On 10 April 2014, the Federal Government released an exposure draft of the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 (the Draft). This draft legislation package is intended to reduce compliance costs for business, and improve the efficient operation of corporations law.
If the Draft becomes law, both small companies limited by guarantee and any other companies limited by guarantee that elect to have their accounts reviewed rather than audited, would be exempt from the need to maintain or appoint an auditor.
Generally, under section 301(3) of the Act, a company limited by guarantee may have its financial report for a financial year reviewed, rather than audited, if:
- the company is not required by accounting standards to be included in the company’s consolidated financial statements and the revenue for the year is less than $1 million; or
- the company is required by the accounting standards to be included in the consolidated financial statements and the consolidated revenue of the consolidated entity for the financial year is less than $1 million.
Lastly, a company limited by guarantee does not currently have to have its financial reports audited or reviewed if the report is prepared in response to a member direction under section 294A and the direction does not ask for audit or review.
The requirement for a small company limited by guarantee to appoint an auditor is at odds with the requirement in section 327A of the Corporations Act obliging all public companies to appoint an auditor within one month of registration. If the Draft becomes law, this inconsistency between having to appoint an auditor for a small company limited by guarantee and the potential to never require an audit under section 301(3) would be addressed.
The proposed amendment exempts all small companies limited by guarantee, and companies limited by guarantee that elect to have their accounts reviewed rather than audited, from the need to appoint or maintain an auditor.