ASIC Class Order [CO 98/96]
Synchronisation of financial year with foreign parent company
This instrument has effect under s341(1) of the Corporations Act 2001.
This compilation was prepared on 22 May 2008 taking into account amendments up to [CO 07/505]. See the table at the end of this class order.
Prepared by the Australian Securities and Investments Commission.
Australian Securities and Investments Commission
Corporations Act 2001 — Subsection 341(1) — Class Order
Pursuant to subsection 341(1) of the Corporations Act 2001 (“the Act”), the Australian Securities and Investments Commission (“ASIC”) hereby makes an order relieving an entity which is a company, registered scheme or disclosing entity (“the entity”) from compliance with s 323D(2) of the Act solely for the purpose of facilitating the synchronisation of its financial year (“the Relevant Financial Year”) with that of a controlling entity which was not incorporated or formed in Australia (“the Foreign Parent”) where:
(a) the Foreign Parent is required by the law in its place of origin to cause the financial year of the entity to be changed;
(b) the financial year of the entity is changed in accordance with that requirement;
(c) the Relevant Financial Year is no longer than 18 months;
(d) if the Relevant Financial Year will be greater than 12 months, the directors have formed the opinion no earlier than 12 months after the commencement of the Relevant Financial Year and no later than 15 months after the commencement of the Relevant Financial Year that there are reasonable grounds to believe that the entity will be able to pay its debts as and when they become due and payable (and evidenced this opinion in the minutes of a meeting of directors);
(e) if the Relevant Financial Year is a period of less than 12 months duration, the requirements of the Act, the Corporations Regulations 2001, the Corporations (Fees) Regulations 2001 and any other class orders are applied in respect of the Relevant Financial Year as if:
(i) s 45A(2)(a) of the Act read “the consolidated revenue for the 12 months to the end of the financial year of the company and the entities it controls (if any) is less than $25 million, or any other amount prescribed by the regulations for the purposes of that paragraph”; and
(ii) s45A(3)(a) of the Act read “the consolidated revenue for the 12 months to the end of the financial year of the company and the entities it controls (if any) is $25 million, or any other amount prescribed by the regulations for the purposes of paragraph (2)(a) or more”; and
(f) the notes to the financial report of the entity for the Relevant Financial Year include a brief statement as to the relief provided by this order.
Notes to ASIC Class Order [CO 98/96]
Note 1
ASIC Class Order [CO 98/96] (in force under s341(1) of the Corporations Act 2001) as shown in this compilation comprises that Class Order amended as indicated in the tables below.
Table of Instruments
Instrument number | Date of making or FRLI registration | Date of commencement | Application, saving or transitional provisions |
[CO 98/96] | 10/7/1998 (see F2007B01152) | 10/7/1998 | |
[CO 07/505] | 13/7/2007 (see F2007L02228) | 17/7/2007 | - |
Table of Amendments
ad. = added or inserted am. = amended rep. = repealed rs. = repealed and substituted
Provision affected | How affected |
Class Order....... | am. [CO 07/505] |
Para (e).......... | am. [CO 07/505] |
Para (f).......... | am. [CO 07/505] |
Overview
The ASIC Class Order [CO 98/96] was enacted in 1998 under the Corporations Act 2001 to address the issue of synchronising the financial year of an Australian company with that of its foreign parent company. This legislation was introduced to provide relief to entities that are subject to different financial reporting periods due to the laws in their place of origin. The Australian Securities and Investments Commission (ASIC) is the enacting body responsible for creating this class order, with the primary policy objective being to facilitate the alignment of financial years for better compliance and reporting efficiency. The order allows companies, registered schemes, or disclosing entities to synchronise their financial year with that of a foreign parent company, subject to certain conditions and requirements to ensure financial stability and transparency.
Scope and Application
The ASIC Class Order [CO 98/96] applies to companies, registered schemes, and disclosing entities that are subsidiaries of foreign parent companies, allowing them to synchronise their financial years with those of their non-Australian incorporated parent entities. This class order is made under the Corporations Act 2001 and applies nationally across Australia, facilitating compliance for entities that need to align their financial reporting periods with those of their overseas parent companies. The order provides relief from specific compliance requirements of the Corporations Act, provided certain conditions are met, such as the foreign parent company being subject to legal requirements to change its financial year, and the subsidiary’s financial year not exceeding 18 months. Notably, if the financial year of the subsidiary is longer than 12 months, the directors must assess and record their opinion on the entity's ability to meet its financial obligations. Additionally, if the financial year is shorter than 12 months, the entity must comply with certain revenue-related provisions as if it were a small business for the purposes of those regulations. The order also mandates that the entity's financial reports include a statement regarding the relief granted by this class order.
Key Provisions
The ASIC Class Order [CO 98/96] under section 341(1) of the Corporations Act 2001 provides specific relief to an Australian company, registered scheme, or disclosing entity (referred to as "the entity") that seeks to synchronise its financial year with that of its foreign parent company (the "Foreign Parent"). The primary provision (subsection 341(1)) allows the entity to deviate from the requirement in section 323D(2) of the Act, which mandates that a company's financial year must end within 12 months of the previous financial year unless an extension is granted. The key conditions for this relief are that the Foreign Parent is legally obligated to change its financial year under its local laws, the entity's financial year must be altered in compliance with these requirements, and the new financial year must not exceed 18 months. Additionally, if the new financial year is longer than 12 months, the entity's directors must certify at least 12 months into the new financial year and no later than 15 months into it, that there are reasonable grounds to believe the entity can meet its debts as they fall due.
This class order imposes several obligations on the entity and its directors. The directors must ensure that the entity’s financial year aligns with that of the Foreign Parent as mandated by local laws and must document their opinion regarding the entity’s ability to meet its financial obligations within the specified timeframes. Furthermore, if the new financial year is shorter than 12 months, the entity must still comply with all other relevant legislative and regulatory requirements, applying certain revenue thresholds as if the financial year were 12 months long. The financial reports for the affected period must include a statement explaining the relief granted by this order.
Breach of the conditions set out in the ASIC Class Order [CO 98/96] can result in serious consequences. While the order itself does not explicitly detail the penalties for non-compliance, violations of the Corporations Act 2001 and related regulations can lead to civil or criminal penalties. For instance, non-compliance with financial reporting requirements can result in significant fines, with penalties potentially reaching up to $210,000 for individuals and $1,050,000 for corporations, depending on the nature and severity of the offence. Additionally, directors found to have contravened their duties may face disqualification from managing corporations, further compounding the repercussions for the entity and its leadership.