The thresholds for determining whether a proprietary company is considered “large” will double from 1 July 2019, reducing the compliance burden of companies that no longer fit this category (including financial reporting requirements and the need to have a whistleblower policy). Accordingly, existing “large” proprietary companies should review whether they will remain in this category.
Details of the new criteria
Following the commencement of the Corporations Amendment (Proprietary Company Thresholds) Regulations 2019 (Regulations), the criteria under the Corporations Act 2001 (Act) for determining how a proprietary company is considered “large” will double. As a result of the change, it is anticipated that approximately one-third of existing “large” proprietary companies will re-classified as “small” from 1 July 2019.
Under the new criteria if, within a financial year, a company satisfies at least two of the following criteria, it will be considered “large”:
Financial reporting obligations
Each year, “large” proprietary companies are required to prepare and lodge with ASIC an audited financial report, director’s report and auditor’s report. Accordingly, companies that are no longer “large” are not required to do this (though they must continue to keep sufficient financial records).
Under the new whistleblower regime, “large” proprietary companies are required to prepare and publish a written whistleblower policy (by 1 January 2020). Accordingly, this requirement will not apply to companies that are no longer “large”. For further information on the new whistleblower regime, please see here.
What to do next?
We recommend that all current “large” companies closely review whether, from 1 July 2019, they may now be “small” and accordingly make the most of the reduction in compliance obligations and associated costs.