Recent prosecutions and convictions obtained by the corporate regulator serve as a timely reminder for companies of the importance of lodging financial reports.
The Australian Securities and Investments Commission (ASIC) recently prosecuted and obtained convictions against three companies for failing to lodge annual financial reports with ASIC within the specified period after the end of the financial year.
Section 292 of the Corporations Act 2001 (Cth) (Corporations Act) require disclosing entities, public companies, large proprietary companies and registered schemes to prepare financial and director’s report for each financial year.
Additionally, section 319 of the Corporations Act require entities that have to prepare financial reports to lodge its annual financial reports with ASIC. Disclosing entities and registered schemes must lodge their annual financial reports within three months of the end of its financial year. All other entities must lodge their annual financial reports within 4 months of the end its financial year.
Section 320 of the Corporations Act also requires certain entities to lodge half-yearly reports with ASIC within 75 days after the end of the half-year
Due to the COVID-19 pandemic, ASIC extended the financial reporting deadlines for the December 2020 reporting period. Most entities have an additional month to comply with their reporting obligations.
The failure to lodge annual financial statements (pursuant to section 319) or half-yearly reports (pursuant to section 320) is a strict liability criminal offence.
Between 1 July 2020 and 31 December 2020, ASIC prosecuted three companies for failing to comply with their statutory obligation to lodge annual financial reports in accordance with section 319 of the Corporations Act.
The companies prosecuted by ASIC include:
|Burbank Properties Pty Ltd||Failed to lodge annual financial reports for five years between 2015 and 2019 (inclusive).||Conviction and $5,000 fine.|
|JHT Holdings Ltd||Failed to lodge annual financial reports for five years between 2014 and 2018 (inclusive).||Conviction and $5,000 fine.|
|Grundfos Australia Holding Pty Ltd||Lodgement of annual financial reports for five years between 2014 and 2018 (inclusive).||Discharged without conviction by way of a good behaviour bond.|
It is important for all entities, companies and schemes to be aware of their financial reporting obligations to ASIC. Accurate and timely financial reporting is crucial for market confidence and integrity – it allows shareholders, creditors and the public to make informed decisions about entities.
Failure to comply with the statutory financial reporting obligations is a criminal offence with strict liability attached.
The recent prosecutions and convictions obtained by ASIC demonstrate the corporate regulator’s intention to take action against entities that fail to comply with their financial reporting obligations.
Entities should ensure that they:
Get in touch with the Gadens team to discuss reporting and regulatory requirements.
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Kelly Griffiths, Partner
Kalidu Wijesundara, Lawyer