Australia: Changes to ASIC financial reporting relief for wholly-owned companies

To add a new company to an existing deed of cross guarantee for the purposes of the benefit of the ASIC financial reporting relief for wholly-owned companies, the existing deed of cross guarantee will need to varied, or a new deed of cross guarantee entered into, to reflect the new ASIC Pro Forma.

On 28 September 2016, the Australian Securities and Investments Commission remade its financial reporting relief for wholly-owned companies - ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. The new ASIC instrument replaced ASIC Class Order [CO 98/1418].

The new ASIC Instrument applies in relation to a financial year ending on or after 1 January 2017. The old ASIC Class Order continues to apply, despite its repeal, in relation to a financial year ending before 1 January 2017.

ASIC has continued the substance of the financial reporting relief except that it no longer provides relief to bodies regulated by the Australian Prudential Regulation Authority.

Effect on existing deeds of cross guarantee

One of the conditions of the ASIC relief is that before the end of the relevant financial year the company seeking relief must be a party to a deed of cross guarantee (as an original party or pursuant to an assumption deed) which has been lodged with ASIC.

A consequence of the remaking of the ASIC relief is that in order to join a company to a deed of cross guarantee executed before 28 September 2016, a new deed of cross guarantee will need to be executed or the pre-existing deed of cross guarantee varied to reflect the revised ASIC Pro Forma deed of cross guarantee (ASIC Pro Forma 24). The pre-existing deed may be varied if it has a variation power in it.

The obligations of a party to the deed of cross guarantee under group finance documents may require that party to obtain the consent or approval of its financier to such a variation of the pre-existing deed of cross guarantee or the entry into of a new deed of cross guarantee.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.