A somewhat unexpected change to the Corporations Act was passed by Parliament last month that means “grandfathered” companies will no longer be exempt from lodging financial statements with the Australian Securities and Investments Commission (ASIC).
What is the large “grandfathered” proprietary company exemption?
In 1995, reforms to the Corporations Law introduced the concept of a “large proprietary company”, requiring the lodgement of audited financial statements with ASIC.
However, at the time, an exemption allowed existing exempt proprietary companies to retain their exemption from lodging financial statements for as long as they continued to meet the old definition of an “exempt proprietary company”.
The continuation of the exemption was intended as a temporary measure but there was no end date to the relief. For some time, ASIC has noted that there was no basis for its retention but amending legislation had not been introduced until last month.
What are the impacts of these amendments?
We expect that many large, established, private/family-held groups will be impacted by this decision. This is because they will be required to lodge their audited financial statements with ASIC if they are deemed to be a large proprietary company or a large group of companies.
A proprietary company is defined as ‘large’ for a financial year if it satisfies at least two of the below criteria:
- the consolidated revenue for the financial year of the company and any entities it controls is $50 million or more
- the value of the consolidated gross assets at the end of the financial year of the company and any entities it controls is $25 million or more, and
- the company and any entities it controls have 100 or more employees at the end of the financial year.
When are the changes effective?
The amendments are effective from 10 August 2022, which means that large grandfathered proprietary companies with financial years ending on or after 10 August 2022 will no longer be exempt from lodging their financial statements with ASIC.
For example, if your year end is 30 June, the changes will impact you in respect for the year ending 30 June 2023.
Please contact Roger Wong or any of the partners and staff at Calibre, if you would like us to assist with forming an assessment on your company’s or group of companies financial reporting requirements in accordance with the Corporations Act.