ASIC Class Order [CO 14/885]

Administered by Department of the Treasury

Legislation au F2014L01778 Not in force Legislative Instrument

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ASIC CLASS ORDER [CO 14/885]

 

EXPLANATORY STATEMENT

 

 

Prepared by the Australian Securities and Investments Commission

 

Corporations Act 2001

 

The Australian Securities and Investments Commission (ASIC) makes Class Order [CO 14/885] under subsection 341(1) of the Corporations Act 2001 (the Act).

 

Subsection 341(1) provides that ASIC may make an order in writing in respect of a specified class of companies, registered schemes or disclosing entities, relieving directors, the companies, registered schemes or disclosing entities themselves, or auditors of the company, registered schemes or disclosing entities, from any of the requirements of Parts 2M.2, 2M.3 and 2M.4 (other than Division 4) of the Act.

This class order is an amending instrument.  Under subsection 33(3) of the Acts Interpretation Act 1901 (as in force as at 1 January 2005 and as applicable to the relevant powers because of section 5C of the Act), where an Act confers a power to make an instrument, the power includes a power exercisable in the like manner and subject to the like conditions (if any) to amend the instrument.

 

1.  Background

 

Accounting Standard AASB 2011-4 deleted certain individual key management personnel disclosures from AASB 124: Related Party Disclosures (AASB 124) as of 1 July 2013.  The relevant disclosures were determined to be more in the nature of governance disclosures that are better dealt with as part of the Act and should be reported on in an entity’s remuneration report as opposed to in the notes to the financial statements.

 

The requirement to include the disclosures in the remuneration report was introduced into the Corporations Regulations 2001 (the Corporations Regulations) by the Corporations and Related Legislation Amendment Regulation 2013 (No.1) (the first amending regulation).

 

The new disclosures were included in subregulation 2M.3.03(1) and were effective for remuneration reports applying to financial years beginning on or after 1 July 2013.

 

Two issues arise with respect to the first amending regulation.

 

Firstly, the original requirements in AASB 124 were specifically restricted to requiring disclosure of equity instruments (such as shares and options) issued or issuable by the disclosing entity (such as a listed company) and any of its subsidiaries. The first amending regulation omitted to restrict the regulations to those equity instruments issued or issuable by the disclosing entity and its subsidiaries.

 

The first amending regulation therefore has the effect of requiring a director to disclose in a remuneration report all of his or her personal shareholdings in any company (where provided as remuneration), even those holdings unrelated to the company the remuneration report is being prepared for. This consequence appears unintentional as the Explanatory Statement to the first amending regulation makes it clear that intention was to directly transplant the requirements from AASB 124 into the Corporations Regulations for the purpose of related party disclosure.

 

Secondly, AASB 124 required the disclosures in relation to the equity instruments being disclosed to be separated into each class of equity instrument. The requirement for separate class disclosure was also omitted from subregulation 2M.3.03(1) of the Corporations Regulations. The loss of this more granular disclosure could detract from the informational value of the disclosure.

 

ASIC Class Order [CO 14/632] (the principal class order) was made in June 2014 to address these issues on an  interim basis pending further amendments to the Corporations Regulations. The principal class order applies in relation to financial years ending on or before 30 September 2014.

 

In November 2014, the Department of the Treasury released for public consultation an exposure draft of Corporations Amendment (Remuneration Disclosures) Regulation 2014 (the exposure draft regulations). These exposure draft regulations will address, among other things, the issues addressed by the principal class order.  The exposure draft regulations indicate that the amendments will apply in relation to financial years ending on or after the day the amending regulation commences. The exposure draft regulations are unlikely to commence until February or March 2015.

 

2. Purpose of the class order

 

The purpose of this amending class order is to address the gap between the likely commencement date of the exposure draft regulations (including the financial years to which those foreshadowed amendments will apply) and the current operation of the principal class order (including the financial years to which it currently applies).

 

In particular, the amending class order will provide certainty to disclosing entities with financial years that end on 31 December 2014.

 

3. Operation of the class order

 

This amending class order amends the principal class order by extending, for a period of 6 months, the operation of the principal class order so that it will apply in relation to financial years ending on or before 31 March 2015.

 

4. Consultation

 

ASIC consulted with the Department of the Treasury before making this class order.
 

ASIC did not engage in further consultation on the basis that the amendments foreshadowed by the exposure draft regulations were the subject of public consultation during November – December 2014  and that this amending class order extends the existing relief for an interim period of 6 months to cover the period until the amendments foreshadowed by the exposure draft regulations become operative.

 

 


 

Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

ASIC Class Order [CO 14/885]

 

This class order is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview of the class order

 

The Corporations Act 2001 requires disclosing entities to prepare a directors’ report as part of their financial report which includes a report on the remuneration of key management personnel.

 

ASIC Class Order [CO 14/632] was made by ASIC to address drafting anomalies in key management personnel disclosure requirements that were moved from accounting standard AASB 124 Related Party Disclosures (AASB 124) into the Corporations Regulations 2001 for financial years starting on or after 1 July 2013.

This class order amends ASIC Class Order [CO 14/632] by extending its operation for a further interim period of 6 months, pending the commencement of the amendments foreshadowed by the Corporations Amendment (Remuneration Disclosures) Regulation 2014 released as exposure draft regulations in November 2014.

 

Human rights implications

 

This class order does not engage any of the applicable rights or freedoms.

 

Conclusion

 

This class order is compatible with human rights as it does not raise any human rights issues.

Overview

The Australian Securities and Investments Commission (ASIC) Class Order [CO 14/885] was enacted in 2014 under the Corporations Act 2001 to address interim issues arising from the transition of key management personnel disclosure requirements from the accounting standard AASB 124 to the Corporations Regulations 2001. This change, effective from 1 July 2013, inadvertently led to broader disclosure requirements than intended, necessitating the introduction of ASIC Class Order [CO 14/632]. The purpose of this amending class order is to bridge the gap between the existing relief provided by the principal class order and the anticipated commencement of the Corporations Amendment (Remuneration Disclosures) Regulation 2014, extending the relief period by six months to ensure continuity and compliance for disclosing entities with financial years ending on or before 31 March 2015. This extension provides necessary certainty and aligns with the forthcoming regulatory changes.

Scope and Application

The ASIC Class Order [CO 14/885] under the Corporations Act 2001 serves to extend the operation of the principal class order, ASIC Class Order [CO 14/632], for an additional six months to provide interim relief to disclosing entities with financial years ending on or before 31 March 2015. The primary purpose of this class order is to address unintended consequences arising from the first amending regulation, which inadvertently broadened the scope of disclosure requirements beyond equity instruments issued or issuable by the disclosing entity and its subsidiaries. This extension is necessary to bridge the gap until the anticipated amendments, outlined in the Corporations Amendment (Remuneration Disclosures) Regulation 2014, are likely to come into effect in February or March 2015. The class order applies to disclosing entities, including companies and registered schemes, requiring them to prepare remuneration reports that include specified key management personnel disclosures. This regulation is instrumental in ensuring that these entities comply with the legislative intent while awaiting the final regulatory changes. ASIC has affirmed that this class order is compatible with human rights as it does not engage any of the applicable rights or freedoms, thereby maintaining its alignment with the human rights standards recognised in international instruments.

Key Provisions

The ASIC Class Order [CO 14/885], made under the Corporations Act 2001, extends the operation of the principal class order [CO 14/632] for a period of six months, until 31 March 2015. This amendment is designed to provide interim relief for disclosing entities with financial years ending on or before 31 March 2015, until the Corporations Amendment (Remuneration Disclosures) Regulation 2014 (the exposure draft regulations) becomes effective. The primary purpose of the class order is to address drafting anomalies in the key management personnel disclosure requirements that were moved from accounting standard AASB 124 to the Corporations Regulations 2001, specifically concerning the disclosure of equity instruments in remuneration reports. The obligations imposed by the class order on disclosing entities are to ensure that remuneration reports for financial years ending on or before 31 March 2015 continue to comply with the requirements as outlined in ASIC Class Order [CO 14/632]. This includes accurately reporting on the remuneration of key management personnel, ensuring that the disclosures align with the intended scope and granularity as originally intended under AASB 124, despite the issues identified in the first amending regulation. Breach of the provisions set out in this class order could lead to regulatory scrutiny and potential enforcement actions by ASIC. The penalties for non-compliance with the Corporations Act 2001 can include substantial fines and, in severe cases, criminal charges for individuals found to have intentionally contravened the Act. For corporate entities, penalties may include fines up to a significant multiple of the financial gain or loss caused by the contravention. The maximum penalties are determined by the severity of the breach and the extent of any harm caused, ensuring that there are robust deterrents against non-compliance.

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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.