ASIC CLASS ORDER [CO 08/15]

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 08/15] 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

Part 2M.3 of the Act requires disclosing entities to prepare and lodge audited financial reports for each half-year and each financial year.  These reports are known respectively as half-year financial reports and annual financial reports.

Under section 323D the first financial year of an entity can be any period of no longer that 18 months from the day the entity is registered, and the first half-year is the first 6 months of that year.

Where a disclosing entity has a short financial year of only a few months, it may be required by the Act to prepare and lodge a half-year financial report and an annual financial report in quick succession.

ASIC recognises that it is inappropriate and an unreasonable burden to expect an entity with a half-year which ends two months or less before the financial year end to prepare and lodge a half-year financial report.  ASIC have previously given case-by-case relief under section 340 of the Act to relieve entities from the requirement to prepare and lodge half-year financial reports in such circumstances.

2. Purpose of the class order

The purpose of the class order is to remove the need for case-by-case relief in respect of short first financial years of disclosing entities.

3.            Operation of the class order

Under the terms of the class order any disclosing entity with a first financial year of 8 months or less is relieved from the requirement to prepare and lodge a half-year financial report and directors' report for that financial year on condition that:

(a) the disclosing entity informs the market (in the case of a listed disclosing entity) or ASIC (in the case of an unlisted disclosing entity) that the entity intends to rely on the relief under the class order ; and

(b) the directors’ report for the first financial year states that the entity relied on the relief under the class order and explains the effect of the relief.

4. Consultation

ASIC consulted with ASX Limited (ASX). Under the ASX Listing Rules, a listed disclosing entity must give ASX a copy of the half-year financial report required to be lodged with ASIC.   The ASX did not object to the class order.

ASIC did not consult with other outside parties as the relief in the class order is considered to be of a minor or machinery nature.