High levels of non-compliance by previously grandfathered companies to lodge their financial reports has prompted ASIC to increase its intensity of reviews and launch a broader crackdown.
‘Financial reports provide shareholders, creditors and the public with important information to enable them to make informed decisions when dealing with these companies,’ said ASIC Commissioner Kate O’Rourke.
‘Companies should be lodging their financial reports in a timely manner. Regular and consistent reporting instils confidence and integrity in our financial system.’
In 2022, the financial report lodgement exemption for grandfathered companies was removed. Since then, previously grandfathered companies that remain large proprietary companies have been required to lodge their financial reports with ASIC.
However, ASIC found that more than half (755 of 1,166) of previously grandfathered companies did not lodge their financial reports in FY23 or FY24.
ASIC made inquiries with 58 of those companies it suspected were large proprietary companies and identified 32 of them had failed to lodge their financial reports.
‘We are also concerned that ASIC did not receive the auditors’ notifications of lodgement breaches for the majority of the organisations identified,’ Ms O’Rourke said.
While most of those companies have since lodged their financial reports following ASIC’s intervention, others remain outstanding.
‘Many of these previously grandfathered companies are large companies and should be lodging financial reports. We will continue to monitor and address lodgement failures, including taking regulatory action when needed,’ Ms O’Rourke said.
As a result of this widespread non-compliance, ASIC has launched a broader surveillance focused on non-lodgement of financial reports by large proprietary companies, which we expect to complete in Q1 2026. ASIC will use its full range of enforcement and compliance tools in response to non-lodgement.
Companies are advised to proactively review their financial reporting obligations and address any instances of non-compliance before ASIC begins the surveillance. Auditors should notify ASIC if they suspect that a company is not complying with its lodgement obligations.
Background
A grandfathered company was a large proprietary company that met specific criteria, including having been a large proprietary company since 1995 and having their financial statements audited for all financial years since 1995. These companies were required to prepare and have their financial statements audited, however this information was not made public due to the past relief from lodgement requirements.
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.
- The company and any entities it controls have 100 or more employees at the end of the financial year.
‘Small’ proprietary companies are not required to lodge financial reports with ASIC, however they need to provide evidence to confirm their ‘small’ status.
Following the enactment of Treasury Law Amendment (2022 Measures No. 1) Act 2022 on 10 August 2022, grandfathered companies with financial years ending on or after this date are no longer eligible for lodgement relief.
Section 292 of the Corporations Act 2001 (Corporations Act) requires all disclosing entities, public companies, large proprietary companies and registered schemes to prepare financial reports each financial year.
Section 319 of the Corporations Act requires a disclosing entity and registered scheme to lodge the complete financial reports within three months after the end of the financial year. All other entities are required to lodge their financial reports within four months after the end of the financial year.
Auditors have ongoing obligations to report certain suspected contraventions of the Corporations Act to ASIC.
