ASIC CLASS ORDER [CO 10/545]
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 10/545] 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 10/545] amends Class Order [CO 98/1417] (the principal class order).
The principal class order provides relief to certain proprietary companies and their auditors from the requirement to have such companies' financial reports audited.
The principal class order currently requires companies to lodge Form 382 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 associated with the requirement to lodge forms with ASIC every year.
3. Operation of the class order
Under the new terms of the principal class order:
(a) companies will only need to lodge Form 382 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 relief is applied under the class order; and
(b) companies that have applied the relief under the principal class order must lodge Form 396 if and when they cease to apply the relief under the class order. The requirement only applies to companies which ceased to apply the relief after 1 July 2010, so that companies which ceased applying the relief before the requirement to lodge Form 396 came into effect do not have to lodge the Form.
Companies will only be required to lodge Form 382 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 382 would be:
(a) recently incorporated companies applying relief for their first financial year;
(b) companies which had not applied the relief in previous financial years but were applying relief for the first time; and
(c) companies that had applied relief in a previous financial year or financial years, but had ceased to apply the relief for a particular period and wished to apply the relief again for the first financial year following that period of non-application.
4. Consultation
ASIC engaged in consultation with external parties representing major users of audited financial information on the public record, who did not oppose the changes effected by [CO 10/545]. The changes are of a minor or machinery nature.
Overview
The Australian Securities and Investments Commission (ASIC) has introduced ASIC Class Order [CO 10/545] under the Corporations Act 2001 to address the administrative burden on companies, particularly proprietary companies, and their auditors who apply relief from certain audit requirements. The primary objective of this class order is to amend the existing Class Order [CO 98/1417], which previously required companies to lodge Form 382 with ASIC annually whenever they applied for relief from the audit requirements. The new class order simplifies this process by limiting the need for annual lodging of Form 382 to only the first financial year when relief is applied or when a company resumes applying relief after a period of non-application. Companies that cease applying for relief are only required to lodge Form 396 if they stop applying for relief after 1 July 2010. ASIC engaged with major users of audited financial information, who did not oppose the changes, considering them to be of minor or administrative nature.
Scope and Application
ASIC Class Order [CO 10/545] applies to proprietary companies and their auditors who previously qualified for relief under Class Order [CO 98/1417] from the requirement to have their financial reports audited. This order is made under the Corporations Act 2001, which applies to companies registered in Australia and their directors, auditors, and the Australian Securities and Investments Commission (ASIC) itself. The class order is intended to reduce the administrative burden on qualifying companies by amending the form lodging requirements. Specifically, the class order now requires companies to lodge Form 382 only for their first financial year of applying the relief, rather than every consecutive financial year. Additionally, companies that cease applying the relief must lodge Form 396 if they stop applying the relief after 1 July 2010. The changes made by this class order do not apply to companies that ceased applying the relief before this requirement came into effect. The order applies across Australia as it is a Commonwealth instrument under the Corporations Act 2001.
Key Provisions
ASIC Class Order [CO 10/545] (the Order) modifies the existing Class Order [CO 98/1417], which provides relief to certain proprietary companies and their auditors from the requirement to have their financial reports audited. The changes introduced by [CO 10/545] are designed to reduce the administrative burden on companies that rely on this relief, specifically by altering the lodgment requirements with ASIC.
Under the Order, companies that apply for relief from the need to have their financial reports audited are only required to lodge Form 382 with ASIC in their first financial year of applying the relief. This change means that companies do not have to lodge Form 382 each financial year they continue to apply the relief. Instead, they must lodge Form 396 with ASIC if and when they cease to apply the relief after 1 July 2010. This amendment is targeted at companies that wish to recommence applying the relief after a period of non-application, ensuring that only those companies initiating the relief or returning to it after a break need to submit the relevant forms.
The primary obligations imposed by the Order on companies, directors, and auditors include lodging the appropriate forms with ASIC as stipulated. For companies, this means lodging Form 382 in the first financial year they apply the relief and Form 396 if they cease applying the relief after 1 July 2010. Directors and auditors must ensure compliance with the class order requirements by facilitating the appropriate lodgment of forms as directed. Failure to comply with these obligations could result in the company being subject to the full requirements of Parts 2M.2, 2M.3 and 2M.4 of the Corporations Act 2001, which would necessitate an audit of the financial reports.
There are no specific offences, penalties, or civil/criminal consequences outlined in the Explanatory Statement for breach of the Order itself. However, non-compliance with the Corporations Act 2001 requirements, such as failing to lodge the necessary forms or incorrectly applying for relief, could result in legal repercussions. These could include financial penalties, legal proceedings, or other enforcement actions taken by ASIC against the company, directors, or auditors involved. The potential penalties for breaches of the Corporations Act would depend on the specific nature and severity of the non-compliance.