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Simplified Reporting for Companies Limited by Guarantee: How does this apply to CRCs?

Many companies limited by guarantee are now subject to reduced and simplified annual financial and directors' reporting requirements (under the Corporations Amendment (Corportate Reporting Reform) Act 2010 ((th)). We note that many CRCs are companies limited by guarantee.

Prior to the reforms, all companies limited by guarantee (regardless of size or activities) were required to prepare annually:

  • an audited financial report, in accordance with Australian accounting standards; and

  • a directors' report in accordance with the Corporations Act 2001 (Cth).

Under the new regime, three tiers of differential reporting requirements apply, according to the annual consolidated revenue and deductible gift recipient status of each company limited by guarantee.

Tier 1

Financial Reporting Duties - Exempt from producing a financial report (and having it audited, and providing it to members), unless required to do so by Members holding at least 5% of the votes, or by ASIC.

Director's Reporting Duties - Exempt from producing a directors’ report (and providing it to members), unless required to do so by Members holding at least 5% of the votes, or by ASIC.

Tier 2

Financial Reporting Duties - Must prepare a financial report, but may elect to have it reviewed (in accordance with Auditing and Assurance Standards Board, Auditing Standard on Review Engagements 2415) rather than audited. Need only provide annual reports to those Members who elect to receive them (electronically or in hard copy).

Director's Reporting Duties - Must continue to prepare an audited financial report. Need only provide annual reports to those Members who elect to receive them (electronically or in hard copy).

Tier 3

Financial Reporting Duties - Must prepare a simplified directors’ report regarding matters including:

  • objectives;

  • strategy;

  • activities;

  • achievements; and

  • performance measures.

Need only provide annual reports to those Members who elect to receive them (electronically or in hard copy).

Director's Reporting Duties - Must prepare a simplified directors’ report regarding matters including:

  • objectives;

  • strategy;

  • activities;

  • achievements; and

  • performance measures.

Need only provide annual reports to those Members who elect to receive them (electronically or in hard copy).

CRC's should note that: Whilst most CRC's will earn over the relevant thresolds during the period of Commonwealth funding, if the CRC company continues beyond this (legacy-transition operations), their earnings may be substantially less. Therefore, some CRC's might consider whether their company Constitution and Participants Agreement would allow them to undertake audit and reporting at the relevant lower thresold or whether changes should be made. Moreover, CRCs may consider whether any of their small related entities or indeed, Participants, may also benefit from these amendments.

As noted, even if a CRC does fall under the relevant thresold, the CRC will still need to consider its obligations pursuant to its Constitution, Participant and Commonwealth Agreements.

14 October 2010