ASIC Class Order [CO 98/1416]

Overview

The ASIC Class Order [CO 98/1416], enacted in 1998, was introduced under the Corporations Act 2001 to address the gap in requirements for comparative financial information for entities that were not previously mandated to prepare such reports. This instrument was created by the Australian Securities and Investments Commission (ASIC) pursuant to subsection 341(1) of the Corporations Act 2001. The primary objective of this Class Order is to relieve certain companies, registered schemes, or disclosing entities from the need to include comparative financial information in their financial reports if they were not previously required to prepare such reports or accounts. The Class Order stipulates that a statement must be included in the notes to the financial report explaining the nature of the relief and the reasons for the absence of prior financial reports. This legislative instrument aims to ensure that entities not previously subject to reporting requirements are not unduly burdened with retrospective comparative information.

Scope and Application

ASIC Class Order [CO 98/1416] applies to companies, registered schemes, and disclosing entities as defined under the Corporations Act 2001. This legislative instrument exempts certain entities from the requirements of the Act to include comparative financial information in their financial reports for periods beginning before 1 January 2005. Specifically, the exemption applies if the entity was not required to prepare a financial report or accounts for the immediately preceding half-year or financial year, and it was not a prescribed interest undertaking that was a disclosing entity for that period. To qualify for the exemption, the financial report must include a statement in the notes describing the nature of the relief and the reasons for not preparing the required financial reports or accounts. This Class Order is a Commonwealth instrument, operating under the authority delegated by the Corporations Act 2001, and its application is not restricted to any particular jurisdiction within Australia. The Order may be further amended or modified through subsequent ASIC Class Orders or legislative instruments.

Key Provisions

The ASIC Class Order [CO 98/1416] provides an exemption from certain requirements under the Corporations Act 2001 (the "Act") for companies, registered schemes, and disclosing entities (the "Entity") to include comparative financial information in their financial reports for half-years or financial years beginning before 1 January 2005. This exemption applies if two conditions are met: (1) the Entity was not required to prepare a financial report or accounts for the immediately preceding half-year or financial year, and (2) the Entity was not a prescribed interest undertaking which was a disclosing entity for the immediately preceding half-year or financial year. However, a statement must be included in the notes to the financial report describing the nature of the relief and the reasons why the Entity was not required to prepare a financial report or accounts in the immediately preceding half-year or financial year (subsections 296(1) and 304 of the Act). The obligations imposed by the ASIC Class Order [CO 98/1416] are primarily administrative in nature. The Entity must ensure that any financial reports for half-years or financial years beginning before 1 January 2005 do not include comparative financial information if they fall under the exemption criteria. Additionally, the Entity must include a statement in the notes to the financial report explaining the exemption and the reasons for its applicability (subsection 341(1) of the Act). Failure to comply with the provisions of the ASIC Class Order [CO 98/1416] may result in various civil or criminal consequences, depending on the nature and severity of the breach. The penalties for breaches of the Corporations Act 2001 can include fines and imprisonment. Specifically, for corporate entities, the maximum penalty for a serious breach can be up to $210,000, and for individuals, it can be up to $42,000 and/or imprisonment for up to two years (subsections 1317E and 1317G of the Act). Furthermore, directors and officers of the Entity may also be held personally liable for any breaches, leading to potential fines and disqualification from managing corporations.