On 28 June 2007, the Corporations Legislation Amendment (Simpler Regulatory System) Bill received Royal Assent. The Bill is intended to introduce wide-ranging amendments to reporting requirements under the Corporations Act 2001 (“the Act”), in order to remove some of the regulatory burdens on businesses. This article will examine the two changes introduced by the Bill which apply to the 2006-2007 financial year. Future editions of LegalTalk will update you on the other changes as they become law.
How big are you?
For the first time since 1995, the revenue and asset threshold for the definition in the Act of a large proprietary company has been increased. A proprietary company is defined as a large proprietary company if it satisfies two out of the three following criteria:
- The consolidated revenue for the financial year of the company and any entities it controls is $25 million (previously $10 million).
- The value of the consolidated gross assets at the end of the financial year of the company and any entities it controls is $12.5 million (previously $5 million).
- The company and any entities it controls have 50 or more employees at the end of the financial year.
Point three is unchanged from the earlier criteria. The purpose of having an employee minimum is to prevent a large number of asset-rich entities which have few employees and a limited revenue stream from having to report to ASIC.
The Act stipulates that an audited financial report and a directors’ report must be prepared for each financial year by all large proprietary companies. It has been estimated that, on average, it costs $60,000 for a company to comply with reporting obligations.
The Government estimates that, under the new thresholds, there will be approximately 1,600 fewer companies that are required to lodge audited annual financial statements with ASIC.
Are your details on the internet?
In a sign of the times, from 28 June 2007, the default method for the distribution of a company’s annual report will be via the company’s website. Companies which currently distribute annual reports through other methods may not be required to change their current default method, however they may do so if they wish.
- To ensure that all members have access to the annual report, there are several restrictions in place. These include:
- A company must send one notice to each of its members personally informing them that:
- hard copies of annual reports are available free of charge
- the member may access the reports on a specified website, and
- where the company has an option whereby it may send reports by electronic copy (such as fax or email), the notice should also specify that the member may elect to receive annual reports in that way.
- A company must send a hard copy of the report to those members who have made an election to do so. Each member’s election is deemed to be a standing election, which means, for example, that the member does not have to re-elect each year to receive a hard copy of the annual report.
- The report must be posted on a website that is accessible by the public. Therefore, for example, a report posted on a restricted access website will be in contravention of the Act.
How do you plan for the future?
Within approximately 6 months, there are several other changes to the Act that will become law. These include changes in the following areas:
- Further changes to company reporting obligations, including amendments to reporting and disclosure of executive remuneration, notification to ASIC of changes to office holders, and upfront payment of annual fees for companies.
- Auditor Independence, including reducing the anomalies which have arisen since the introduction of CLERP 9.
- Corporate Governance, including the changing of thresholds for related party approval thresholds.
- Fundraising, including issues surrounding employee share schemes disclosure.
- Takeovers, including removal of telephone monitoring during takeover bids.
