Australia: Company Law Review Act - Financial Reporting And Annual Returns

Last Updated: 21 September 1998

By Sebastian Hempel

Annual returns - lodgment requirements (section 345)

Who is required to lodge an annual return?
  • A company (public or proprietary)
  • A registered scheme's responsible entity (for the scheme) -different regime to old section 1071(1) returns

When is lodgement with ASIC normally required?
  • By 31 January each year -for a company (public or proprietary)
  • Within 3 months after the end of its financial year -for a registered scheme (old returns were due within 90 days)

A different lodgment date may be agreed with ASIC (subsection 345(3))

Transitional provisions may be applicable

Annual returns - contents and method of lodgment

Company: Contents of annual return is the information set out in the table in section 348

Registered Scheme: Contents of annual return is the information set out in the table in section 349

Regulations may require further information (no regulations at present)
2 methods of lodgement available (section 347):

(a) in writing
  • in form approved by ASIC; and
  • signed in accordance with section 351; or
(b) electronically in accordance with section 352

Solvency resolution

  • Directors of a company must pass a solvency resolution (subject to transitional provision)
  • Resolution as to whether, in their opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable
  • Solvency resolution must be passed within 1 month before the annual return is lodged

Requirement does not apply to a company that has lodged a financial report with ASIC under Chapter 2M (refer section 319) within 12 months before the annual return is lodged

Previously a requirement in relation to the directors' statement only (old section 301(5))

Contents of annual return - companies (section 348)

  • Information such as name;
  • address of registered office;
  • name, address, date and place of birth of each director and company secretary, etc.
  • reduced requirements from what was contained in old Regulation 3.8.01 (Form 316)
Most significant new requirement is list of top 20 members (rather than top 10)
Several items of information no longer required, for example:
  • principal activities of the company
  • whether company had an auditor during the year (and if so, the auditor's details)
  • whether or not the accounts were audited (and if so, whether the report contained certain negative matters)
Information must be current as at the date when the annual return is signed (or authenticated -if lodged electronically)

Annual return - transitional provisions

Sections 1435 and 1436
Public company:
  • previously was required to lodge within 1 month after AGM (old section 335)
  • not required to lodge under old section 335 if date for lodgment occurs on or after 1 July 1998
  • not required to lodge under new section 345 if lodge under old section 335 before 1 July 1998 and between 1 August 1998 and 31 January 1999
  • would probably choose to lodge under new section 345
Proprietary company:
  • 31 January deadline continues to apply
Solvency Resolution:
  • Directors not required to make a solvency resolution in relation to the company's first annual return lodged under new section 345 if the company has lodged accounts under old Chapter 3 within 12 months before annual return is lodged.
Financial reporting

Now in Part 2M.3
Chapter 2M has the title 'Financial Reports and Audit'
  • also covers financial records (Part 2M.2), appointment and removal of auditors (Part 2M.4) and other matters
ASIC exemptions and modifications under Part 2M.6 (relating to Parts 2M.2 and 2M.3)
Easier to follow than old Part 3.6:
  • which sections apply to which companies/entities (and when)
  • deadlines
  • 'chief entity' complications removed/simplified
  • accounting standards now regulate need for consolidated financial statements (although special provisions now in Division 6 of Part 2M.3)
'Financial year' now determined under section 323D (old sections 50A and 70A)
  • no 'accounting periods'
Chapter 2M applies to financial years and half-years ending after midnight on 30 June 1998 (eg on 31 December 1998) (section 1431)
  • key provisions of old Law continue to apply to financial years and half-years that end on or before midnight on 30 June 1998
Annual financial reports - who has to prepare them?

Financial report must be prepared by each:
  • disclosing entity (incorporated or formed in Australia)
  • public company
  • large proprietary company
  • registered scheme
  • small proprietary company (if directed by shareholder or ASIC)
  • small proprietary company (in certain circumstances if controlled by a foreign company)
See Section 292 -note the transitional provisions

Annual financial reports - what is required?

Financial report must be prepared for each financial year
Financial report consists of 3 parts:

1. financial statements:
  • profit and loss statement
  • balance sheet
  • cash flow statement
  • consolidated financial statement if accounting standards require
2. notes to financial statements:
  • disclosures required by regulations
  • notes required by accounting standards
  • any other information necessary to give a true and fair view
3. director's declaration:
  • compliance with accounting standards
  • true and fair view
  • solvency
  • 'legal' opinion
Financial report must comply with the accounting standards (exception for certain small proprietary companies) -section 296
Financial report must comply with any further requirements in the regulations
Financial statements and notes for a financial year must give a true and fair view of financial position and performance -section 297
Financial report for a financial year must be audited (in accordance with Division 3 of Part 2M.3) and auditor's report must be obtained -section 301
  • exemption for certain small proprietary companies
Financial report (and auditor's report) must be lodged with ASIC within 3 months/4 months after the end of the financial year - section 319
  • exemption for certain small proprietary companies and certain large proprietary companies
  • transitional provision for certain public companies (section 1432)
Annual directors' reports - requirements

Required to be prepared by generally same entities/companies as for financial report - section 292
Exemptions available for small proprietary companies
Directors' report for a financial year must include:
  • General information (section 299)
  • Specific information (section 300)
Directors' report must be made in accordance with resolution of directors, specify date on which made, and be signed by a director
Directors' report must be lodged with ASIC -section 319
'General information' covers:
  • review and results of operations and significant changes in state of affairs
  • other information generally as per old sections 304 and 305
  • performance in relation to environmental regulation (new requirement -section 299(l)(f))
  • exemption for prejudicial information (re future developments and results) still available
'Specific information' covers:
  • dividends
  • names of directors (holding office at any time during or since the end of the year)
  • options granted (as part of their 'remuneration') to any of the directors or any of the 5 'most highly remunerated officers' of the company (changed requirement -n.b. old Class Order 97/1011 with respect to options issued by listed companies - now revoked)
  • insurance premium and indemnity disclosures
'Specific information' may be included in the annual financial report instead
'Remuneration' specially defined in section 300(4)
  • cross reference to Chapter 2E (old Part 3.2A -Financial benefits to related parties)
Special rules for certain public companies, listed companies, listed registered schemes and registered schemes
Section 300A -for certain listed companies
Section 323DA -for certain listed companies

Half-year financial reports

Division 2 of Part 2M.3
Only required to be prepared by disclosing entity (incorporated or formed in Australia)
Financial report (sections 303 to 305) for the half-year is required
Directors' report (section 306) for the half-year is required
Financial report for the half-year must be audited or reviewed in accordance with Division 3 of Part 2M.3 and auditor's report must be obtained
Financial report, directors' report and auditor's report must be lodged with ASIC within 75 days after the end of the half-year

Auditing and reporting to members

Audit requirements are in Division 3 of Part 2M.3 (previously Division 2 of Part 3.7)
No major changes to audit requirements
A company, registered scheme or disclosing entity must report to members for a financial year
Report to members by either:
  • sending copies of financial report, directors' report and auditor's report; or
  • sending a concise financial report for the year that complies with section 314(2)
Class Order 98/101 - Uncontactable Members
Deadlines in section 315
  • public company: earlier of 21 days before AGM or 4 months after balance date
Member request provisions in section 316
Public company AGM requirements in section 317

For more information contact
Sebastian Hempel
Senior Associate
Minter Ellison
44 Martin Place
Sydney  NSW  2000

Ph (61 2) 9210 4444
Fax (61 2) 9235 2711

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The information contained in this article has been prepared by the Minter Ellison Legal Group.Professional advice should be sought before applying the information to particular circumstances.

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