The Australian Securities and Investments Commission (ASIC) is intensifying its reviews of previously grandfathered companies that have failed to lodge their financial reports. This move follows alarming levels of non-compliance among these firms.
ASIC Commissioner Kate O’Rourke highlighted the importance of financial reports. She stated, “Financial reports provide shareholders, creditors and the public with important information to enable them to make informed decisions when dealing with these companies.” O’Rourke underscored the need for timely submissions: “Regular and consistent reporting instils confidence and integrity in our financial system.”
In 2022, the exemption allowing grandfathered companies to bypass financial report lodgement was lifted. Since then, large proprietary companies must submit their reports to ASIC. However, over half of these companies, accounting for 755 out of 1,166, did not lodge their reports for FY23 or FY24.
ASIC conducted inquiries with 58 of these companies, identifying 32 that had failed to meet their obligations. O’Rourke expressed concern over the lack of auditors’ notifications regarding these breaches: “We are also concerned that ASIC did not receive the auditors’ notifications of lodgement breaches for the majority of the organisations identified.”
While many companies have subsequently lodged their reports post-intervention, others still have outstanding submissions. “Many of these previously grandfathered companies are large companies and should be lodging financial reports,” O’Rourke stated. She confirmed that ASIC will monitor compliance closely and take regulatory action when necessary.
In response to the widespread non-compliance, ASIC has initiated a broader surveillance strategy. This will focus on non-lodgement by large proprietary companies, expected to conclude in Q1 2026. ASIC plans to deploy its full enforcement and compliance toolkit to address these failures.
Companies are urged to review their reporting obligations proactively and rectify any non-compliance issues before ASIC’s surveillance begins. Auditors must report any suspected breaches to ASIC.
Grandfathered companies were required to have their financial statements audited since 1995 but did not need to make this information public due to prior relief from lodgement. A company classified as ‘large’ satisfies specific criteria, including revenue of $50 million or more, gross assets of $25 million or more, or 100 or more employees.
The absence of reporting requirements for small proprietary companies highlights the importance of compliance for larger firms. Following the enactment of the Treasury Law Amendment in August 2022, grandfathered companies are no longer exempt from lodgement.
Under the Corporations Act 2001, certain companies must prepare and lodge financial reports annually. Failure to do so can result in significant regulatory action. Auditors have ongoing obligations to report any suspected contraventions to ASIC.
