Recent changes made in the Treasury Law Amendment (2022 Measures No. 1) Act 2022 mean that grandfathered (exempt) proprietary companies will no longer be exempt from lodging financial statements with ASIC.
In summary...
For the last 27 years grandfathered proprietary companies have been required to prepare audited annual financial statements and distribute them to members. They have however, been exempt from the requirement to lodge the financial statements with ASIC. The exemption from lodgement was provided by ASIC Corporations (Exempt Proprietary Companies) Instrument 2015/840 (AI 2015/840).
The exemption impacted many large private family-owned Australian companies. The exemption was referred to by many as the kidnapping provision. We believe approximately 1,100 exempt proprietary companies will be impacted by this change.
Recent changes made in the Treasury Law Amendment (2022 Measures No. 1) Act 2022 (Act) mean that grandfathered proprietary companies will no longer be exempt from lodging financial statements with ASIC – that is, with the repeal of AI 2015/840 the legislative exemption has been removed.
The above measure was a late unanticipated amendment to the above Act and received little public debate. Over the last 27 years there have been a number of unsuccessful attempts to remove the grandfathering provisions – which back in 1995 were only ever intended to be a temporary measure.
When does the change take effect?
The change takes effect the day after the Act receives royal assent. For financial years ending on or before 9 August 2022 the relief in AI 2015/840 can still apply – that is, the lodgement exemption still applies. So, for example, financial years ending 30 June 2022 can still apply the lodgement relief provided in AI 2015/840.
For financial years ending on or after 10 August 2022 the relief from lodgement will no longer be available. So, for financial years ending 31 December 2022 or 30 June 2023 lodgement with ASIC will be required.
In my view the changes to remove grandfathering is probably overdue. Grandfathering was always billed as a temporary measure – it was not intended to last for over 25 years.
Arguably the measure has become less important over time given other measures such as the ATO general purpose financial statement provisions and the large body of information now available for public use.
With the amendment all large proprietary companies will now be treated equally and will be required to publicly disclose their yearly financial position and results.
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Further details can be found in the PDF version of the Reporting Update.
