Company Law – ASIC extends time for financial reporting due to COVID-19 - Wolters Kluwer CCH
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Commercial LawCovid-19

Company Law – ASIC extends time for financial reporting due to COVID-19

By June Ahern

On 9 April 2020, in response to the COVID-19 pandemic, the Australian Securities and Investments Commission (ASIC) announced that it will extend the deadline, by one month, for unlisted entities to lodge financial reports under Chapters 2M and 7 of the Corporations Act 2001 (Cth) (Corporations Act), for those entities with balance dates from 31 December 2019 to 31 March 2020.

This extended deadline will assist those entities whose financial reporting processes take additional time due to factors such as remote working arrangements, travel restrictions and other impacts resulting from the COVID-19 health emergency.

The extended lodgement period explained

ASIC’s extended lodgement period applies to financial reports, directors’ reports and audit reports for unlisted entities. The deadlines are calculated as periods after the relevant balance dates.

  1. Under Chapter 2M of the Corporations Act, the deadline for the lodgement of full-year financial reports, directors’ reports and auditor’s reports for:
  • unlisted disclosing entities and unlisted registered schemes, is extended from 3 months to 4 months, and
  • all other unlisted entities, is extended from 4 months to 5 months. This applies to both public and proprietary companies which are not disclosing entities or registered schemes.

Note that an extension of the deadline for unlisted registered schemes to lodge compliance plan audit reports will automatically occur as a result of the extension for registered schemes. The period for auditors to complete the compliance plan audit report will therefore also be extended from 3 months to 4 months.

  1. Under Chapter 2M of the Corporations Act, the deadline for the lodgement of half-year financial reports, directors’ reports and audit/review reports for unlisted disclosing entities, including unlisted registered schemes which are disclosing entities, is extended from 75 days to 75 days plus 1 month.
  2. Under Chapter 7 of the Corporations Act, the deadline for the lodgement of profit and loss balance sheets, and any associated information, for:
  • unlisted Australian Financial Services Licensees (AFSLs) that are body corporates and are also disclosing entities or registered schemes, is extended from 3 months to 4 months,
  • unlisted AFSLs that are body corporates and are not disclosing entities or registered schemes, is extended from 4 months to 5 months, and
  • AFSLs that are not body corporates, is extended from 2 months to 3 months.

How the extended timeframes will work in practice

For an unlisted public company that is not a disclosing entity, the normal deadline to lodge its reports for the year ending 31 March 2020, is 31 July 2020. Under ASIC’s extended timeframe for lodgement, the deadline will now be 31 August 2020.

However, it is important for entities to note that the extended deadlines will only apply where the normal reporting deadline had not passed as of 9 April 2020 (when ASIC made its announcement). For example, the deadline for a 31 December 2019 balance date of a managed investment scheme was 31 March 2020. Hence no extended reporting period will apply, as the reporting deadline has already passed. However, the deadline for a proprietary company which is not a disclosing entity is 30 April 2020. As this deadline had not yet passed as at the date of ASIC’s announcement, the extended deadline will now be 31 May 2020.

Financial reporting periods after 31 March 2020

ASIC is continuing to assess the impact of COVID-19 on financial reporting for entities with reporting balance dates after 31 March 2020, particularly at 30 June 2020. ASIC will make further announcements for these entities in due course, depending on how the COVID-19 situation evolves.

What does this mean for corporations?

Where possible, it is recommended that corporate entities continue to lodge their financial reports within the original statutory deadlines and only avail of the extended timeframes where absolutely necessary. This will ensure that corporations continue to meet their statutory and regulatory obligations, as well as ongoing obligations to their shareholders and creditors.

It is also important to note that where a grandfathered proprietary company uses the extended deadline relief, it will continue to retain its grandfathered status. The directors’ report of such a company must disclose that the company has applied the ASIC relief to report to members no later than 1 month after the normal reporting deadline.

What’s next?

ASIC is closely monitoring ongoing market conditions amid the COVID-19 pandemic, for developments which may affect financial reporting. At present, there appears to be no significant issues for the relatively small number of listed entities with a 31 March 2020 balance date, in meeting their full-year and half-year financial reporting obligations. Timely reporting by these entities is important; however, where appropriate, ASIC will consider applications to extend the reporting deadline for individual entities in appropriate circumstances. Applications should ideally be made at least 14 days prior to the normal reporting deadline and include sufficient detailed information to allow ASIC to assess the impact of COVID-19 on the corporate entity in question.

Further reading and sources

ASIC Media Release 20-084MR – ASIC to provide additional time for unlisted entity financial reports

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