The Government has released for public consultation exposure draft regulations and an explanatory statement containing proposals to reduce the financial reporting burden for some proprietary companies by increasing the thresholds for determining what constitutes a large proprietary company under the Corporations Act 2001.

Under the Act, large proprietary companies are required to lodge an annual financial report, a director’s report and an auditor’s report with the Australian Securities and Investments Commission (ASIC), while small proprietary companies are generally required to keep sufficient financial records. Small proprietary companies are only required to lodge or audit financial reports if directed by AISC, or 5 percent or more of their shareholders.

The Act currently provides that a proprietary company is ‘large’ for a given financial year if it satisfies at least two of the following:
• the consolidated revenue for the financial year of the company and any entities it controls is $25 million or more;
• the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls is $12.5 million or more; and
• the company and any entities it controls have 50 or more employees at the end of the financial year.

The draft Corporations Amendment (Proprietary Company Thresholds) Regulations 2018 would change these thresholds by doubling them as follows:
• increasing the annual consolidated revenue threshold to $50 million or more;
• increasing the value of gross assets to $25 million or more; and
• increasing the maximum employee size to 100 employees or more.

The Regulations are proposed to commence on 1 July 2019 and apply in relation to the financial years beginning on or after 1 July 2019.