ASIC Class Order [CO 98/2017]

Overview

The ASIC Class Orders were enacted in 1998 to provide regulatory flexibility and streamline compliance requirements for certain entities under the Corporations Law. These orders, issued by the Australian Securities and Investments Commission (ASIC) pursuant to its powers under the Corporations Act 2001, aim to address gaps and provide clarity in the application of corporate laws to specific entities. The primary objective of these orders is to ensure that the regulatory framework is effective and appropriately tailored to the circumstances of entities such as wholly-owned subsidiaries of corporate bodies and related entities of Australian banks. These amendments are designed to enhance the efficiency of compliance processes and reduce unnecessary regulatory burdens on qualifying entities.

Scope and Application

The Australian Securities and Investments Commission (ASIC) Class Order, made pursuant to subsection 341(1) of the Corporations Law, modifies existing ASIC Class Orders 98/1418 and 98/1416. This legislation primarily applies to companies, specifically excluding proprietary companies from the requirement to appoint an auditor if they are a wholly-owned subsidiary of a body corporate or a related body corporate of an Australian bank. The Class Order further specifies modifications to financial reporting requirements for disclosing entities, requiring them to disclose certain information in respect of the immediately preceding half-year or financial year. The reach of this Class Order is national, applying across Australia as it pertains to entities regulated under the Corporations Law. No specific exclusions or thresholds are mentioned in the text, and any further application or restrictions are likely to be detailed in the subordinate Corporations Regulations.

Key Provisions

The key operative sections of this legislation are sections 327(1) to (5) of the Corporations Law and regulation 2M.6.02 of the Corporations Regulations. Section 327(1) to (5) requires a company, other than a proprietary company, to appoint an auditor. However, this requirement is varied by the legislation such that it does not apply to a wholly-owned subsidiary of a body corporate, as defined in section 9 of the Law, or to a related body corporate of an Australian bank. This exception is detailed in the first paragraph of the legislation and aims to provide relief to certain entities from the need to appoint an auditor. Regulation 2M.6.02 of the Corporations Regulations also undergoes amendments in the legislation, which is referenced in the first subparagraph of the first paragraph. The obligations and requirements imposed by this legislation are primarily directed towards companies, especially those that are not proprietary companies. The primary obligation is the appointment of an auditor, as mandated by sections 327(1) to (5) of the Corporations Law. However, this obligation is not universal, and certain entities are exempt from it, as outlined in the legislation. The exemptions apply to wholly-owned subsidiaries of a body corporate and related body corporates of an Australian bank. Additionally, the legislation modifies ASIC Class Order 98/1416 dated 29 July 1998 by inserting specific references to sections 296(1) and 304 of the Corporations Law and by clarifying the time frame for disclosing entities in subparagraph (a)(ii). In terms of penalties and consequences, the legislation does not explicitly outline any penalties for non-compliance with the varied requirements. However, it is important to note that failing to comply with the Corporations Law or the Corporations Regulations can result in civil and/or criminal penalties, depending on the nature and severity of the breach. The specific penalties for each offence can vary widely, and may include fines, imprisonment, or both, depending on the relevant provisions of the Corporations Law and other applicable laws. The maximum penalties for contraventions of the Corporations Law can be found in sections 1317E and 1317G of the Corporations Act 2001 (Cth), and can include fines of up to $210,000 for individuals and $1,050,000 for bodies corporate, as well as imprisonment for up to five years. It is therefore crucial for companies and other entities to ensure that they comply with the requirements of the legislation to avoid any potential legal repercussions.