Redefining Small Proprietary Companies
The Corporations Act 2001 (Cth) (‘Act’) classifies Australian proprietary companies into ‘large’ or ‘small’ companies. While the Act specifies threshold amounts, the Act also provides that other amounts may be prescribed by regulations.
The Corporations Amendment (Proprietary Company Thresholds) Regulations 2019 (Cth), came into force on 1 July 2019 and doubles the existing classification thresholds. The thresholds that now apply are:
A proprietary company is classified as a large proprietary company when it meets two or more of the criteria in respect of a financial year.
The new regulations commence from 1 July 2019 with the changes to the thresholds applying in relation to the 2019-20 financial year and later financial years.
The Act generally imposes less onerous obligations on small proprietary companies.
Most large proprietary companies are required to lodge audited financial reports under Part 2M.3 of the Act. Most small proprietary companies are not required to prepare financial reports under Part 2M.3 of the Act.
Foreign controlled small proprietary companies
The Corporations Act imposes a requirement for small proprietary companies that are controlled by a foreign company to lodge audited financial reports with ASIC. ASIC Corporations (Foreign Controlled Company Reports) Instrument 2017/204 relieves foreign controlled small proprietary companies from their financial reporting obligation where that entity is not part of a ‘large group’ ‘Large group’ is defined in the Instrument by reference to a small proprietary company under the Act. The relief from reporting obligations afforded to foreign controlled small proprietary companies is only afforded where the parent group’s presence in Australia is less than the small proprietary company thresholds.
Companies may also be relieved from whistleblowing obligations under the Act, as amended by the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Cth) which requires public companies and ‘large’ proprietary companies to have a compliant whistleblower policy.
The changes represent a significant loosening of the regulatory burden for companies that fall within the new thresholds, however companies should seek advice on the consequential issues arising.
Opportuna Legal communications are intended to provide commentary and general information. They should not be relied upon as legal advice. If you would like further information in relation to this matter or other legal matters please contact Opportuna Legal.