proprietary companies. This class order reduces the administrative burden on these companies by changing the conditions under which they must lodge forms with ASIC. Under the new terms of the order, a company only needs to lodge Form 384 with ASIC in the first financial year it applies for relief, rather than each year the relief is applied (section 3). This change simplifies the process for companies that wish to avail themselves of the reporting relief.
The obligations imposed by the class order on the relevant companies include lodging Form 384 only in the initial financial year of applying for relief, and lodging Form 394 when the company ceases to apply for relief, unless it lodges a financial report for the year in which it first ceased to take advantage of the relief (section 3(b)). These obligations aim to ensure that ASIC is informed of the initial application of relief and when a company stops applying for relief, while avoiding unnecessary annual reporting.
There are no specific offences, penalties, or civil/criminal consequences outlined in the Explanatory Statement for breach of the provisions in the class order. However, the Corporations Act 2001 contains general provisions that could be applicable to breaches of reporting requirements, which may result in civil or criminal penalties. It is important for companies to comply with the requirements of the class order to avoid any potential legal consequences under the Act.