ASIC Class Order [CO 08/618]

Administered by Department of the Treasury

Legislation au F2008L03055 Not in force Legislative Instrument

Select Document

ASIC CLASS ORDER [CO 08/618]

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 08/618] under s.341(1) of the Corporations Act 2001 (the Act).

Subsection 341(1) provides that 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

ASIC Class Order [CO 98/1418] “Wholly-owned entities” under s.341(1) relieves wholly-owned subsidiaries from the requirement to prepare financial reports and directors’ reports under Chapter 2M of the Act where those subsidiaries enter into a deed of cross guarantee with their holding entity. Conditions for relief include preparation of consolidated financial statements by the holding entity.

2. Purpose of the class order

Three minor issues have been identified in relation to the operation of [CO 98/1418]:

(a) [CO 98/1418] requires asset values in the holding entity’s consolidated financial statements that may be inconsistent with the values required under the Act.

Condition (h)(i) of [CO 98/1418] requires the holding entity’s consolidated financial statements to show asset values no greater than those that would appear in the financial reports of the subsidiaries. That condition does not allow for adjustments made to asset values on consolidation in accordance with the requirements of the accounting standards that apply to holding entity reports under Chapter 2M of the Act. For example, where the holding entity has acquired a pre-existing company, the accounting standards require the assets of the newly acquired company to be shown at fair values in the consolidated financial statements, even though the assets may remain at depreciated cost to the subsidiary in the subsidiary’s own financial report. This is an unintended consequence.

Condition (h)(i) is no longer necessary in light of changes in accounting standards in recent years. Accounting standards contain new impairment tests for assets in both single entity and consolidated financial statements.

(b) [CO 98/1418] does not allow for the possibility of new trustee being substituted for the trustee under the deed.

Relief is not available under [CO 98/1418] where a deed of cross guarantee is changed in a manner other than specified in condition (s) of that class order. ASIC’s pro forma deed of cross guarantee (ASIC Pro Forma 24) requires a trustee to be appointed to act in the interests of creditors. Clause 7.5 of that pro forma deed specifically allows for deeds to be varied to substitute one trustee for another. However, the substitution of a trustee specified in the deed for another trustee is not an allowable deed change under condition (s). This is an unintended consequence.

(c) [CO 98/1418] could provide greater clarity as to when comparative information is to be presented in the additional disclosure required in the holding entity’s consolidated financial statements.

Condition (i) of [CO 98/1418] requires certain financial information to be presented in the notes to the consolidated financial statements of the holding entity. The information is specified in the condition and in the Schedule to the order and includes a requirement for comparative information for the previous year. Greater clarity could be provided as to whether comparative information is required where the holding entity was not a party to a deed of cross guarantee in the previous year.

3. Operation of the class order

Class Order [CO 08/618] “Variation to wholly-owned entities class order” varies [CO 98/1418] by:

(a) removing condition (h)(i) so that asset values in the holding entity’s consolidated financial statements are determined in accordance with accounting standards;

(b) allowing for the substitution of one trustee for another trustee under condition (s) as contemplated by the pro forma deed of cross guarantee; and

(c) providing greater clarity as to when comparative information is required in note disclosures required for the holding entity’s consolidated financial statements.

4. Consultation

As [CO 08/618] is of a minor or machinery nature and does not substantially alter existing arrangements, ASIC did not undertake any consultation with stakeholders before that class order was made.

Overview

The Australian Securities and Investments Commission (ASIC) has issued ASIC Class Order [CO 08/618] under the Corporations Act 2001 to address minor issues with the previous class order, [CO 98/1418]. This new order provides relief to wholly-owned subsidiaries from certain financial reporting requirements under Chapter 2M of the Act, provided the subsidiaries enter into a deed of cross guarantee with their holding entity and the holding entity prepares consolidated financial statements. The primary purpose of this order is to rectify unintended consequences identified in the previous order, such as inconsistencies in asset values due to changes in accounting standards, the inability to substitute trustees under the deed of cross guarantee, and lack of clarity on the presentation of comparative information in consolidated financial statements. The order was made by ASIC without prior consultation as it does not substantially alter existing arrangements.

Scope and Application

The ASIC Class Order [CO 08/618] applies to wholly-owned subsidiaries that enter into a deed of cross guarantee with their holding entities under the Corporations Act 2001. This class order relieves these subsidiaries from certain financial reporting requirements, specifically those outlined in Parts 2M.2, 2M.3, and 2M.4 of the Act. The relief provided is conditional on the preparation of consolidated financial statements by the holding entity. The order is issued under the authority of section 341(1) of the Corporations Act and is designed to address minor operational issues identified in the earlier Class Order [CO 98/1418]. It is applicable nationally, with its provisions extending to all companies, registered schemes, and disclosing entities within the Commonwealth of Australia. The order does not introduce any new exclusions or exemptions but rather refines existing conditions to better align with contemporary accounting standards and practices. Subordinate instruments may further extend or clarify the application of this class order.

Key Provisions

The key operative sections of ASIC Class Order [CO 08/618] include the variations made to the existing Class Order [CO 98/1418] (section 3). The new order removes condition (h)(i) which previously required asset values in the holding entity's consolidated financial statements to be no greater than those that would appear in the subsidiaries' financial reports. Instead, asset values in the consolidated financial statements are now to be determined in accordance with accounting standards (section 3(a)). Additionally, the new order allows for the substitution of one trustee for another under the deed of cross guarantee, as allowed by the ASIC Pro Forma 24 (section 3(b)). Finally, it provides clarity on the requirement for comparative information in the consolidated financial statements, specifying when such information should be presented (section 3(c)). The obligations and requirements imposed by the Act on the parties governed by this class order include the preparation of consolidated financial statements by the holding entity, in accordance with the accounting standards (section 3(a)). The holding entity must also ensure that any substitution of trustees under the deed of cross guarantee is handled in accordance with the provisions of the ASIC Pro Forma 24 (section 3(b)). Furthermore, the holding entity is required to present comparative information in the consolidated financial statements where specified, as clarified by the new order (section 3(c)). In terms of offences, penalties, or consequences for breach, the explanatory statement does not explicitly detail the specific penalties for non-compliance with the class order. However, given that the order is made under section 341(1) of the Corporations Act 2001, it is likely that breaches of the order could result in civil or criminal penalties, as outlined in the relevant sections of the Act. These penalties could include fines, imprisonment, or both, depending on the severity of the breach and the discretion of the court. It is important for the governed entities to adhere to the requirements of the class order to avoid any potential legal repercussions.

Area of Law: Corporate Law & Governance
Instrument: Order
Concepts: Delegated & Subordinate Legislation; Licensing & Registration; Reporting & Disclosure Obligations

Interactions

Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.

Legislation content