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Corporations Act 2001

Authoritative Version
  • - C2016C00368
  • In force - Superseded Version
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Act No. 50 of 2001 as amended, taking into account amendments up to Corporations Amendment (Financial Advice Measures) Act 2016
An Act to make provision in relation to corporations and financial products and services, and for other purposes
Administered by: Attorney-General's; Treasury
General Comments: This compilation is affected by retrospective amendments. Please see the Treasury Laws Amendment (2017 Measures No. 3) Act 2017 (Act No. 75 of 2017) for details.
Registered 27 Apr 2016
Start Date 19 Mar 2016
End Date 23 Sep 2016
Table of contents.

Corporations Act 2001

No. 50, 2001

Compilation No. 72

Compilation date:                              19 March 2016

Includes amendments up to:            Act No. 22, 2016

Registered:                                         27 April 2016

This compilation is in 5 volumes

Volume 1:       sections 1–260E

Volume 2:       sections 283AA–601DJ

Volume 3:       sections 601EA–742

Volume 4:       sections 760A–1200U

Volume 5:       sections 1274–1549

                        Schedules

                        Endnotes

Each volume has its own contents

 

About this compilation

This compilation

This is a compilation of the Corporations Act 2001 that shows the text of the law as amended and in force on 19 March 2016 (the compilation date).

The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law.

Uncommenced amendments

The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on the Legislation Register (www.legislation.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the series page on the Legislation Register for the compiled law.

Application, saving and transitional provisions for provisions and amendments

If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.

Editorial changes

For more information about any editorial changes made in this compilation, see the endnotes.

Modifications

If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the series page on the Legislation Register for the compiled law.

Self‑repealing provisions

If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.

  

  

  


Contents

Chapter 2L—Debentures                                                                                       1

Part 2L.1—Requirement for trust deed and trustee                                        1

283AA.................. Requirement for trust deed and trustee................................ 1

283AB................... Trust deed........................................................................... 2

283AC................... Who can be a trustee........................................................... 2

283AD.................. Existing trustee continues to act until new trustee takes office 3

283AE................... Replacement of trustee........................................................ 4

Part 2L.2—Duties of borrower                                                                                     5

283BA................... Duties of borrower............................................................. 5

283BB................... General duties..................................................................... 5

283BC................... Duty to notify ASIC of information related to trustee......... 5

283BCA................ Register relating to trustees for debenture holders.............. 6

283BD................... Duty to replace trustee........................................................ 6

283BE................... Duty to inform trustee about security interests.................... 7

283BF................... Duty to give trustee and ASIC quarterly reports................. 7

283BG................... Exceptions to borrower’s duty to report to trustee and ASIC  10

283BH................... How debentures may be described................................... 10

283BI.................... Offences for failure to comply with statutory duties......... 11

Part 2L.3—Duties of guarantor                                                                                  12

283CA................... Duties of guarantor........................................................... 12

283CB................... General duties................................................................... 12

283CC................... Duty to inform trustee about security interests.................. 12

283CD................... Exceptions to guarantor’s duty to inform trustee.............. 13

283CE................... Offences for failure to comply with statutory duties......... 13

Part 2L.4—Trustee                                                                                                             14

283DA.................. Trustee’s duties................................................................. 14

283DB................... Exemptions and indemnifications of trustee from liability 15

283DC................... Indemnity.......................................................................... 16

Part 2L.5—Meetings of debenture holders                                                          17

283EA................... Borrower’s duty to call meeting........................................ 17

283EB................... Trustee’s power to call meeting........................................ 18

283EC................... Court may order meeting.................................................. 19

Part 2L.6—Civil liability                                                                                                  20

283F...................... Civil liability for contravening this Chapter...................... 20

Part 2L.7—ASIC powers                                                                                                21

283GA.................. ASIC’s power to exempt and modify............................... 21

283GB................... ASIC may approve body corporate to be trustee.............. 22

Part 2L.8—Court                                                                                                                 23

283HA.................. General Court power to give directions and determine questions             23

283HB................... Specific Court powers...................................................... 23

Part 2L.9—Location of other debenture provisions                                       25

283I....................... Signpost to other debenture provisions............................. 25

Chapter 2M—Financial reports and audit                                       26

Part 2M.1—Overview                                                                                                        26

285........................ Overview of obligations under this Chapter..................... 26

285A..................... Overview of obligations of companies limited by guarantee 28

Part 2M.2—Financial records                                                                                      31

286........................ Obligation to keep financial records.................................. 31

287........................ Language requirements..................................................... 31

288........................ Physical format................................................................. 32

289........................ Place where records are kept............................................. 32

290........................ Director access.................................................................. 33

291........................ Signposts to other relevant provisions.............................. 33

Part 2M.3—Financial reporting                                                                                  35

Division 1—Annual financial reports and directors’ reports               35

292........................ Who has to prepare annual financial reports and directors’ reports          35

293........................ Small proprietary company—shareholder direction.......... 36

294........................ Small proprietary company—ASIC direction................... 36

294A..................... Small company limited by guarantee—member direction. 37

294B...................... Small company limited by guarantee—ASIC direction..... 37

295........................ Contents of annual financial report................................... 38

295A..................... Declaration in relation to listed entity’s financial statements by chief executive officer and chief financial officer............................................................................... 40

296........................ Compliance with accounting standards and regulations.... 42

297........................ True and fair view............................................................. 42

298........................ Annual directors’ report.................................................... 43

299........................ Annual directors’ report—general information................. 44

299A..................... Annual directors’ report—additional general requirements for listed entities           46

300........................ Annual directors’ report—specific information................ 46

300A..................... Annual directors’ report—specific information to be provided by listed companies                54

300B...................... Annual directors’ report—companies limited by guarantee 59

301........................ Audit of annual financial report........................................ 60

Division 2—Half‑year financial report and directors’ report              62

302........................ Disclosing entity must prepare half‑year financial report and directors’ report        62

303........................ Contents of half‑year financial report................................ 62

304........................ Compliance with accounting standards and regulations.... 64

305........................ True and fair view............................................................. 64

306........................ Half‑year directors’ report................................................ 64

Division 3—Audit and auditor’s report                                                            66

307........................ Audit................................................................................. 66

307A..................... Audit to be conducted in accordance with auditing standards  66

307B...................... Audit working papers to be retained for 7 years............... 67

307C...................... Auditor’s independence declaration.................................. 70

308........................ Auditor’s report on annual financial report....................... 73

309........................ Auditor’s report on half‑year financial report................... 74

310........................ Auditor’s power to obtain information............................. 75

311........................ Reporting to ASIC............................................................ 76

312........................ Assisting auditor............................................................... 79

313........................ Special provisions on audit of debenture issuers and guarantors             79

Division 4—Annual financial reporting to members                                 81

314........................ Annual financial reporting to members............................. 81

315........................ Deadline for reporting to members................................... 83

316........................ Member’s choices for annual financial information.......... 84

316A..................... Annual financial reporting to members of companies limited by guarantee              85

317........................ Consideration of reports at AGM..................................... 86

318........................ Additional reporting by debenture issuers........................ 87

Division 5—Lodging reports with ASIC                                                          88

319........................ Lodgment of annual reports with ASIC............................ 88

320........................ Lodgment of half‑year reports with ASIC........................ 88

321........................ ASIC power to require lodgment...................................... 89

322........................ Relodgment if financial statements or directors’ reports amended after lodgment    89

Division 6—Special provisions about consolidated financial statements               91

323........................ Directors and officers of controlled entity to give information 91

323A..................... Auditor’s power to obtain information from controlled entity  91

323B...................... Controlled entity to assist auditor...................................... 91

323C...................... Application of Division to entity that has ceased to be controlled            92

Division 7—Financial years and half‑years                                                    93

323D..................... Financial years and half‑years........................................... 93

Division 8—Disclosure by listed companies of information filed overseas          95

323DA.................. Listed companies to disclose information filed overseas... 95

Part 2M.4—Appointment and removal of auditors                                        96

Division 1—Entities that may be appointed as an auditor for a company or registered scheme            96

324AA.................. Individual auditors, audit firms and authorised audit companies              96

324AB................... Effect of appointing firm as auditor—general................... 96

324AC................... Effect of appointing firm as auditor—reconstitution of firm 97

324AD.................. Effect of appointing company as auditor........................... 98

324AE................... Professional members of the audit team............................ 99

324AF................... Lead and review auditors.................................................. 99

Division 2—Registration requirements                                                           101

324BA................... Registration requirements for appointment of individual as auditor         101

324BB................... Registration requirements for appointment of firm as auditor  101

324BC................... Registration requirements for appointment of company as auditor           103

324BD................... Exception from registration requirement for proprietary company           105

324BE................... Exception from registration requirement—reviewing financial reports of companies limited by guarantee........................................................................................ 106

Division 3—Auditor independence                                                                    107

Subdivision A—General requirement                                                               107

324CA................... General requirement for auditor independence—auditors 107

324CB................... General requirement for auditor independence—member of audit firm    111

324CC................... General requirement for auditor independence—director of audit company             114

324CD................... Conflict of interest situation............................................ 118

Subdivision B—Specific requirements                                                             120

324CE................... Auditor independence—specific requirements for individual auditor       120

324CF................... Auditor independence—specific requirements for audit firm 125

324CG................... Auditor independence—specific requirements for audit company           131

324CH................... Relevant relationships..................................................... 140

324CI.................... Special rule for retiring partners of audit firms and retiring directors of authorised audit companies       147

324CJ.................... Special rule for retiring professional member of audit company              147

324CK................... Multiple former audit firm partners or audit company directors               148

Subdivision C—Common provisions                                                                149

324CL................... People who are regarded as officers of a company for the purposes of this Division              149

Division 4—Deliberately disqualifying auditor                                           151

324CM.................. Deliberately disqualifying auditor................................... 151

Division 5—Auditor rotation for listed companies                                   153

324DA.................. Limited term for eligibility to play significant role in audit of a listed company or listed registered scheme........................................................................................ 153

324DAA............... Directors may extend eligibility term.............................. 154

324DAB................ Requirements for directors to approve extension of eligibility term         155

324DAC................ Notifications about approval to extend eligibility term.... 156

324DAD............... Approval ineffective unless it complies with requirements 157

324DB................... Individual’s rotation obligation....................................... 157

324DC................... Audit firm’s rotation obligation...................................... 157

324DD.................. Audit company’s rotation obligation............................... 159

Division 6—Appointment, removal and fees of auditors for companies               162

Subdivision A—Appointment of company auditors                                      162

325........................ Appointment of auditor by proprietary company............ 162

327A..................... Public company auditor (initial appointment of auditor). 162

327B...................... Public company auditor (annual appointments at AGMs to fill vacancies)              162

327C...................... Public company auditor (appointment to fill casual vacancy) 165

327D..................... Appointment to replace auditor removed from office...... 165

327E...................... ASIC may appoint public company auditor if auditor removed but not replaced     166

327F...................... ASIC’s general power to appoint public company auditor 167

327G..................... Restrictions on ASIC’s powers to appoint public company auditor         167

327H..................... Effect on appointment of public company auditor of company beginning to be controlled by a corporation........................................................................................ 168

327I....................... Remaining auditors may act during vacancy................... 168

328A..................... Auditor’s consent to appointment................................... 168

328B...................... Nomination of auditor..................................................... 169

Subdivision B—Removal and resignation of company auditors               170

329........................ Removal and resignation of auditors............................... 170

330........................ Effect of winding up on office of auditor........................ 173

Subdivision C—Company auditors’ fees and expenses                                173

331........................ Fees and expenses of auditors........................................ 173

Division 7—Appointment, removal and fees of auditors for registered schemes             174

Subdivision A—Appointment of registered scheme auditors                      174

331AAA............... Registered scheme auditor (initial appointment of auditor) 174

331AAB................ Registered scheme auditor (appointment to fill vacancy) 176

331AAC................ ASIC’s power to appoint registered scheme auditor....... 176

331AAD............... Remaining auditors may act during vacancy................... 176

Subdivision B—Removal and resignation of registered scheme auditors 177

331AC................... Removal and resignation of auditors............................... 177

331AD.................. Effect of winding up on office of auditor........................ 178

Subdivision C—Fees and expenses of auditors                                               179

331AE................... Fees and expenses of auditors........................................ 179

Part 2M.4A—Annual transparency reports for auditors                         180

332........................ Meaning of transparency reporting auditor and transparency reporting year       180

332A..................... Transparency reporting auditors must publish annual transparency reports             180

332B...................... Content of annual transparency report............................ 181

332C...................... Extension of period for publication of annual transparency report           181

332D..................... Exemption orders—applications by transparency reporting auditors       182

332E...................... Exemption orders—class orders for transparency reporting auditors       183

332F...................... Exemption orders—criteria for orders............................ 183

332G..................... Offences by members of audit firm................................ 184

Part 2M.5—Accounting and auditing standards                                            185

334........................ Accounting standards..................................................... 185

335........................ Equity accounting........................................................... 185

336........................ Auditing standards.......................................................... 185

337........................ Interpretation of accounting and auditing standards........ 186

338........................ Evidence of text of accounting standard or auditing standard.. 186

Part 2M.6—Exemptions and modifications                                                       188

340........................ Exemption orders—companies, registered schemes and disclosing entities             188

341........................ Exemption orders—class orders for companies, registered schemes and disclosing entities    188

342........................ Exemption orders—criteria for orders for companies, registered schemes and disclosing entities           189

342AA.................. Exemption orders—non‑auditor members and former members of audit firms; former employees of audit companies....................................................................... 190

342AB................... Exemption orders—class orders for non‑auditor members etc.                191

342AC................... Exemption orders—criteria for orders for non‑auditor members etc.       191

342A..................... ASIC’s power to modify the operation of section 324DA 192

342B...................... Auditor to notify company or registered scheme of section 342A declaration         193

343........................ Modification by regulations............................................ 194

Part 2M.7—Sanctions for contraventions of Chapter                                195

344........................ Contravention of Part 2M.2 or 2M.3, or of certain provisions of Part 2M.4           195

Chapter 2N—Updating ASIC information about companies and registered schemes                                                                                                                       196

Part 2N.1—Review date                                                                                                 196

345A..................... Review date.................................................................... 196

345B...................... Company or responsible entity may change review date. 197

345C...................... When choice has effect................................................... 197

Part 2N.2—Extract of particulars                                                                           198

346A..................... ASIC must give an extract of particulars each year......... 198

346B...................... ASIC may ask questions................................................ 198

346C...................... Requirements in relation to an extract of particulars........ 198

Part 2N.3—Solvency resolution                                                                                 200

347A..................... Directors must pass a solvency resolution after each review date            200

347B...................... Notice to ASIC............................................................... 200

347C...................... Payment of review fee is taken to be a representation by the directors that the company is solvent         201

Part 2N.4—Return of particulars                                                                            202

348A..................... ASIC may give a return of particulars............................ 202

348B...................... ASIC may ask questions................................................ 202

348C...................... ASIC may require a solvency resolution and statement.. 202

348D..................... General requirements in relation to a return of particulars 203

Part 2N.5—Notice by proprietary companies of changes to ultimate holding company                205

349A..................... Proprietary companies must notify ASIC of changes to ultimate holding company 205

349B...................... Another company becomes an ultimate holding company 205

349C...................... A company ceases to be an ultimate holding company... 205

349D..................... Ultimate holding company changes its name.................. 206

Chapter 2P—Lodgments with ASIC                                                     207

350........................ Forms for documents to be lodged with ASIC............... 207

351........................ Signing documents lodged with ASIC........................... 208

352........................ Documents lodged with ASIC electronically.................. 208

353........................ Electronic lodgment of certain documents....................... 209

354........................ Telephone notice of certain changes................................ 209

Chapter 5—External administration                                                    210

Part 5.1—Arrangements and reconstructions                                                  210

410........................ Interpretation................................................................... 210

411........................ Administration of compromises etc................................ 210

412........................ Information as to compromise with creditors.................. 218

413........................ Provisions for facilitating reconstruction and amalgamation of Part 5.1 bodies       220

414........................ Acquisition of shares of shareholders dissenting from scheme or contract approved by majority           222

415........................ Notification of appointment of scheme manager and power of Court to require report            226

Part 5.2—Receivers, and other controllers, of property of corporations                227

416........................ Definitions...................................................................... 227

417........................ Application of Part.......................................................... 227

418........................ Persons not to act as receivers........................................ 228

418A..................... Court may declare whether controller is validly acting.... 228

419........................ Liability of controller...................................................... 229

419A..................... Liability of controller under pre‑existing agreement about property used by corporation         230

420........................ Powers of receiver.......................................................... 231

420A..................... Controller’s duty of care in exercising power of sale...... 234

420B...................... Court may authorise managing controller to dispose of property despite prior security interest               234

420C...................... Receiver’s power to carry on corporation’s business during winding up                236

421........................ Managing controller’s duties in relation to bank accounts and financial records      237

421A..................... Managing controller to report within 2 months about corporation’s affairs             238

422........................ Reports by receiver or managing controller.................... 238

423........................ Supervision of controller................................................ 240

424........................ Controller may apply to Court........................................ 241

425........................ Court’s power to fix receiver’s remuneration................. 241

426........................ Controller has qualified privilege in certain cases........... 243

427........................ Notification of matters relating to controller.................... 244

428........................ Statement that receiver appointed or other controller acting 245

429........................ Officers to report to controller about corporation’s affairs 245

430........................ Controller may require reports........................................ 247

431........................ Controller may inspect books......................................... 248

432........................ Lodging controller’s accounts......................................... 249

433........................ Property subject to circulating security interest—payment of certain debts to have priority     250

434........................ Enforcing controller’s duty to make returns.................... 253

434A..................... Court may remove controller for misconduct.................. 253

434B...................... Court may remove redundant controller.......................... 254

434C...................... Effect of sections 434A and 434B.................................. 255

434D..................... Appointment of 2 or more receivers of property of a corporation            255

434E...................... Appointment of 2 or more receivers and managers of property of a corporation     255

434F...................... Appointment of 2 or more controllers of property of a corporation         256

434G..................... Appointment of 2 or more managing controllers of property of a corporation         256

Part 5.3A—Administration of a company’s affairs with a view to executing a deed of company arrangement                                                                                                       257

Division 1—Preliminary                                                                                          257

435A..................... Object of Part.................................................................. 257

435B...................... Definitions...................................................................... 257

435C...................... When administration begins and ends............................. 257

Division 2—Appointment of administrator and first meeting of creditors          260

436A..................... Company may appoint administrator if board thinks it is or will become insolvent 260

436B...................... Liquidator may appoint administrator............................. 260

436C...................... Secured party may appoint administrator........................ 261

436D..................... Company already under administration........................... 261

436DA.................. Declarations by administrator—indemnities and relevant relationships    261

436E...................... Purpose and timing of first meeting of creditors............. 263

436F...................... Functions of committee of creditors................................ 264

436G..................... Membership of committee.............................................. 264

Division 3—Administrator assumes control of company’s affairs   266

437A..................... Role of administrator...................................................... 266

437B...................... Administrator acts as company’s agent........................... 266

437C...................... Powers of other officers suspended................................ 266

437D..................... Only administrator can deal with company’s property.... 267

437E...................... Order for compensation where officer involved in void transaction         268

437F...................... Effect of administration on company’s members............ 269

Division 4—Administrator investigates company’s affairs                  272

438A..................... Administrator to investigate affairs and consider possible courses of action            272

438B...................... Directors to help administrator........................................ 272

438C...................... Administrator’s rights to company’s books.................... 273

438D..................... Reports by administrator................................................. 274

438E...................... Administrator’s accounts................................................ 275

Division 5—Meeting of creditors decides company’s future               277

439A..................... Administrator to convene meeting and inform creditors. 277

439B...................... Conduct of meeting......................................................... 279

439C...................... What creditors may decide.............................................. 279

Division 6—Protection of company’s property during administration  280

440A..................... Winding up company...................................................... 280

440B...................... Restrictions on exercise of third party property rights.... 280

440D..................... Stay of proceedings........................................................ 282

440E...................... Administrator not liable in damages for refusing consent 282

440F...................... Suspension of enforcement process................................ 282

440G..................... Duties of court officer in relation to property of company 282

440H..................... Lis pendens taken to exist............................................... 284

440J....................... Administration not to trigger liability of director or relative under guarantee of company’s liability        284

440JA.................... Property subject to a banker’s lien—exemption from this Division         285

Division 7—Rights of secured party, owner or lessor                            287

Subdivision A—General                                                                                       287

441........................ Application of Division.................................................. 287

Subdivision B—Property subject to security interests                                  287

441AA.................. Application of Subdivision—PPSA security interests.... 287

441A..................... Secured party acts before or during decision period....... 287

441B...................... Where enforcement of security interest begins before administration       289

441C...................... Security interest in perishable property........................... 290

441D..................... Court may limit powers of secured party etc. in relation to secured property           290

441E...................... Giving a notice under a security agreement etc............... 291

441EA................... Sale of property subject to a possessory security interest 291

Subdivision C—Property not subject to security interests                           292

441EB................... Scope of Subdivision...................................................... 292

441F...................... Where recovery of property begins before administration 293

441G..................... Recovering perishable property...................................... 293

441H..................... Court may limit powers of receiver etc. in relation to property used by company    293

441J....................... Giving a notice under an agreement about property........ 294

Division 8—Powers of administrator                                                               295

442A..................... Additional powers of administrator................................ 295

442B...................... Dealing with property subject to circulating security interests  295

442C...................... When administrator may dispose of encumbered property 296

442CA................... Property subject to a possessory security interest—inspection or examination by potential purchasers etc......................................................................................... 298

442CB................... Property subject to a security interest or to a retention of title clause—administrator’s duty of care in exercising power of sale.................................................................. 298

442CC................... Proceeds of sale of property........................................... 299

442D..................... Administrator’s powers subject to powers of secured party, receiver or controller  301

442E...................... Administrator has qualified privilege.............................. 302

442F...................... Protection of persons dealing with administrator............ 302

Division 9—Administrator’s liability and indemnity for debts of administration            304

Subdivision A—Liability                                                                                      304

443A..................... General debts.................................................................. 304

443B...................... Payments for property used or occupied by, or in the possession of, the company 304

443BA................... Certain taxation liabilities................................................ 306

443C...................... Administrator not otherwise liable for company’s debts. 307

Subdivision B—Indemnity                                                                                   307

443D..................... Right of indemnity.......................................................... 307

443E...................... Right of indemnity has priority over other debts............. 308

443F...................... Lien to secure indemnity................................................. 310

Division 10—Execution and effect of deed of company arrangement 311

444A..................... Effect of creditors’ resolution......................................... 311

444B...................... Execution of deed........................................................... 312

444C...................... Creditor etc. not to act inconsistently with deed before its execution        312

444D..................... Effect of deed on creditors.............................................. 313

444DA.................. Giving priority to eligible employee creditors................. 314

444DB................... Superannuation contribution debts not admissible to proof 315

444E...................... Protection of company’s property from persons bound by deed              316

444F...................... Court may limit rights of secured creditor or owner or lessor  317

444G..................... Effect of deed on company, officers and members......... 318

444GA.................. Transfer of shares........................................................... 319

444H..................... Extent of release of company’s debts.............................. 319

444J....................... Guarantees and indemnities............................................ 319

Division 11—Variation, termination and avoidance of deed              320

445A..................... Variation of deed by creditors......................................... 320

445B...................... Court may cancel variation.............................................. 320

445C...................... When deed terminates..................................................... 320

445CA................... When creditors may terminate deed................................ 321

445D..................... When Court may terminate deed..................................... 321

445E...................... Creditors may terminate deed and resolve that company be wound up    322

445F...................... Meeting of creditors to consider proposed variation or termination of deed             322

445FA................... Notice of termination of deed.......................................... 323

445G..................... When Court may void or validate deed........................... 324

445H..................... Effect of termination or avoidance.................................. 324

Division 11A—Deed administrator’s accounts                                           325

445J....................... Deed administrator’s accounts........................................ 325

Division 12—Transition to creditors’ voluntary winding up              327

446A..................... Administrator becomes liquidator in certain cases.......... 327

446B...................... Regulations may provide for transition in other cases..... 328

446C...................... Liquidator may require submission of a report about the company’s affairs            329

Division 13—Powers of Court                                                                             332

447A..................... General power to make orders........................................ 332

447B...................... Orders to protect creditors during administration............ 332

447C...................... Court may declare whether administrator validly appointed 333

447D..................... Administrator may seek directions.................................. 333

447E...................... Supervision of administrator of company or deed.......... 333

447F...................... Effect of Division........................................................... 334

Division 14—Qualifications of administrators                                            335

448A..................... Appointee must consent.................................................. 335

448B...................... Administrator must be registered liquidator.................... 335

448C...................... Disqualification of person connected with company....... 335

448D..................... Disqualification of insolvent under administration.......... 337

Division 15—Removal, replacement and remuneration of administrator           338

449A..................... Appointment of administrator cannot be revoked........... 338

449B...................... Court may remove administrator..................................... 338

449C...................... Vacancy in office of administrator of company.............. 338

449CA................... Declarations by administrator—indemnities and relevant relationships    340

449D..................... Vacancy in office of administrator of deed of company arrangement       342

449E...................... Remuneration of administrator........................................ 342

Division 16—Notices about steps taken under Part                                 346

450A..................... Appointment of administrator......................................... 346

450B...................... Execution of deed of company arrangement................... 347

450C...................... Failure to execute deed of company arrangement............ 347

450D..................... Termination of deed of company arrangement................ 347

450E...................... Notice in public documents etc. of company................... 347

450F...................... Effect of contravention of this Division.......................... 348

Division 17—Miscellaneous                                                                                   349

451A..................... Appointment of 2 or more administrators of company... 349

451B...................... Appointment of 2 or more administrators of deed of company arrangement            349

451C...................... Effect of things done during administration of company 350

451D..................... Time for doing act does not run while act prevented by this Part             350

Part 5.4—Winding up in insolvency                                                                       351

Division 1—When company to be wound up in insolvency                  351

459A..................... Order that insolvent company be wound up in insolvency 351

459B...................... Order made on application under section 234, 462 or 464 351

459C...................... Presumptions to be made in certain proceedings............. 351

459D..................... Contingent or prospective liability relevant to whether company solvent 352

Division 2—Statutory demand                                                                             353

459E...................... Creditor may serve statutory demand on company......... 353

459F...................... When company taken to fail to comply with statutory demand                354

Division 3—Application to set aside statutory demand                          356

459G..................... Company may apply....................................................... 356

459H..................... Determination of application where there is a dispute or offsetting claim 356

459J....................... Setting aside demand on other grounds.......................... 358

459K...................... Effect of order setting aside demand............................... 358

459L...................... Dismissal of application.................................................. 358

459M..................... Order subject to conditions............................................. 358

459N..................... Costs where company successful................................... 358

Division 4—Application for order to wind up company in insolvency 359

459P...................... Who may apply for order under section 459A................ 359

459Q..................... Application relying on failure to comply with statutory demand              360

459R...................... Period within which application must be determined...... 360

459S...................... Company may not oppose application on certain grounds 361

459T...................... Application to wind up joint debtors in insolvency......... 361

Part 5.4A—Winding up by the Court on other grounds                           362

461........................ General grounds on which company may be wound up by Court           362

462........................ Standing to apply for winding up................................... 363

464........................ Application for winding up in connection with investigation under ASIC Act        364

Part 5.4B—Winding up in insolvency or by the Court                               365

Division 1A—Preliminary                                                                                      365

465........................ Definitions...................................................................... 365

Division 1—General                                                                                                  366

465A..................... Notice of application....................................................... 366

465B...................... Substitution of applicants................................................ 366

465C...................... Applicant to be given notice of grounds for opposing application           367

466........................ Payment of preliminary costs etc.................................... 367

467........................ Court’s powers on hearing application........................... 368

467A..................... Effect of defect or irregularity on application under Part 5.4 or 5.4A       369

467B...................... Court may order winding up of company that is being wound up voluntarily         370

468........................ Avoidance of dispositions of property, attachments etc.. 370

468A..................... Effect of winding up on company’s members................ 371

469........................ Application to be lis pendens.......................................... 374

470........................ Certain notices to be lodged............................................ 374

Division 1A—Effect of winding up order                                                       376

471........................ Effect on creditors and contributories............................. 376

471A..................... Powers of other officers suspended during winding up. 376

471B...................... Stay of proceedings and suspension of enforcement process.. 377

471C...................... Secured creditor’s rights not affected.............................. 377

Division 2—Court‑appointed liquidators                                                       378

472........................ Court to appoint official liquidator.................................. 378

473........................ General provisions about liquidators.............................. 379

474........................ Custody and vesting of company’s property.................. 382

475........................ Report as to company’s affairs to be submitted to liquidator 383

476........................ Preliminary report by liquidator...................................... 385

477........................ Powers of liquidator....................................................... 385

478........................ Application of property; list of contributories................. 388

479........................ Exercise and control of liquidator’s powers.................... 389

480........................ Release of liquidator and deregistration of company....... 390

481........................ Orders for release or deregistration................................. 390

Division 3—General powers of Court                                                             392

Subdivision A—General powers                                                                         392

482........................ Power to stay or terminate winding up........................... 392

483........................ Delivery of property to liquidator................................... 394

484........................ Appointment of special manager..................................... 395

485........................ Claims of creditors and distribution of property............. 396

486........................ Inspection of books by creditors and contributories....... 396

486A..................... Court may make order to prevent officer or related entity from avoiding liability to company 396

486B...................... Warrant to arrest person who is absconding, or who has dealt with property or books, in order to avoid obligations in connection with winding up..................... 399

487........................ Power to arrest absconding contributory........................ 399

488........................ Delegation to liquidator of certain powers of Court........ 400

489........................ Powers of Court cumulative........................................... 400

Subdivision B—Procedures relating to section 486B warrants                 401

489A..................... Arrest of person subject to warrant................................. 401

489B...................... Procedure after arrest...................................................... 401

489C...................... Procedure on remand on bail.......................................... 401

489D..................... Court’s power to make orders under section 486A, 598 or 1323            402

489E...................... Jurisdiction under this Subdivision................................. 402

Part 5.4C—Winding up by ASIC                                                                            403

489EA................... ASIC may order the winding up of a company.............. 403

489EB................... Deemed resolution that company be wound up voluntarily 404

489EC................... Appointment of liquidator............................................... 405

Part 5.5—Voluntary winding up                                                                              406

Division 1A—Preliminary                                                                                      406

489F...................... Definitions...................................................................... 406

Division 1—Resolution for winding up                                                            407

490........................ When company cannot wind up voluntarily.................... 407

491........................ Circumstances in which company may be wound up voluntarily             407

493........................ Effect of voluntary winding up....................................... 407

493A..................... Effect of voluntary winding up on company’s members 408

494........................ Declaration of solvency.................................................. 410

Division 2—Members’ voluntary winding up                                              413

495........................ Liquidators...................................................................... 413

496........................ Duty of liquidator where company turns out to be insolvent 414

Division 3—Creditors’ voluntary winding up                                             416

497........................ Meeting of creditors........................................................ 416

498........................ Power to adjourn meeting............................................... 417

499........................ Liquidators...................................................................... 418

500........................ Execution and civil proceedings...................................... 421

Division 4—Voluntary winding up generally                                               422

501........................ Distribution of property of company.............................. 422

502........................ Appointment of liquidator............................................... 422

503........................ Removal of liquidator..................................................... 422

504........................ Review of liquidator’s remuneration............................... 422

505........................ Acts of liquidator valid etc.............................................. 423

506........................ Powers and duties of liquidator...................................... 424

506A..................... Declarations by liquidator—relevant relationships.......... 425

507........................ Power of liquidator to accept shares etc. as consideration for sale of property of company     427

508........................ Annual obligations of liquidator—meeting or report...... 428

509........................ Final meeting and deregistration..................................... 430

510........................ Arrangement: when binding on creditors........................ 431

511........................ Application to Court to have questions determined or powers exercised 432

Part 5.6—Winding up generally                                                                               433

Division 1—Preliminary                                                                                          433

513........................ Application of Part.......................................................... 433

513AA.................. Definitions...................................................................... 433

Division 1A—When winding up taken to begin                                          434

513A..................... Winding up ordered by the Court................................... 434

513B...................... Voluntary winding up..................................................... 434

513C...................... Section 513C day in relation to an administration under Part 5.3A          435

513D..................... Validity of proceedings in earlier winding up................. 435

Division 2—Contributories                                                                                    437

514........................ Where Division applies................................................... 437

515........................ General liability of contributory...................................... 437

516........................ Company limited by shares............................................. 437

517........................ Company limited by guarantee........................................ 437

518........................ Company limited both by shares and by guarantee......... 437

519........................ Exceptions for former unlimited company...................... 438

520........................ Past member: later debts................................................. 438

521........................ Person ceasing to be a member a year or more before winding up           438

522........................ Present members to contribute first................................. 438

523........................ Past member of former unlimited company.................... 438

524........................ Past member of former limited company........................ 439

526........................ Liability on certain contracts........................................... 439

527........................ Nature of contributory’s liability..................................... 439

528........................ Death of contributory...................................................... 439

529........................ Bankruptcy of contributory............................................. 440

Division 3—Liquidators                                                                                          441

530........................ Appointment of 2 or more liquidators of a company...... 441

530AA.................. Appointment of 2 or more provisional liquidators of a company             441

530A..................... Officers to help liquidator............................................... 441

530B...................... Liquidator’s rights to company’s books......................... 443

530C...................... Warrant to search for, and seize, company’s property or books               444

531........................ Books to be kept by liquidator........................................ 445

532........................ Disqualification of liquidator.......................................... 445

533........................ Reports by liquidator...................................................... 447

534........................ Prosecution by liquidator of delinquent officers and members 449

535........................ When liquidator has qualified privilege........................... 449

536........................ Supervision of liquidators............................................... 449

537........................ Notice of appointment and address of liquidator............. 450

538........................ Regulations relating to money etc. received by liquidator 451

539........................ Liquidator’s accounts...................................................... 452

540........................ Liquidator to remedy defaults......................................... 453

Division 4—General                                                                                                  455

541........................ Notification that company is in liquidation...................... 455

542........................ Books of company.......................................................... 455

543........................ Investment of surplus funds on general account............. 456

544........................ Unclaimed money to be paid to ASIC............................ 457

545........................ Expenses of winding up where property insufficient...... 458

546........................ Resolutions passed at adjourned meetings of creditors and contributories               458

547........................ Meetings to ascertain wishes of creditors or contributories 458

Division 5—Committees of inspection                                                             460

548........................ Convening of meetings by liquidator for appointment of committee of inspection—company not in pooled group.............................................................................. 460

548A..................... Convening of meeting for appointment of committee of inspection—pooled group                461

549........................ Proceedings of committee of inspection.......................... 462

550........................ Vacancies on committee of inspection............................ 463

551........................ Member of committee not to accept extra benefit............ 464

552........................ Powers of Court where no committee of inspection....... 465

Division 6—Proof and ranking of claims                                                       466

Subdivision A—Admission to proof of debts and claims                             466

553........................ Debts or claims that are provable in winding up............. 466

553A..................... Member cannot prove debt unless contributions paid..... 467

553AA.................. Selling shareholder cannot prove debt unless documents given               467

553AB................... Superannuation contribution debts not admissible to proof 467

553B...................... Insolvent companies—penalties and fines not generally provable            469

553C...................... Insolvent companies—mutual credit and set‑off............. 469

553D..................... Debts or claims may be proved formally or informally... 469

553E...................... Application of Bankruptcy Act to winding up of insolvent company      470

Subdivision B—Computation of debts and claims                                         470

554........................ General rule—compute amount as at relevant date.......... 470

554A..................... Determination of value of debts and claims of uncertain value 470

554B...................... Discounting of debts payable after relevant date............. 472

554C...................... Conversion into Australian currency of foreign currency debts or claims                472

Subdivision C—Special provisions relating to secured creditors of insolvent companies          473

554D..................... Application of Subdivision............................................. 473

554E...................... Proof of debt by secured creditor.................................... 473

554F...................... Redemption of security interest by liquidator.................. 474

554G..................... Amendment of valuation................................................. 475

554H..................... Repayment of excess...................................................... 475

554J....................... Subsequent realisation of security interest...................... 476

Subdivision D—Priorities                                                                                    476

555........................ Debts and claims proved to rank equally except as otherwise provided   476

556........................ Priority payments............................................................ 477

558........................ Debts due to employees.................................................. 484

559........................ Debts of a class to rank equally...................................... 485

560........................ Advances for company to make priority payments in relation to employees            485

561........................ Priority of employees’ claims over circulating security interests              486

562........................ Application of proceeds of contracts of insurance.......... 487

562A..................... Application of proceeds of contracts of reinsurance....... 487

563........................ Provisions relating to injury compensation..................... 489

563AA.................. Seller under a buy‑back agreement................................. 490

563A..................... Postponing subordinate claims....................................... 490

563AAA............... Redemption of debentures.............................................. 491

Subdivision E—Miscellaneous                                                                            491

563B...................... Interest on debts and claims from relevant date to date of payment          491

563C...................... Debt subordination......................................................... 492

564........................ Power of Court to make orders in favour of certain creditors  492

Division 7—Effect on certain transactions                                                   493

565........................ Undue preference............................................................ 493

566........................ Effect of floating charge.................................................. 493

567........................ Liquidator’s right to recover in respect of certain transactions 493

Division 7A—Disclaimer of onerous property                                            497

568........................ Disclaimer by liquidator; application to Court by party to contract           497

568A..................... Liquidator must give notice of disclaimer....................... 499

568B...................... Application to set aside disclaimer before it takes effect. 499

568C...................... When disclaimer takes effect........................................... 500

568D..................... Effect of disclaimer......................................................... 501

568E...................... Application to set aside disclaimer after it has taken effect 501

568F...................... Court may dispose of disclaimed property...................... 502

Division 7B—Effect on enforcement process against company’s property         504

569........................ Executions, attachments etc. before winding up.............. 504

570........................ Duties of sheriff after receiving notice of application...... 505

Division 8—Pooling                                                                                                   509

Subdivision A—Pooling determinations                                                          509

571........................ Pooling determination..................................................... 509

572........................ Variation of pooling determination................................. 512

573........................ Lodgment of copy of pooling determination etc.............. 512

574........................ Eligible unsecured creditors must approve the making or variation of a pooling determination               513

575........................ Members’ voluntary winding up—copy of notice etc. to be given to each member of the company        514

576........................ Conduct of meeting......................................................... 515

577........................ Eligible unsecured creditors may decide to approve the determination or variation  515

578........................ When pooling determination comes into force etc........... 516

579........................ Duties of liquidator......................................................... 517

579A..................... Court may vary or terminate pooling determination........ 517

579B...................... Court may cancel or confirm variation............................ 519

579C...................... When Court may void or validate pooling determination 520

579D..................... Effect of termination or avoidance.................................. 521

Subdivision B—Pooling orders                                                                          521

579E...................... Pooling orders................................................................ 521

579F...................... Variation of pooling orders............................................. 525

579G..................... Court may make ancillary orders etc............................... 525

579H..................... Variation of ancillary orders etc...................................... 527

579J....................... Notice of application for pooling order etc...................... 528

579K...................... Notice of pooling order etc............................................. 529

579L...................... Consolidated meetings of creditors................................. 532

Subdivision C—Other provisions                                                                       533

579M..................... When debts or claims are provable in winding up.......... 533

579N..................... Group of companies....................................................... 533

579P...................... Secured debt may become unsecured.............................. 534

579Q..................... Eligible unsecured creditor.............................................. 534

Division 9—Co‑operation between Australian and foreign courts in external administration matters                                                                                                                    535

580........................ Definitions...................................................................... 535

581........................ Courts to act in aid of each other..................................... 535

Part 5.7—Winding up bodies other than companies                                    537

582........................ Application of Part.......................................................... 537

583........................ Winding up Part 5.7 bodies............................................ 537

585........................ Insolvency of Part 5.7 body............................................ 538

586........................ Contributories in winding up of Part 5.7 body............... 539

587........................ Power of Court to stay or restrain proceedings............... 540

588........................ Outstanding property of defunct registrable body........... 540

Part 5.7B—Recovering property or compensation for the benefit of creditors of insolvent company 542

Division 1—Preliminary                                                                                          542

588C...................... Definitions...................................................................... 542

588D..................... Secured debt may become unsecured.............................. 542

588E...................... Presumptions to be made in recovery proceedings......... 542

588F...................... Certain taxation liabilities taken to be debts..................... 545

Division 2—Voidable transactions                                                                    546

588FA................... Unfair preferences.......................................................... 546

588FB................... Uncommercial transactions............................................. 547

588FC................... Insolvent transactions..................................................... 547

588FD................... Unfair loans to a company.............................................. 548

588FDA................ Unreasonable director‑related transactions...................... 549

588FE.................... Voidable transactions...................................................... 550

588FF.................... Courts may make orders about voidable transactions..... 553

588FG................... Transaction not voidable as against certain persons........ 555

588FGA................ Directors to indemnify Commissioner of Taxation if certain payments set aside     557

588FGB................ Defences in proceedings under section 588FGA............ 558

588FH................... Liquidator may recover from related entity benefit resulting from insolvent transaction          559

588FI..................... Creditor who gives up benefit of unfair preference may prove for preferred debt    560

588FJ.................... Circulating security interest created within 6 months before relation‑back day        561

Division 2A—Vesting of PPSA security interests if not continuously perfected               563

588FK................... Interpretation and application.......................................... 563

588FL.................... Vesting of PPSA security interests if collateral not registered within time               563

588FM.................. Extension of time for registration.................................... 566

588FN................... PPSA security interests unaffected by section 588FL.... 567

588FO................... Certain lessors, bailors and consignors entitled to damages 569

Division 2B—Security interests in favour of company officers etc. 571

588FP.................... Security interests in favour of an officer of a company etc. void              571

Division 3—Director’s duty to prevent insolvent trading                     574

588G..................... Director’s duty to prevent insolvent trading by company 574

588H..................... Defences......................................................................... 576

Division 4—Director liable to compensate company                               578

Subdivision A—Proceedings against director                                                578

588J....................... On application for civil penalty order, Court may order compensation    578

588K...................... Criminal court may order compensation......................... 579

588L...................... Enforcement of order under section 588J or 588K......... 579

588M..................... Recovery of compensation for loss resulting from insolvent trading       579

588N..................... Avoiding double recovery.............................................. 580

588P...................... Effect of sections 588J, 588K and 588M........................ 580

588Q..................... Certificates evidencing contravention.............................. 581

Subdivision B—Proceedings by creditor                                                         581

588R...................... Creditor may sue for compensation with liquidator’s consent  581

588S...................... Creditor may give liquidator notice of intention to sue for compensation 582

588T...................... When creditor may sue for compensation without liquidator’s consent   582

588U..................... Events preventing creditor from suing............................ 583

Division 5—Liability of holding company for insolvent trading by subsidiary 584

588V..................... When holding company liable......................................... 584

588W..................... Recovery of compensation for loss resulting from insolvent trading       584

588X..................... Defences......................................................................... 585

Division 6—Application of compensation under Division 4 or 5       587

588Y..................... Application of amount paid as compensation.................. 587

Division 7—Person managing a corporation while disqualified may become liable for corporation’s debts                                                                                                                    588

588Z...................... Court may make order imposing liability........................ 588

Part 5.8—Offences                                                                                                            589

589........................ Interpretation and application.......................................... 589

590........................ Offences by officers of certain companies...................... 592

592........................ Incurring of certain debts; fraudulent conduct................. 595

593........................ Powers of Court............................................................. 597

594........................ Certain rights not affected............................................... 598

595........................ Inducement to be appointed liquidator etc. of company.. 599

596........................ Frauds by officers........................................................... 599

Part 5.8A—Employee entitlements                                                                          601

596AA.................. Object and coverage of Part............................................ 601

596AB................... Entering into agreements or transactions to avoid employee entitlements 602

596AC................... Person who contravenes section 596AB liable to compensate for loss    603

596AD.................. Avoiding double recovery.............................................. 604

596AE................... Effect of section 596AC................................................. 604

596AF................... Employee may sue for compensation with liquidator’s consent               604

596AG.................. Employee may give liquidator notice of intention to sue for compensation              604

596AH.................. When employee may sue for compensation without liquidator’s consent                605

596AI.................... Events preventing employee from suing......................... 606

Part 5.9—Miscellaneous                                                                                                 607

Division 1—Examining a person about a corporation                           607

596A..................... Mandatory examination.................................................. 607

596B...................... Discretionary examination.............................................. 607

596C...................... Affidavit in support of application under section 596B.. 608

596D..................... Content of summons....................................................... 608

596E...................... Notice of examination..................................................... 608

596F...................... Court may give directions about examination................. 609

597........................ Conduct of examination.................................................. 609

597A..................... When Court is to require affidavit about corporation’s examinable affairs               612

597B...................... Costs of unnecessary examination or affidavit................ 613

Division 2—Orders against a person in relation to a corporation  615

598........................ Order against person concerned with corporation........... 615

Division 3—Provisions applying to various kinds of external administration   617

600AA.................. Duty of receiver, administrator or liquidator—parental leave pay            617

600A..................... Powers of Court where outcome of voting at creditors’ meeting determined by related entity 617

600B...................... Review by Court of resolution of creditors passed on casting vote of person presiding at meeting         619

600C...................... Court’s powers where proposed resolution of creditors lost as casting vote of person presiding at meeting........................................................................................ 620

600D..................... Interim order on application under section 600A, 600B or 600C             621

600E...................... Order under section 600A or 600B does not affect act already done pursuant to resolution    621

600F...................... Limitation on right of suppliers of essential services to insist on payment as condition of supply           621

600G..................... Electronic methods of giving or sending certain notices etc. 623

600H..................... Rights if claim against the company postponed.............. 624

Chapter 5A—Deregistration, and transfer of registration, of companies              626

Part 5A.1—Deregistration                                                                                            626

601........................ Definitions...................................................................... 626

601AA.................. Deregistration—voluntary.............................................. 626

601AB................... Deregistration—ASIC initiated....................................... 628

601AC................... Deregistration—following amalgamation or winding up 629

601AD.................. Effect of deregistration.................................................... 630

601AE................... What the Commonwealth or ASIC does with the property 631

601AF................... The Commonwealth’s and ASIC’s power to fulfil outstanding obligations of deregistered company     633

601AG.................. Claims against insurers of deregistered company........... 634

601AH.................. Reinstatement.................................................................. 634

Part 5A.2—Transfer of registration                                                                       636

601AI.................... Transferring registration................................................. 636

601AJ.................... Applying to transfer registration..................................... 636

601AK................... ASIC makes transfer of registration declaration............. 637

601AL................... ASIC to deregister company........................................... 637

Chapter 5B—Bodies corporate registered as companies, and registrable bodies           638

Part 5B.1—Registering a body corporate as a company                           638

Division 1—Registration                                                                                         638

601BA................... Bodies corporate may be registered as certain types of companies           638

601BB................... Bodies registered as proprietary companies.................... 639

601BC................... Applying for registration under this Part........................ 639

601BD................... ASIC gives body ACN, registers as company and issues certificate       643

601BE................... Registered office............................................................. 644

601BF................... Name.............................................................................. 644

601BG................... Constitution.................................................................... 644

601BH................... Modifications of constitution.......................................... 644

601BJ.................... ASIC may direct company to apply for Court approval for modifications of constitution       645

601BK................... Establishing registers and minute books......................... 645

601BL................... Registration of registered bodies..................................... 646

Division 2—Operation of this Act                                                                      647

601BM.................. Effect of registration under this Part............................... 647

601BN................... Liability of members on winding up............................... 647

601BP................... Bearer shares.................................................................. 647

601BQ................... References in pre‑registration contracts and other documents to par value in existing contracts and documents........................................................................................ 648

601BR................... First AGM...................................................................... 649

601BS................... Modification by regulations............................................ 649

Part 5B.2—Registrable bodies                                                                                   650

Division 1A—Preliminary                                                                                      650

601C...................... Definitions...................................................................... 650

Division 1—Registrable Australian bodies                                                   651

601CA................... When a registrable Australian body may carry on business in this jurisdiction and outside its place of origin........................................................................................ 651

601CB................... Application for registration............................................. 651

601CC................... Cessation of business etc................................................ 652

Division 2—Foreign companies                                                                           655

601CD................... When a foreign company may carry on business in this jurisdiction        655

601CDA................ Limited disclosure if place of origin is a prescribed country 655

601CE................... Application for registration............................................. 655

601CF................... Appointment of local agent............................................. 656

601CG................... Local agent: how appointed............................................ 657

601CH................... Local agent: how removed.............................................. 658

601CJ.................... Liability of local agent..................................................... 658

601CK................... Balance‑sheets and other documents............................... 658

601CL................... Cessation of business etc................................................ 660

601CM.................. Register of members of foreign company....................... 663

601CN................... Register kept under section 601CM................................ 664

601CP................... Notifying ASIC about register kept under section 601CM 665

601CQ................... Effect of right to acquire shares compulsorily................. 665

601CR................... Index of members and inspection of registers................. 666

601CS................... Certificate as to shareholding.......................................... 666

Division 3—Bodies registered under this Part                                            667

601CTA................ Limited disclosure if place of origin is a prescribed country 667

601CT................... Registered office............................................................. 667

601CU................... Certificate of registration................................................. 668

601CV................... Notice of certain changes................................................ 668

601CW.................. Body’s name etc. must be displayed at office and place of business        669

601CX................... Service of documents on registered body....................... 670

601CY................... Power to hold land.......................................................... 671

Division 4—Register of debenture holders for non‑companies          672

601CZA................ Certain documents are debentures................................... 672

601CZB................. Register of debenture holders to be maintained by non‑companies          672

601CZC................. Location of register......................................................... 672

601CZD................ Application of sections 173 to 177................................. 673

Part 5B.3—Names of registrable Australian bodies and foreign companies         674

601DA.................. Reserving a name............................................................ 674

601DB................... Acceptable abbreviations................................................ 674

601DC................... When a name is available................................................ 675

601DD.................. Registered Australian bodies and registered foreign companies can carry on business with some names only........................................................................................ 676

601DE................... Using a name and ARBN............................................... 677

601DF................... Exception to requirement to have ARBN on receipts...... 678

601DG.................. Regulations may exempt from requirement to set out information on documents    678

601DH.................. Notice of name change must be given to ASIC.............. 678

601DJ.................... ASIC’s power to direct a registered name be changed.... 679


Chapter 2LDebentures

Part 2L.1Requirement for trust deed and trustee

  

283AA  Requirement for trust deed and trustee

             (1)  Before a body:

                     (a)  makes an offer of debentures in this jurisdiction that needs disclosure to investors under Chapter 6D, or does not need disclosure to investors under Chapter 6D because of subsection 708(14) (disclosure document exclusion for debenture roll overs) or section 708A (sale offers that do not need disclosure); or

                     (b)  makes an offer of debentures in this jurisdiction or elsewhere as consideration for the acquisition of securities under an off‑market takeover bid; or

                     (c)  issues debentures in this jurisdiction or elsewhere under a compromise or arrangement under Part 5.1 approved at a meeting held as a result of an order under subsection 411(1) or (1A);

regardless of where any resulting issue, sale or transfer occurs, the body must enter into a trust deed that complies with section 283AB and appoint a trustee that complies with section 283AC.

Note:          For rules about when an offer of debentures will need disclosure to investors under Chapter 6D, see sections 706, 707, 708, 708AA and 708A.

          (1A)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (2)  The body may revoke the trust deed after it has repaid all amounts payable under the debentures in accordance with the debentures’ terms and the trust deed.

             (3)  The body must comply with this Chapter.

Note:          Sections 168 and 601CZB require a register of debenture holders to be set up and kept.

             (4)  The regulations may exempt a specified offer of debentures, or a specified class of offers of debentures, from subsection (1).

283AB  Trust deed

             (1)  The trust deed must provide that the following are held in trust by the trustee for the benefit of the debenture holders:

                     (a)  the right to enforce the borrower’s duty to repay;

                     (b)  any charge or security for repayment;

                     (c)  the right to enforce any other duties that the borrower and any guarantor have under:

                              (i)  the terms of the debentures; or

                             (ii)  the provisions of the trust deed or this Chapter.

Note:          For information about the duties that the borrower and any guarantor body have under this Chapter, see sections 283BB to 283CE.

             (2)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

283AC  Who can be a trustee

Who can be trustee

             (1)  The trustee must be:

                     (a)  the Public Trustee of any State or Territory; or

                    (aa)  a licensed trustee company (within the meaning of Chapter 5D); or

                     (b)  a body corporate authorised by a law of any State or Territory to take in its own name a grant of probate of the will, or letters of administration of the estate, of a deceased person; or

                     (c)  a body corporate registered under section 21 of the Life Insurance Act 1995; or

                     (d)  an Australian ADI; or

                     (e)  a body corporate, all of whose shares are held beneficially by a body corporate or bodies corporate of the kind referred to in paragraph (b), (c) or (d) if that body or those bodies:

                              (i)  are liable for all of the liabilities incurred, or to be incurred, by the trustee as trustee; or

                             (ii)  have subscribed for and beneficially hold shares in the trustee and there is an uncalled liability of at least $500,000 in respect of those shares that can only be called up if the trustee becomes an externally‑administered body corporate (see section 254N); or

                      (f)  a body corporate approved by ASIC (see section 283GB).

Note:          Section 283BD provides that if the borrower becomes aware that the trustee cannot be a trustee, the trustee must be replaced.

Circumstances in which a person cannot be trustee

             (2)  A person may only be appointed or act as trustee (except to the extent provided for by section 283AD) if the appointment or acting will not result in a conflict of interest or duty. This subsection is not intended to affect any rule of law or equity.

             (3)  An offence based on subsection (1) or (2) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

283AD  Existing trustee continues to act until new trustee takes office

                   An existing trustee continues to act as the trustee until a new trustee is appointed and has taken office as trustee, despite any rule of law or equity to the contrary.

Note:          This section applies even if the existing trustee resigns.

283AE  Replacement of trustee

Related party of existing trustee may be appointed as a new trustee

             (1)  In addition to any other powers of appointment under the terms of the debentures or provisions of the trust deed, the borrower may appoint a body corporate that is related to the existing trustee as trustee in place of the existing trustee if:

                     (a)  the body corporate can be a trustee under section 283AC; and

                     (b)  the existing trustee consents in writing to the appointment.

The appointment has effect despite any terms of the debentures or provisions of the trust deed.

Appointment by Court

             (2)  The Court may:

                     (a)  appoint a person who may be a trustee under section 283AC as trustee on the application of the borrower, a debenture holder or ASIC if:

                              (i)  a trustee has not been validly appointed; or

                             (ii)  the trustee has ceased to exist; or

                     (b)  terminate the existing trustee’s appointment and appoint a person who may be a trustee under section 283AC as trustee in the existing trustee’s place on the application of the borrower, the existing trustee, a debenture holder or ASIC if:

                              (i)  the existing trustee cannot be trustee under section 283AC; or

                             (ii)  the existing trustee fails, or refuses, to act.

Part 2L.2Duties of borrower

  

283BA  Duties of borrower

                   A borrower that is required to enter into a trust deed under section 283AA has the duties imposed by this Part.

283BB  General duties

                   The borrower must:

                     (a)  carry on and conduct its business in a proper and efficient manner; and

                     (b)  provide a copy of the trust deed to:

                              (i)  a debenture holder; or

                             (ii)  the trustee;

                            if they request a copy; and

                     (c)  make all of its financial and other records available for inspection by:

                              (i)  the trustee; or

                             (ii)  an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

                            (iii)  a registered company auditor appointed by the trustee to carry out the inspection;

                            and give them any information, explanations or other assistance that they require about matters relating to those records.

Note:          The borrower also has a duty to call a meeting of debenture holders in certain circumstances (see section 283EA).

283BC  Duty to notify ASIC of information related to trustee

             (1)  Within 14 days after the trustee is appointed, the borrower must lodge with ASIC a notice containing the following information:

                     (a)  the name of the trustee;

                     (b)  any other information related to the trustee or the debentures that is prescribed by the regulations.

             (2)  If there is any change to the information, the borrower must, within 14 days of the change, lodge with ASIC a notice containing the changed information.

             (3)  A notice under subsection (1) or (2) must be in the prescribed form.

283BCA  Register relating to trustees for debenture holders

The register

             (1)  ASIC must establish and maintain a register relating to trustees for debenture holders.

             (2)  The regulations may prescribe the way in which the register must be established or maintained, including the details that ASIC must enter in the register.

Inspection of register

             (3)  A person may inspect the register, and may make copies of, or take extracts from, the register.

             (4)  The regulations may prescribe the fees that a person must pay ASIC to do the things mentioned in subsection (3).

             (5)  Any disclosure necessary for the purposes of this section is authorised by this section.

283BD  Duty to replace trustee

                   The borrower must take all reasonable steps to replace the trustee under section 283AE as soon as practicable after the borrower becomes aware that the trustee:

                     (a)  has ceased to exist; or

                     (b)  has not been validly appointed; or

                     (c)  cannot be a trustee under section 283AC; or

                     (d)  has failed or refused to act as trustee.

283BE  Duty to inform trustee about security interests

                   If the borrower creates a security interest, it must:

                     (a)  give the trustee written details of the security interest within 21 days after it is created; and

                     (b)  if the total amount to be advanced on the security of the security interest is indeterminate and the advances are not merged in a current account with bankers, trade creditors or anyone else—give the trustee written details of the amount of each advance within 7 days after it is made.

Note:          If the advances are merged in a current account the borrower must give the trustee the details in the quarterly report (see subsection 283BF(4)).

283BF  Duty to give trustee and ASIC quarterly reports

Quarterly reports

             (1)  Within 1 month after the end of each quarter, the borrower must:

                     (a)  give the trustee a quarterly report that sets out the information required by subsections (4), (5) and (6); and

                     (b)  lodge a copy of the report with ASIC (see section 351).

First quarter

             (2)  The first quarter is the period of 3 months ending on a day fixed by the borrower, by written notice to the trustee. The day must be less than 6 months after the first issue of a debenture under the trust deed.

Subsequent quarters

             (3)  Each of the subsequent quarters are periods of 3 months. The trustee may allow a particular quarter to be a period of less than 3 months if the trustee is satisfied that special circumstances justify doing so.

Content of quarterly report

             (4)  The report for a quarter must include details of:

                     (a)  any failure by the borrower and each guarantor to comply with the terms of the debentures or the provisions of the trust deed or this Chapter during the quarter; and

                     (b)  any event that has happened during the quarter that has caused, or could cause, 1 or more of the following:

                              (i)  any amount deposited or lent under the debentures to become immediately payable;

                             (ii)  the debentures to become immediately enforceable;

                            (iii)  any other right or remedy under the terms of the debenture or provisions of the trust deed to become immediately enforceable; and

                     (c)  any circumstances that have occurred during the quarter that materially prejudice:

                              (i)  the borrower, any of its subsidiaries, or any of the guarantors; or

                             (ii)  any security interest included in or created by the debentures or the trust deed; and

                     (d)  any substantial change in the nature of the business of the borrower, any of its subsidiaries, or any of the guarantors that has occurred during the quarter; and

                     (e)  any of the following events that happened in the quarter:

                              (i)  the appointment of a guarantor;

                             (ii)  the cessation of liability of a guarantor body for the payment of the whole or part of the money for which it was liable under the guarantee;

                            (iii)  a change of name of a guarantor (if this happens, the report must also disclose the guarantor’s new name); and

                      (f)  the net amount outstanding on any advances at the end of the quarter if the borrower has created a security interest where:

                              (i)  the total amount to be advanced on the security of the security interest is indeterminate; and

                             (ii)  the advances are merged in a current account with bankers, trade creditors or anyone else; and

                     (g)  any other matters that may materially prejudice any security interests or other interests of the debenture holders.

Note:          Paragraph (f)—the borrower has a duty to inform the trustee about security interests as they are created (see section 283BE).

             (5)  If the borrower has deposited money with, or lent money to, a related body corporate during the quarter, the report must also include details of:

                     (a)  the total of the money deposited with, or lent to, the related body corporate during the quarter (see subsection (7)); and

                     (b)  the total amount of money owing to the borrower at the end of the quarter in respect of the deposits or loans to the related body corporate.

Disregard any amount that the borrower deposits with an ADI in the normal course of the borrower’s business.

             (6)  If the borrower has assumed a liability of a related body corporate during the quarter, the report must also include details of the extent of the liability assumed during the quarter and the extent of the liability as at the end of the quarter.

             (7)  For the purposes of subsections (5) and (6), the report:

                     (a)  must distinguish between deposits, loans and assumptions of liability that are secured and those that are unsecured; and

                     (b)  may exclude any deposit, loan or assumption of liability on behalf of the related body corporate if it has:

                              (i)  guaranteed the repayment of the debentures of the borrower; and

                             (ii)  secured the guarantee by a security interest over all of its property in favour of the trustee.

Formalities

             (8)  The report must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the date on which the report is made.

283BG  Exceptions to borrower’s duty to report to trustee and ASIC

                   Section 283BF does not apply in respect of:

                     (a)  a borrower, while:

                              (i)  it is under external administration; or

                             (ii)  a receiver, or a receiver and manager, of property of the borrower has been appointed and has not ceased to act under that appointment; or

                     (b)  a security interest in PPSA retention of title property.

283BH  How debentures may be described

             (1)  The borrower may describe or refer to the debentures in:

                     (a)  any disclosure in relation to the offer of the debentures; or

                     (b)  any other document constituting or relating to the offer of the debentures; or

                     (c)  the debentures themselves;

only in accordance with the following table:

 

How debentures may be described

Item

Description

When description may be used

1

mortgage debenture

only if the circumstances set out in subsection (2) are satisfied

2

debenture

only if the circumstances set out in subsection (2) or (3) are satisfied

3

unsecured note or unsecured deposit note

in any other case

          (1A)  The borrower commits an offence if it intentionally or recklessly contravenes subsection (1).

When debentures can be called mortgage debentures or debentures

             (2)  The borrower may describe or refer to the debentures as:

                     (a)  mortgage debentures; or

                     (b)  debentures;

if:

                     (c)  the repayment of all money that has been, or may be, deposited or lent under the debentures is secured by a first mortgage given to the trustee over land vested in the borrower or in any of the guarantors; and

                     (d)  the mortgage has been registered, or is a registrable mortgage that has been lodged for registration, in accordance with the law relating to the registration of mortgages of land in the place where the land is situated; and

                     (e)  the total amount of that money and of all other liabilities (if any) secured by the mortgage of that land ranking equally with the liability to repay that money does not exceed 60% of the value of the borrower’s or guarantor’s interest in that land as shown in the valuation included in the disclosure document for the debentures.

When debentures can be called debentures

             (3)  The borrower may describe or refer to the debentures as debentures if:

                     (a)  the repayment of all money that has been, or may be, deposited or lent under the debentures has been secured by a security interest in favour of the trustee over the whole or any part of the tangible property of the borrower or of any of the guarantors; and

                     (b)  the tangible property that constitutes the security for the security interest is sufficient and is reasonably likely to be sufficient to meet the liability for the repayment of all such money and all other liabilities that:

                              (i)  have been or may be incurred; and

                             (ii)  rank in priority to, or equally with, that liability.

283BI  Offences for failure to comply with statutory duties

                   The borrower commits an offence if it intentionally or recklessly contravenes section 283BB, 283BC, 283BD, 283BE, 283BF or 283EA.

Part 2L.3Duties of guarantor

  

283CA  Duties of guarantor

                   If a borrower is required to enter into a trust deed under section 283AA in relation to debentures, a guarantor in respect of the debentures has the duties imposed by this Part.

283CB  General duties

                   The guarantor must:

                     (a)  carry on and conduct its business in a proper and efficient manner; and

                     (b)  make all of its financial and other records available for inspection by:

                              (i)  the trustee; or

                             (ii)  an officer or employee of the trustee authorised by the trustee to carry out the inspection; or

                            (iii)  a registered company auditor appointed by the trustee to carry out the inspection;

                            and give them any information, explanations or other assistance that they require about matters relating to those records.

283CC  Duty to inform trustee about security interests

                   If the guarantor creates a security interest, it must:

                     (a)  give the trustee written details of the security interest within 21 days after it is created; and

                     (b)  if the total amount to be advanced on the security of the security interest is indeterminate, give the trustee written details of:

                              (i)  the amount of each advance made within 7 days after it is made; or

                             (ii)  where the advances are merged in a current account with bankers, trade creditors or anyone else—the net amount outstanding on the advances at the end of every 3 months.

283CD  Exceptions to guarantor’s duty to inform trustee

                   Section 283CC does not apply in respect of:

                     (a)  the guarantor, while:

                              (i)  it is under external administration; or

                             (ii)  a receiver, or a receiver and manager, of property of the guarantor has been appointed and has not ceased to act under that appointment; or

                     (b)  a security interest in PPSA retention of title property.

283CE  Offences for failure to comply with statutory duties

                   The guarantor commits an offence if it intentionally or recklessly contravenes paragraph 283CB(b) or section 283CC.

Part 2L.4Trustee

  

283DA  Trustee’s duties

                   The trustee of a trust deed entered into under section 283AA must:

                     (a)  exercise reasonable diligence to ascertain whether the property of the borrower and of each guarantor that is or should be available (whether by way of security or otherwise) will be sufficient to repay the amount deposited or lent when it becomes due; and

                     (b)  exercise reasonable diligence to ascertain whether the borrower or any guarantor has committed any breach of:

                              (i)  the terms of the debentures; or

                             (ii)  the provisions of the trust deed or this Chapter; and

                     (c)  do everything in its power to ensure that the borrower or a guarantor remedies any breach known to the trustee of:

                              (i)  any term of the debentures; or

                             (ii)  any provision of the trust deed or this Chapter;

                            unless the trustee is satisfied that the breach will not materially prejudice the debenture holders’ interests or any security for the debentures; and

                     (e)  notify ASIC as soon as practicable if:

                              (i)  the borrower has not complied with section 283BE, 283BF or subsection 318(1) or (4); or

                             (ii)  a guarantor has not complied with section 283CC; and

                      (f)  notify ASIC and the borrower as soon as practicable if the trustee discovers that it cannot be a trustee under section 283AC; and

                     (g)  give the debenture holders a statement explaining the effect of any proposal that the borrower submits to the debenture holders before any meeting that:

                              (i)  the Court calls in relation to a scheme under subsection 411(1) or (1A); or

                             (ii)  the trustee calls under subsection 283EB(1); and

                     (h)  comply with any directions given to it at a debenture holders’ meeting referred to in section 283EA, 283EB or 283EC unless:

                              (i)  the trustee is of the opinion that the direction is inconsistent with the terms of the debentures or the provisions of the trust deed or this Act or is otherwise objectionable; and

                             (ii)  has either obtained, or is in the process of obtaining, an order from the Court under section 283HA setting aside or varying the direction; and

                      (i)  apply to the Court for an order under section 283HB if the borrower requests it to do so.

Note 1:       Paragraph (g)—Section 411 relates to compromises and arrangements.

Note 2:       Section 283DC deals with indemnification in respect of a trustee’s liability to the debenture holders.

283DB  Exemptions and indemnifications of trustee from liability

             (1)  A term of a debenture, provision of a trust deed or a term of a contract with holders of debentures secured by a trust deed, is void in so far as the term or provision would have the effect of:

                     (a)  exempting a trustee from liability for breach of section 283DA for failure to show the degree of care and diligence required of it as trustee; or

                     (b)  indemnifying the trustee against that liability;

unless the term or provision:

                     (c)  releases the trustee from liability for something done or omitted to be done before the release is given; or

                     (d)  enables a meeting of debenture holders to approve the release of the trustee from liability for something done or omitted to be done before the release is given.

             (2)  For the purposes of paragraph (1)(d):

                     (a)  a release is approved if the debenture holders who vote for the resolution hold 75% of the nominal value of the debentures held by all the debenture holders who attend the meeting and vote on the resolution; and

                     (b)  a debenture holder attends the meeting and votes on the resolution if:

                              (i)  they attend the meeting in person and vote on the resolution; or

                             (ii)  if proxies are permitted—they are represented at the meeting by a proxy and the proxy votes on the resolution.

283DC  Indemnity

                   The trustee is not liable for anything done or omitted to be done in accordance with a direction given to it by the debenture holders at any meeting called under section 283EA, 283EB or 283EC.

Part 2L.5Meetings of debenture holders

  

283EA  Borrower’s duty to call meeting

Duty to call meeting

             (1)  The borrower must call a meeting of debenture holders if:

                     (a)  debenture holders who together hold 10% or more of the nominal value of the issued debentures to which the trust relates direct the borrower to do so; and

                     (b)  the direction is given to the borrower in writing at its registered office; and

                     (c)  the purpose of the meeting is to:

                              (i)  consider the financial statements that were laid before the last AGM of the borrower; or

                             (ii)  give the trustee directions in relation to the exercise of any of its powers.

Note:          The trustee usually must comply with any directions given to it by the debenture holders at the meeting (see paragraph 283DA(h)).

Duty to give notification of meeting

             (2)  If the borrower is required to call a meeting, it must give notice of the time and place of the meeting to:

                     (a)  the trustee; and

                     (b)  the borrower’s auditor; and

                     (c)  each of the debenture holders whose names are entered on the register of debenture holders.

Notice to joint holders of a debenture must be given to the joint holder named first in the register of debenture holders.

             (3)  The borrower may give the notice to a debenture holder:

                     (a)  personally; or

                     (b)  by sending it by post to the address for the debenture holder in the register of debenture holders; or

                     (c)  by sending it to the fax number or electronic address (if any) nominated by the debenture holder; or

                     (d)  by any other means that the trust deed or the terms of the debentures permit.

Note:          A defect in the notice may not invalidate a meeting (see section 1322).

When notice by post or fax is given

             (4)  A notice of meeting sent to a debenture holder is taken to be given:

                     (a)  3 days after it is posted, if it is posted; or

                     (b)  on the business day after it is sent, if it is sent by fax or other electronic means;

unless the trust deed or the terms of the debentures provide otherwise.

283EB  Trustee’s power to call meeting

Trustee may call meeting in event of breach

             (1)  If the borrower or a guarantor fails to remedy any breach of the terms of the debentures or provisions of the trust deed or this Chapter when required by the trustee, the trustee may:

                     (a)  call a meeting of debenture holders; and

                     (b)  inform the debenture holders of the failure at the meeting; and

                     (c)  submit proposals for protection of the debenture holders’ interests to the meeting; and

                     (d)  ask for directions from the debenture holders in relation to the matter.

Trustee may appoint person to chair meeting

             (2)  The trustee may appoint a person to chair a meeting of debenture holders called under subsection (1). If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.

283EC  Court may order meeting

             (1)  Without limiting section 283HA or 283HB, the Court may make an order under either of those sections for a meeting of all or any of the debenture holders to be held to give directions to the trustee. The order may direct the trustee to:

                     (a)  place before the debenture holders any information concerning their interests; and

                     (b)  place before the debenture holders any proposals to protect their interests that the Court directs or the trustee considers appropriate; and

                     (c)  obtain the debenture holders’ directions concerning the protection of their interests.

             (2)  The meeting is to be held and conducted in the manner the Court directs. The trustee may appoint a person to chair the meeting. If the trustee does not exercise this power, the debenture holders present at the meeting may appoint a person to chair the meeting.

Part 2L.6Civil liability

  

283F  Civil liability for contravening this Chapter

             (1)  A person who suffers loss or damage because a person contravenes a provision of this Chapter may recover the amount of the loss or damage from:

                     (a)  the person who contravened the provision; or

                     (b)  a person involved in the contravention.

This is so even if the person did not commit, and was not involved in, the contravention.

             (2)  An action under subsection (1) may begin at any time within 6 years after the day on which the cause of action arose.

             (3)  This Part does not affect any liability that a person has under any other law.

Part 2L.7ASIC powers

  

283GA  ASIC’s power to exempt and modify

             (1)  ASIC may:

                     (a)  exempt a person from a provision of this Chapter; or

                     (b)  declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

             (2)  The exemption or declaration may do all or any of the following:

                     (a)  apply to all or specified provisions of this Chapter;

                     (b)  apply to all persons, specified persons, or a specified class of persons;

                     (c)  relate to all debentures, specified debentures or a specified class of debentures;

                     (d)  relate to any other matter generally or as specified.

             (3)  An exemption may apply unconditionally or subject to specified conditions. A person to whom a condition specified in an exemption applies must comply with the condition. The Court may order the person to comply with the condition in a specified way. Only ASIC may apply to the Court for the order.

             (4)  The exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette.

             (5)  For the purposes of this section, the provisions of this Chapter include:

                     (a)  regulations made for the purposes of this Chapter; and

                     (b)  definitions in this Act or the regulations as they apply to references in:

                              (i)  this Chapter; or

                             (ii)  regulations made for the purposes of this Chapter; and

                     (c)  the old Division 12 of Part 11.2 transitionals.

283GB  ASIC may approve body corporate to be trustee

             (1)  ASIC may approve a body corporate in writing to be a trustee for the purposes of paragraph 283AC(1)(f). The approval may allow the body corporate to act as trustee:

                     (a)  in any circumstances; or

                     (b)  in relation to a particular borrower or particular class of borrower; or

                     (c)  in relation to a particular trust deed;

and may be given subject to conditions.

             (2)  ASIC must publish notice of the approval in the Gazette.

Part 2L.8Court

  

283HA  General Court power to give directions and determine questions

                   If the trustee applies to the Court for any direction in relation to the performance of the trustee’s functions or to determine any question in relation to the interests of the debenture holders, the Court may give any direction and make any declaration or determination in relation to the matter that the Court considers appropriate. The Court may also make ancillary or consequential orders.

Note:          Under this section, the Court may order a meeting of debenture holders to be held, see section 283EC.

283HB  Specific Court powers

             (1)  If the trustee or ASIC applies to the Court, the Court may make any or all of the following orders:

                     (a)  an order staying an action or other civil proceedings before a court by or against the borrower or a guarantor body;

                     (b)  an order restraining the borrower from paying any money to the debenture holders or any holders of any other class of debentures;

                     (c)  an order that any security for the debentures be enforceable immediately or at the time the Court directs (even if the debentures are irredeemable or redeemable only on the happening of a contingency);

                     (d)  an order appointing a receiver of any property constituting security for the debentures;

                     (e)  an order restricting advertising by the borrower for deposits or loans;

                      (f)  an order restricting borrowing by the borrower;

                     (g)  any other order that the Court considers appropriate to protect the interests of existing or prospective debenture holders.

             (2)  In deciding whether to make an order under subsection (1), the Court must have regard to:

                     (a)  the ability of the borrower and each guarantor to repay the amount deposited or lent as and when it becomes due; and

                     (b)  any contravention of section 283GA by the borrower; and

                     (c)  the interests of the borrower’s members and creditors; and

                     (d)  the interests of the members of each of the guarantors.

Note:          The Court may order a meeting of debenture holders to be held (see section 283EC).

Part 2L.9Location of other debenture provisions

  

283I  Signpost to other debenture provisions

                   There are other rules relating to debentures in paragraph 124(1)(b) and section 563AAA.

Chapter 2MFinancial reports and audit

Part 2M.1Overview

  

285  Overview of obligations under this Chapter

Obligations under this Chapter

             (1)  Under this Chapter, all companies, registered schemes and disclosing entities must keep financial records (see sections
286‑291)—and some must prepare financial reports (see sections 292‑323D). All those that have to prepare financial reports have to prepare them annually; disclosing entities have to prepare half‑year financial reports as well. The following table sets out what is involved in annual financial reporting:

 

Annual financial reporting

 

steps

sections

comments

1

prepare financial report

s. 295

The financial report includes:

• financial statements

• disclosures and notes

• directors’ declaration.

2

prepare directors’ report

s. 298

Unless the report relates to a company limited by guarantee, it has a general component (sections 299 and 299A), a specific component (section 300) and a special component for listed companies (section 300A). See section 285A for an overview of the obligations of companies limited by guarantee.

3

have the financial report audited and obtain auditor’s report

s. 301, 307, 308

A small proprietary company preparing a financial report in response to a shareholder direction under s. 293 only has to have an audit if the direction asks for it.

There are similar rules for companies limited by guarantee (see section 285A for an overview).

Under s. 312, officers must assist the auditor in the conduct of the audit.

ASIC may use its exemption powers under s. 340 and 341 to relieve large proprietary companies from the audit requirements in appropriate cases (s. 342(2) and (3)).

4

provide the financial report, directors’ report and auditor’s report to members

s. 314

Unless the report relates to a company limited by guarantee, a concise financial report may be provided to members instead of the full financial statements (subsections 314(1) and (2)). For deadline, see subsections 315(1) to (4). See section 285A for an overview of the obligations of companies limited by guarantee.

5

lodge the financial report, directors’ report and auditor’s report with ASIC

s. 319

For deadline see s. 319(3).

Companies that have the benefit of the grandfathering in the relevant Part 10.1 transitionals do not have to lodge.

6

[public companies only] lay financial report, directors’ report and auditor’s report before AGM

s. 317

For the AGM deadline see s. 250N.

Application to disclosing entities

             (2)  This Chapter covers all disclosing entities:

                     (a)  incorporated or formed in Australia; and

                     (b)  whether or not they are companies or registered schemes.

Application to registered schemes

             (3)  For the purposes of applying this Chapter to a registered scheme:

                     (a)  the scheme’s responsible entity is responsible for the performance of obligations in respect of the scheme; and

                     (b)  the directors and officers of the responsible entity are taken to be the directors and officers of the scheme; and

                     (c)  the debts incurred in operating the scheme are taken to be the debts of the scheme.

285A  Overview of obligations of companies limited by guarantee

                   The following table sets out what is involved in annual financial reporting for companies limited by guarantee:

 

Annual financial reporting for companies limited by guarantee

Item

Nature of company

Obligations

Sections

1

Small company limited by guarantee.

 

No obligation to do any of the following unless required to do so under a member direction or ASIC direction:

• prepare a financial report;

• prepare a directors’ report;

• have financial report audited;

• notify members of reports.

Sections 292, 301 and 316A

2

Company limited by guarantee with annual revenue or, if part of a consolidated entity, annual consolidated revenue of less than $1 million.

Must prepare a financial report.

Must prepare a directors’ report, although less detailed than that required of other companies.

Need not have financial report audited unless a Commonwealth company, or a subsidiary of a Commonwealth company or Commonwealth authority. If the company does not have financial report audited, it must have financial report reviewed.

Must give reports to any member who elects to receive them.

Sections 292, 298, 300B, 301, 316A

3

Company limited by guarantee with annual revenue or, if part of a consolidated entity, annual consolidated revenue of $1 million or more.

Must prepare a financial report.

Must prepare a directors’ report, although less detailed than that required of other companies.

Must have financial report audited.

Must give reports to any member who elects to receive them.

Sections 292, 298, 300B, 301, 316A

Part 2M.2Financial records

  

286  Obligation to keep financial records

             (1)  A company, registered scheme or disclosing entity must keep written financial records that:

                     (a)  correctly record and explain its transactions and financial position and performance; and

                     (b)  would enable true and fair financial statements to be prepared and audited.

The obligation to keep financial records of transactions extends to transactions undertaken as trustee.

Note:          Section 9 defines financial records.

Period for which records must be retained

             (2)  The financial records must be retained for 7 years after the transactions covered by the records are completed.

Strict liability offences

             (3)  An offence based on subsection (1) or (2) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

287  Language requirements

             (1)  The financial records may be kept in any language.

             (2)  An English translation of financial records not kept in English must be made available within a reasonable time to a person who:

                     (a)  is entitled to inspect the records; and

                     (b)  asks for the English translation.

             (3)  An offence based on subsection (2) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

288  Physical format

             (1)  If financial records are kept in electronic form, they must be convertible into hard copy. Hard copy must be made available within a reasonable time to a person who is entitled to inspect the records.

             (2)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

289  Place where records are kept

             (1)  A company, registered scheme or disclosing entity may decide where to keep the financial records.

Records kept outside this jurisdiction

             (2)  If financial records about particular matters are kept outside this jurisdiction, sufficient written information about those matters must be kept in this jurisdiction to enable true and fair financial statements to be prepared. The company, registered scheme or disclosing entity must give ASIC written notice in the prescribed form of the place where the information is kept.

          (2A)  An offence based on subsection (2) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (3)  ASIC may direct a company, registered scheme or disclosing entity to produce specified financial records that are kept outside this jurisdiction.

             (4)  The direction must:

                     (a)  be in writing; and

                     (b)  specify a place in this jurisdiction where the records are to be produced (the place must be reasonable in the circumstances); and

                     (c)  specify a day (at least 14 days after the direction is given) by which the records are to be produced.

290  Director access

Personal access

             (1)  A director of a company, registered scheme or disclosing entity has a right of access to the financial records at all reasonable times.

Court order for inspection on director’s behalf

             (2)  On application by a director, the Court may authorise a person to inspect the financial records on the director’s behalf.

             (3)  A person authorised to inspect records may make copies of the records unless the Court orders otherwise.

             (4)  The Court may make any other orders it consider appropriate, including either or both of the following:

                     (a)  an order limiting the use that a person who inspects the records may make of information obtained during the inspection;

                     (b)  an order limiting the right of a person who inspects the records to make copies in accordance with subsection (3).

291  Signposts to other relevant provisions

                   The following table sets out other provisions that are relevant to access to financial records.

 

Other provisions relevant to access to financial records

 

 

 

1

 

section 247A

members

A member may apply to the Court for an order to inspect the records.

 

2

 

section 310

auditor

The auditor has a right of access to the records.

 

3

 

section 431

controllers

A controller of a corporation’s property (for example, a receiver or receiver and manager) has a right of access to the records.

 

4

 

sections 28 to 39 of the ASIC Act

ASIC

ASIC has power to inspect the records. It also has power under subsection 289(3) of this Act to call for the production of financial records kept outside this jurisdiction.

Part 2M.3Financial reporting

Division 1Annual financial reports and directors’ reports

292  Who has to prepare annual financial reports and directors’ reports

             (1)  A financial report and a directors’ report must be prepared for each financial year by:

                     (a)  all disclosing entities; and

                     (b)  all public companies; and

                     (c)  all large proprietary companies; and

                     (d)  all registered schemes.

Note:          This Chapter only applies to disclosing entities incorporated or formed in Australia (see subsection 285(2)).

Small proprietary companies

             (2)  A small proprietary company has to prepare the financial report and directors’ report only if:

                     (a)  it is directed to do so under section 293 or 294; or

                     (b)  it was controlled by a foreign company for all or part of the year and it is not consolidated for that period in financial statements for that year lodged with ASIC by:

                              (i)  a registered foreign company; or

                             (ii)  a company, registered scheme or disclosing entity.

The rest of this Part does not apply to any other small proprietary company.

Small companies limited by guarantee

             (3)  Despite subsection (1), a small company limited by guarantee has to prepare the financial report and directors’ report only if it is directed to do so under section 294A or 294B. The rest of this Part does not apply to any other small company limited by guarantee.

293  Small proprietary company—shareholder direction

             (1)  Shareholders with at least 5% of the votes in a small proprietary company may give the company a direction to:

                     (a)  prepare a financial report and directors’ report for a financial year; and

                     (b)  send them to all shareholders.

             (2)  The direction must be:

                     (a)  signed by the shareholders giving the direction; and

                     (b)  made no later than 12 months after the end of the financial year concerned.

             (3)  The direction may specify all or any of the following:

                     (a)  that the financial report does not have to comply with some or all of the accounting standards;

                     (b)  that a directors’ report or a part of that report need not be prepared;

                     (c)  that the financial report is to be audited.

294  Small proprietary company—ASIC direction

             (1)  ASIC may give a small proprietary company a direction to comply with requirements of this Division and Divisions 3, 4, 5 and 6 for a financial year.

          (1A)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (2)  The direction may be general or may specify the particular requirements that the company is to comply with.

             (3)  The direction must specify the date by which the documents have to be prepared, sent or lodged. The date must be a reasonable one in view of the nature of the direction.

             (4)  The direction must:

                     (a)  be made in writing; and

                     (b)  specify the financial year concerned; and

                     (c)  be made no later than 6 years after the end of that financial year.

294A  Small company limited by guarantee—member direction

             (1)  Members with at least 5% of the votes in a small company limited by guarantee may give the company a direction to:

                     (a)  prepare a financial report and directors’ report for a financial year; and

                     (b)  send them to members who have elected to receive them under section 316A.

             (2)  The direction must be:

                     (a)  signed by the members giving the direction; and

                     (b)  made no later than 12 months after the end of the financial year concerned.

             (3)  The direction may specify all or any of the following:

                     (a)  that the financial report does not have to comply with some or all of the accounting standards;

                     (b)  that a directors’ report or a part of that report need not be prepared;

                     (c)  that the financial report is to be audited or reviewed.

294B  Small company limited by guarantee—ASIC direction

             (1)  ASIC may give a small company limited by guarantee a direction to comply with the requirements of this Division and Divisions 3, 4, 5 and 6 for a financial year.

             (2)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (3)  The direction may be general or may specify the particular requirements that the company is to comply with.

             (4)  The direction must specify the date by which the documents have to be prepared, sent or lodged. The date must be a reasonable one in view of the nature of the direction.

             (5)  The direction must:

                     (a)  be made in writing; and

                     (b)  specify the financial year concerned; and

                     (c)  be made no later than 6 years after the end of that financial year.

             (6)  A direction given under subsection (1) is not a legislative instrument.

295  Contents of annual financial report

Basic contents

             (1)  The financial report for a financial year consists of:

                     (a)  the financial statements for the year; and

                     (b)  the notes to the financial statements; and

                     (c)  the directors’ declaration about the statements and notes.

Financial statements

             (2)  The financial statements for the year are:

                     (a)  unless paragraph (b) applies—the financial statements in relation to the company, registered scheme or disclosing entity required by the accounting standards; or

                     (b)  if the accounting standards require the company, registered scheme or disclosing entity to prepare financial statements in relation to a consolidated entity—the financial statements in relation to the consolidated entity required by the accounting standards.

Notes to financial statements

             (3)  The notes to the financial statements are:

                     (a)  disclosures required by the regulations; and

                     (b)  notes required by the accounting standards; and

                     (c)  any other information necessary to give a true and fair view (see section 297).

Directors’ declaration

             (4)  The directors’ declaration is a declaration by the directors:

                     (c)  whether, in the directors’ opinion, there are reasonable grounds to believe that the company, registered scheme or disclosing entity will be able to pay its debts as and when they become due and payable; and

                    (ca)  if the company, registered scheme or disclosing entity has included in the notes to the financial statements, in compliance with the accounting standards, an explicit and unreserved statement of compliance with international financial reporting standards—that this statement has been included in the notes to the financial statements; and

                     (d)  whether, in the directors’ opinion, the financial statement and notes are in accordance with this Act, including:

                              (i)  section 296 (compliance with accounting standards); and

                             (ii)  section 297 (true and fair view); and

                     (e)  if the company, disclosing entity or registered scheme is listed—that the directors have been given the declarations required by section 295A.

Note:          See paragraph 285(3)(c) for the reference to the debts of a registered scheme.

             (5)  The declaration must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the date on which the declaration is made; and

                     (c)  be signed by a director.

295A  Declaration in relation to listed entity’s financial statements by chief executive officer and chief financial officer

             (1)  If the company, disclosing entity or registered scheme is listed, the directors’ declaration under subsection 295(4) must be made only after each person who performs:

                     (a)  a chief executive function; or

                     (b)  a chief financial officer function;

in relation to the company, disclosing entity or registered scheme has given the directors a declaration under subsection (2) of this section.

             (2)  The declaration is a declaration whether, in the person’s opinion:

                     (a)  the financial records of the company, disclosing entity or registered scheme for the financial year have been properly maintained in accordance with section 286; and

                     (b)  the financial statements, and the notes referred to in paragraph 295(3)(b), for the financial year comply with the accounting standards; and

                     (c)  the financial statements and notes for the financial year give a true and fair view (see section 297); and

                     (d)  any other matters that are prescribed by the regulations for the purposes of this paragraph in relation to the financial statements and the notes for the financial year are satisfied.

             (3)  The declaration must:

                     (a)  be made in writing; and

                     (b)  specify the date on which the declaration is made; and

                     (c)  specify the capacity in which the person is making the declaration; and

                     (d)  be signed by the person making the declaration.

A person who performs both a chief executive function and a chief financial officer function may make a single declaration in both capacities.

             (4)  A person performs a chief executive function in relation to the company, disclosing entity or registered scheme if the person is the person who is primarily and directly responsible to the directors for the general and overall management of the company, disclosing entity or registered scheme.

             (5)  If there is no one person who performs a chief executive function in relation to the company, disclosing entity or registered scheme under subsection (4), a person performs a chief executive function in relation to the company, disclosing entity or registered scheme if the person is one of a number of people who together are primarily and directly responsible to the directors for the general and overall management of the company, disclosing entity or registered scheme.

             (6)  A person performs a chief financial officer function in relation to the company, disclosing entity or registered scheme if that person is the person who is:

                     (a)  primarily responsible for financial matters in relation to the company, disclosing entity or registered scheme; and

                     (b)  directly responsible for those matters to either:

                              (i)  the directors; or

                             (ii)  the person or persons who perform the chief executive function in relation to the company.

             (7)  If there is no one person who performs a chief financial officer function in relation to the company, disclosing entity or registered scheme under subsection (6), a person performs a chief financial officer function in relation to the company, disclosing entity or registered scheme if the person is one of a number of people who together are:

                     (a)  primarily responsible for financial matters in relation to the company, disclosing entity or registered scheme; and

                     (b)  directly responsible for those matters to either:

                              (i)  the directors; or

                             (ii)  the person or persons who perform the chief executive function in relation to the company.

             (8)  Nothing in this section derogates from the responsibility that a director has for ensuring that financial statements comply with this Act.

296  Compliance with accounting standards and regulations

             (1)  The financial report for a financial year must comply with the accounting standards.

Small proprietary companies

          (1A)  Despite subsection (1), the financial report of a small proprietary company does not have to comply with particular accounting standards if:

                     (a)  the report is prepared in response to a shareholder direction under section 293; and

                     (b)  the direction specifies that the report does not have to comply with those standards.

Small companies limited by guarantee

          (1B)  Despite subsection (1), the financial report of a small company limited by guarantee does not have to comply with particular accounting standards if:

                     (a)  the report is prepared in response to a member direction under section 294A; and

                     (b)  the direction specifies that the report does not have to comply with those standards.

Further requirements

             (2)  The financial report must comply with any further requirements in the regulations.

297  True and fair view

                   The financial statements and notes for a financial year must give a true and fair view of:

                     (a)  the financial position and performance of the company, registered scheme or disclosing entity; and

                     (b)  if consolidated financial statements are required—the financial position and performance of the consolidated entity.

This section does not affect the obligation under section 296 for a financial report to comply with accounting standards.

Note:          If the financial statements and notes prepared in compliance with the accounting standards would not give a true and fair view, additional information must be included in the notes to the financial statements under paragraph 295(3)(c).

298  Annual directors’ report

             (1)  The company, registered scheme or disclosing entity must prepare a directors’ report for each financial year.

       (1AA)  Except in the case of a company limited by guarantee, the report must include:

                     (a)  the general information required by sections 299 (all entities) and 299A (additional requirements for listed entities); and

                     (b)  the specific information required by sections 300 and 300A; and

                     (c)  a copy of the auditor’s declaration under section 307C in relation to the audit for the financial year.

       (1AB)  In the case of a company limited by guarantee, the report must include:

                     (a)  the general information required by section 300B; and

                     (b)  a copy of the auditor’s declaration under section 307C in relation to the audit or review for the financial year.

          (1A)  If the financial report for a financial year includes additional information under paragraph 295(3)(c) (information included to give true and fair view of financial position and performance), the directors’ report for the financial year must also:

                     (a)  set out the directors’ reasons for forming the opinion that the inclusion of that additional information was necessary to give the true and fair view required by section 297; and

                     (b)  specify where that additional information can be found in the financial report.

             (2)  The report must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the date on which the report is made; and

                     (c)  be signed by a director.

Small proprietary companies

             (3)  A small proprietary company does not have to comply with subsection (1) for a financial year if:

                     (a)  it is preparing financial statements for that year in response to a shareholder direction under section 293; and

                     (b)  the direction specified that a directors’ report need not be prepared.

Small companies limited by guarantee

             (4)  A small company limited by guarantee does not have to comply with subsection (1) for a financial year if:

                     (a)  it is preparing the financial statements for that year in response to a member direction under section 294A; and

                     (b)  the direction specified that a directors’ report need not be prepared.

299  Annual directors’ report—general information

General information about operations and activities

             (1)  The directors’ report for a financial year must:

                     (a)  contain a review of operations during the year of the entity reported on and the results of those operations; and

                     (b)  give details of any significant changes in the entity’s state of affairs during the year; and

                     (c)  state the entity’s principal activities during the year and any significant changes in the nature of those activities during the year; and

                     (d)  give details of any matter or circumstance that has arisen since the end of the year that has significantly affected, or may significantly affect:

                              (i)  the entity’s operations in future financial years; or

                             (ii)  the results of those operations in future financial years; or

                            (iii)  the entity’s state of affairs in future financial years; and

                     (e)  refer to likely developments in the entity’s operations in future financial years and the expected results of those operations; and

                      (f)  if the entity’s operations are subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory—give details of the entity’s performance in relation to environmental regulation.

             (2)  The entity reported on is:

                     (a)  the company, registered scheme or disclosing entity (if consolidated financial statements are not required); or

                     (b)  the consolidated entity (if consolidated financial statements are required).

Prejudicial information need not be disclosed

             (3)  The report may omit material that would otherwise be included under paragraph (1)(e) if it is likely to result in unreasonable prejudice to:

                     (a)  the company, registered scheme or disclosing entity; or

                     (b)  if consolidated financial statements are required—the consolidated entity or any entity (including the company, registered scheme or disclosing entity) that is part of the consolidated entity.

If material is omitted, the report must say so.

299A  Annual directors’ report—additional general requirements for listed entities

             (1)  The directors’ report for a financial year for a company, registered scheme or disclosing entity that is listed must also contain information that members of the listed entity would reasonably require to make an informed assessment of:

                     (a)  the operations of the entity reported on; and

                     (b)  the financial position of the entity reported on; and

                     (c)  the business strategies, and prospects for future financial years, of the entity reported on.

             (2)  The entity reported on is:

                     (a)  the company, registered scheme or disclosing entity that is listed (if consolidated financial statements are not required); or

                     (b)  the consolidated entity (if consolidated financial statements are required).

             (3)  The report may omit material that would otherwise be included under paragraph (1)(c) if it is likely to result in unreasonable prejudice to:

                     (a)  the company, registered scheme or disclosing entity; or

                     (b)  if consolidated financial statements are required—the consolidated entity or any entity (including the company, registered scheme or disclosing entity) that is part of the consolidated entity.

If material is omitted, the report must say so.

300  Annual directors’ report—specific information

             (1)  The directors’ report for a financial year must include details of:

                     (a)  dividends or distributions paid to members during the year; and

                     (b)  dividends or distributions recommended or declared for payment to members, but not paid, during the year; and

                     (c)  the name of each person who has been a director of the company, registered scheme or disclosing entity at any time during or since the end of the year and the period for which they were a director; and

                    (ca)  the name of each person who:

                              (i)  is an officer of the company, registered scheme or disclosing entity at any time during the year; and

                             (ii)  was a partner in an audit firm, or a director of an audit company, that is an auditor of the company, disclosing entity or registered scheme for the year; and

                            (iii)  was such a partner or director at a time when the audit firm or the audit company undertook an audit of the company, disclosing entity or registered scheme; and

                     (d)  options that are:

                              (i)  granted over unissued shares or unissued interests during or since the end of the year; and

                             (ii)  granted to any of the directors or any of the 5 most highly remunerated officers of the company (other than the directors); and

                            (iii)  granted to them as part of their remuneration;

                            (see subsections (3), (4) and (5)); and

                     (e)  unissued shares or interests under option as at the day the report is made (see subsections (3) and (6)); and

                      (f)  shares or interests issued during or since the end of the year as a result of the exercise of an option over unissued shares or interests (see subsections (3) and (7)); and

                     (g)  indemnities given and insurance premiums paid during or since the end of the year for a person who is or has been an officer or auditor (see subsections (8) and (9)).

Public companies, listed companies and registered schemes must include additional information under subsections (10), (11), (11AA), (11A), (11B), (12) and (13) of this section and section 300A.

             (2)  Details do not have to be included in the directors’ report under this section if they are included in the company’s financial report for the financial year.

          (2A)  If subsection (2) is relied on to not include in the directors’ report for a financial year details that would otherwise be required to be included in that report under paragraph (11B)(a) or (11C)(b), that report must specify, in the section headed “Non‑audit services”, where those details may be found in the company’s financial report for that financial year.

             (3)  Paragraphs (1)(d), (e) and (f) cover:

                     (a)  options over unissued shares and interests of the company, registered scheme or disclosing entity; and

                     (b)  if consolidated financial statements are required—options over unissued shares and interests of any controlled entity that is a company, registered scheme or disclosing entity.

Options details

             (5)  The details of an option granted are:

                     (a)  the company, registered scheme or disclosing entity granting the option; and

                     (b)  the name of the person to whom the option is granted; and

                     (c)  the number and class of shares or interests over which the option is granted.

             (6)  The details of unissued shares or interests under option are:

                     (a)  the company, registered scheme or disclosing entity that will issue shares or interests when the options are exercised; and

                     (b)  the number and classes of those shares or interests; and

                     (c)  the issue price, or the method of determining the issue price, of those shares or interests; and

                     (d)  the expiry date of the options; and

                     (e)  any rights that option holders have under the options to participate in any share issue or interest issue of the company, registered scheme or disclosing entity or of any other body corporate or registered scheme.

Shares or interests issued as a result of exercise of option

             (7)  The details of shares or interests issued as a result of the exercise of an option are:

                     (a)  the company, registered scheme or disclosing entity issuing the shares or interests; and

                     (b)  the number of shares or interests issued; and

                     (c)  if the company, registered scheme or disclosing entity has different classes of shares or interests—the class to which each of those shares or interests belongs; and

                     (d)  the amount unpaid on each of those shares or interests; and

                     (e)  the amount paid, or agreed to be considered as paid, on each of those shares or interests.

Indemnities and insurance premiums for officers or auditors

             (8)  The report for a company must include details of:

                     (a)  any indemnity that is given to a current or former officer or auditor against a liability and that is covered by subsection 199A(2) or (3), or any relevant agreement under which an officer or auditor may be given an indemnity of that kind; and

                     (b)  any premium that is paid, or agreed to be paid, for insurance against a current or former officer’s or auditor’s liability for legal costs.

Note:          Sections 199A and 199B contain general prohibitions against giving certain indemnities and paying certain insurance premiums. This subsection requires transactions that are exceptions to these prohibitions to be reported.

             (9)  The details required under subsection (8) are:

                     (a)  for an officer—their name or the class of officer to which they belong or belonged; and

                     (b)  for an auditor—their name; and

                     (c)  the nature of the liability; and

                     (d)  for an indemnity given—the amount the company paid and any other action the company took to indemnify the officer or auditor; and

                     (e)  for an agreement to indemnify—the amount that the relevant agreement requires the company to pay and any other action the relevant agreement requires the company to take to indemnify the officer or auditor; and

                      (f)  for an insurance premium—the amount of the premium.

The report need not give details of the nature of the liability covered by, or the amount of the premium payable under, a contract of insurance to the extent that disclosure of those details is prohibited by the insurance contract.

Special rules for public companies

           (10)  The report for a public company that is not a wholly‑owned subsidiary of another company must also include details of:

                     (a)  each director’s qualifications, experience and special responsibilities; and

                     (b)  the number of meetings of the board of directors held during the year and each director’s attendance at those meetings; and

                     (c)  the number of meetings of each board committee held during the year and each director’s attendance at those meetings; and

                     (d)  the qualifications and experience of each person who is a company secretary of the company as at the end of the year.

Special rules for listed companies and schemes

           (11)  The report for a listed company must also include the following details for each director:

                     (a)  their relevant interests in shares of the company or a related body corporate;

                     (b)  their relevant interests in debentures of, or interests in a registered scheme made available by, the company or a related body corporate;

                     (c)  their rights or options over shares in, debentures of or interests in a registered scheme made available by, the company or a related body corporate;

                     (d)  contracts:

                              (i)  to which the director is a party or under which the director is entitled to a benefit; and

                             (ii)  that confer a right to call for or deliver shares in, or debentures of or interests in a registered scheme made available by the company or a related body corporate;

                     (e)  all directorships of other listed companies held by the director at any time in the 3 years immediately before the end of the financial year and the period for which each directorship has been held.

Note:          Directors must also disclose interests of these kinds to a relevant market operator under section 205G as they are acquired.

     (11AA)  If an individual plays a significant role in the audit of a listed company or listed registered scheme for the financial year in reliance on an approval granted under section 324DAA, the report for the company or scheme must also include details of, and reasons for, the approval.

        (11A)  If a registered company auditor plays a significant role in the audit of a listed company for the financial year in reliance on a declaration made under section 342A, the report for the company must also include details of the declaration.

Listed companies—non‑audit services and auditor independence

        (11B)  The report for a listed company must also include the following in relation to each auditor:

                     (a)  details of the amounts paid or payable to the auditor for non‑audit services provided, during the year, by the auditor (or by another person or firm on the auditor’s behalf);

                     (b)  a statement whether the directors are satisfied that the provision of non‑audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by this Act;

                     (c)  a statement of the directors’ reasons for being satisfied that the provision of those non‑audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) did not compromise the auditor independence requirements of this Act.

These details and statements must be included in the directors’ report under the heading “Non‑audit services”. If consolidated financial statements are required, the details and statements must relate to amounts paid or payable to the auditor by, and non‑audit services provided to, any entity (including the company, registered scheme or disclosing entity) that is part of the consolidated entity.

        (11C)  For the purposes of paragraph (11B)(a), the details of amounts paid or payable to an auditor for non‑audit services provided, during the year, by the auditor (or by another person or firm on the auditor’s behalf) are:

                     (a)  the name of the auditor; and

                     (b)  the dollar amount that:

                              (i)  the listed company; or

                             (ii)  if consolidated financial statements are required—any entity that is part of the consolidated entity;

                            paid, or is liable to pay, for each of those non‑audit services.

        (11D)  The statements under paragraphs (11B)(b) and (c) must be made in accordance with:

                     (a)  advice provided by the listed company’s audit committee if the company has an audit committee; or

                     (b)  a resolution of the directors of the listed company if paragraph (a) does not apply.

        (11E)  For the purposes of subsection (11D), a statement is taken to be made in accordance with advice provided by the company’s audit committee only if:

                     (a)  the statement is consistent with that advice and does not contain any material omission of material included in that advice; and

                     (b)  the advice is endorsed by a resolution passed by the members of the audit committee; and

                     (c)  the advice is written advice signed by a member of the audit committee on behalf of the audit committee and given to the directors.

Special rules for listed registered schemes

           (12)  The report for a registered scheme whose interests are quoted on a prescribed financial market must also include the following details for each director of the company that is the responsible entity for the scheme:

                     (a)  their relevant interests in interests in the scheme;

                     (b)  their rights or options over interests in the scheme;

                     (c)  contracts to which the director is a party or under which the director is entitled to a benefit and that confer a right to call for or deliver interests in the scheme.

Special rules for registered schemes

           (13)  The report for a registered scheme must also include details of:

                     (a)  the fees paid to the responsible entity and its associates out of scheme property during the financial year; and

                     (b)  the number of interests in the scheme held by the responsible entity or its associates as at the end of the financial year; and

                     (c)  interests in the scheme issued during the financial year; and

                     (d)  withdrawals from the scheme during the financial year; and

                     (e)  the value of the scheme’s assets as at the end of the financial year, and the basis for the valuation; and

                      (f)  the number of interests in the scheme as at the end of the financial year.

Proceedings on behalf of a company

           (14)  The report for a company must also include the following details of any application for leave under section 237 made in respect of the company:

                     (a)  the applicant’s name; and

                     (b)  a statement whether leave was granted.

           (15)  The report for a company must also include the following details of any proceedings that a person has brought or intervened in on behalf of the company with leave under section 237:

                     (a)  the person’s name;

                     (b)  the names of the parties to the proceedings;

                     (c)  sufficient information to enable members to understand the nature and status of the proceedings (including the cause of action and any orders made by the court).

300A  Annual directors’ report—specific information to be provided by listed companies

             (1)  The directors’ report for a financial year for a company must also include (in a separate and clearly identified section of the report):

                     (a)  discussion of board policy for determining, or in relation to, the nature and amount (or value, as appropriate) of remuneration of the key management personnel for:

                              (i)  the company, if consolidated financial statements are not required; or

                             (ii)  the consolidated entity, if consolidated financial statements are required; and

                     (b)  discussion of the relationship between such policy and the company’s performance; and

                   (ba)  if an element of the remuneration of a member of the key management personnel for the company, or if consolidated financial statements are required, for the consolidated entity is dependent on the satisfaction of a performance condition:

                              (i)  a detailed summary of the performance condition; and

                             (ii)  an explanation of why the performance condition was chosen; and

                            (iii)  a summary of the methods used in assessing whether the performance condition is satisfied and an explanation of why those methods were chosen; and

                            (iv)  if the performance condition involves a comparison with factors external to the company:

                                        (A)  a summary of the factors to be used in making the comparison; and

                                        (B)  if any of the factors relates to the performance of another company, of 2 or more other companies or of an index in which the securities of a company or companies are included—the identity of that company, of each of those companies or of the index; and

                     (c)  the prescribed details in relation to the remuneration of:

                              (i)  if consolidated financial statements are required—each member of the key management personnel for the consolidated entity; or

                             (ii)  if consolidated financial statements are not required—each member of the key management personnel for the company; and

                     (d)  if an element of the remuneration of a person referred to in paragraph (c) consists of securities of a body and that element is not dependent on the satisfaction of a performance condition—an explanation of why that element of the remuneration is not dependent on the satisfaction of a performance condition; and

                     (e)  for each person referred to in paragraph (c):

                              (i)  an explanation of the relative proportions of those elements of the person’s remuneration that are related to performance and those elements of the person’s remuneration that are not; and

                             (ii)  the value (worked out as at the time they are granted and in accordance with any applicable accounting standards) of options that are granted to the person during the year as part of their remuneration; and

                            (iii)  the value (worked out as at the time they are exercised) of options that were granted to the person as part of their remuneration and that are exercised by the person during the year; and

                            (iv)  if options granted to the person as part of their remuneration lapse during the financial year—the number of those options, and the financial year in which those options were granted; and

                           (vii)  if the person is employed by the company under a contract—the duration of the contract, the periods of notice required to terminate the contract and the termination payments provided for under the contract; and

                      (f)  such other matters related to the policy or policies referred to in paragraph (a) as are prescribed by the regulations; and

                     (g)  if:

                              (i)  at the company’s most recent AGM, comments were made on the remuneration report that was considered at that AGM; and

                             (ii)  when a resolution that the remuneration report for the last financial year be adopted was put to the vote at the company’s most recent AGM, at least 25% of the votes cast were against adoption of that report;

                            an explanation of the board’s proposed action in response or, if the board does not propose any action, the board’s reasons for inaction; and

                     (h)  if a remuneration consultant made a remuneration recommendation in relation to any of the key management personnel for the company or, if consolidated financial statements are required, for the consolidated entity, for the financial year:

                              (i)  the name of the consultant; and

                             (ii)  a statement that the consultant made such a recommendation; and

                            (iii)  if the consultant provided any other kind of advice to the company or entity for the financial year—a statement that the consultant provided that other kind or those other kinds of advice; and

                            (iv)  the amount and nature of the consideration payable for the remuneration recommendation; and

                             (v)  the amount and nature of the consideration payable for any other kind of advice referred to in subparagraph (iii); and

                            (vi)  information about the arrangements the company made to ensure that the making of the remuneration recommendation would be free from undue influence by the member or members of the key management personnel to whom the recommendation relates; and

                           (vii)  a statement about whether the board is satisfied that the remuneration recommendation was made free from undue influence by the member or members of the key management personnel to whom the recommendation relates; and

                          (viii)  if the board is satisfied that the remuneration recommendation was made free from undue influence by the member or members of the key management personnel to whom the recommendation relates—the board’s reasons for being satisfied of this.

       (1AA)  Without limiting paragraph (1)(b), the discussion under that paragraph of the company’s performance must specifically deal with:

                     (a)  the company’s earnings; and

                     (b)  the consequences of the company’s performance on shareholder wealth;

in the financial year to which the report relates and in the previous 4 financial years.

       (1AB)  In determining, for the purposes of subsection (1AA), the consequences of the company’s performance on shareholder wealth in a financial year, have regard to:

                     (a)  dividends paid by the company to its shareholders during that year; and

                     (b)  changes in the price at which shares in the company are traded between the beginning and the end of that year; and

                     (c)  any return of capital by the company to its shareholders during that year that involves:

                              (i)  the cancellation of shares in the company; and

                             (ii)  a payment to the holders of those shares that exceeds the price at which shares in that class are being traded at the time when the shares are cancelled; and

                     (d)  any other relevant matter.

          (1A)  The material referred to in subsection (1) must be included in the directors’ report under the heading “Remuneration report”.

          (1C)  Without limiting paragraph (1)(c), the regulations may:

                     (a)  provide that the value of an element of remuneration is to be determined, for the purposes of this section, in a particular way or by reference to a particular standard; and

                     (b)  provide that details to be given of an element of remuneration must relate to the remuneration provided in:

                              (i)  the financial year to which the directors’ report relates; and

                             (ii)  the earlier financial years specified in the regulations.

             (2)  This section applies to any listed disclosing entity that is a company.

             (3)  This section applies despite anything in the company’s constitution.

             (4)  For the purposes of this section, if:

                     (a)  consolidated financial statements are required; and

                     (b)  a person is a group executive who is a group executive of 2 or more entities within the consolidated entity;

the person’s remuneration is taken to include all of the person’s remuneration from those entities (regardless of the capacity in which the person received the remuneration).

300B  Annual directors’ report—companies limited by guarantee

             (1)  The directors’ report for a financial year for a company limited by guarantee must:

                     (a)  contain a description of the short and long term objectives of the entity reported on; and

                     (b)  set out the entity’s strategy for achieving those objectives; and

                     (c)  state the entity’s principal activities during the year; and

                     (d)  state how those activities assisted in achieving the entity’s objectives; and

                     (e)  state how the entity measures its performance, including any key performance indicators used by the entity.

             (2)  The entity reported on is:

                     (a)  the company (if consolidated financial statements are not required); or

                     (b)  the consolidated entity (if consolidated financial statements are required).

             (3)  The directors’ report for a financial year for a company limited by guarantee must also include details of:

                     (a)  the name of each person who has been a director of the company at any time during or since the end of the year and the period for which the person was a director; and

                     (b)  each director’s qualifications, experience and special responsibilities; and

                     (c)  the number of meetings of the board of directors held during the year and each director’s attendance at those meetings; and

                     (d)  for each class of membership in the company—the amount which a member of that class is liable to contribute if the company is wound up; and

                     (e)  the total amount that members of the company are liable to contribute if the company is wound up.

301  Audit of annual financial report

             (1)  A company, registered scheme or disclosing entity must have the financial report for a financial year audited in accordance with Division 3 and obtain an auditor’s report.

Small proprietary companies

             (2)  A small proprietary company’s financial report for a financial year does not have to be audited if:

                     (a)  the report is prepared in response to a direction under section 293; and

                     (b)  the direction did not ask for the financial report to be audited.

Companies limited by guarantee

             (3)  A company limited by guarantee may have its financial report for a financial year reviewed, rather than audited, if:

                     (a)  the company is not one of the following:

                              (i)  a Commonwealth company for the purposes of the Public Governance, Performance and Accountability Act 2013;

                             (ii)  a subsidiary of a Commonwealth company for the purposes of that Act;

                            (iii)  a subsidiary of a corporate Commonwealth entity for the purposes of that Act; and

                     (b)  one of the following is true:

                              (i)  the company is not required by the accounting standards to be included in consolidated financial statements and the revenue of the company for the financial year is less than $1 million;

                             (ii)  the company is required by the accounting standards to be included in consolidated financial statements and the consolidated revenue of the consolidated entity for the financial year is less than $1 million.

             (4)  A small company limited by guarantee’s financial report for a financial year does not have to be audited or reviewed if:

                     (a)  the report is prepared in response to a member direction under section 294A; and

                     (b)  the direction does not ask for the audit or review.

Division 2Half‑year financial report and directors’ report

302  Disclosing entity must prepare half‑year financial report and directors’ report

                   A disclosing entity must:

                     (a)  prepare a financial report and directors’ report for each half‑year; and

                     (b)  have the financial report audited or reviewed in accordance with Division 3 and obtain an auditor’s report; and

                     (c)  lodge the financial report, the directors’ report and the auditor’s report on the financial report with ASIC;

unless the entity is not a disclosing entity when lodgment is due.

Note 1:       This Chapter only applies to disclosing entities incorporated or formed in Australia (see subsection 285(2)).

Note 2:       See section 320 for the time for lodgment with ASIC.

Note 3:       Subsection 318(4) requires disclosing entities that are borrowers in relation to debentures to also report to the trustee for debenture holders.

303  Contents of half‑year financial report

Basic contents

             (1)  The financial report for a half‑year consists of:

                     (a)  the financial statements for the half‑year; and

                     (b)  the notes to the financial statements; and

                     (c)  the directors’ declaration about the statements and notes.

Financial statements

             (2)  The financial statements for the half‑year are:

                     (a)  unless paragraph (b) applies—the financial statements in relation to the disclosing entity required by the accounting standards; or

                     (b)  if the accounting standards require the disclosing entity to prepare financial statements in relation to a consolidated entity—the financial statements in relation to the consolidated entity required by the accounting standards.

Notes to financial statements

             (3)  The notes to the financial statements are:

                     (a)  disclosures required by the regulations; and

                     (b)  notes required by the accounting standards; and

                     (c)  any other information necessary to give a true and fair view (see section 305).

Directors’ declaration

             (4)  The directors’ declaration is a declaration by the directors:

                     (c)  whether, in the directors’ opinion, there are reasonable grounds to believe that the disclosing entity will be able to pay its debts as and when they become due and payable; and

                     (d)  whether, in the directors’ opinion, the financial statement and notes are in accordance with this Act, including:

                              (i)  section 304 (compliance with accounting standards); and

                             (ii)  section 305 (true and fair view).

Note:          See paragraph 285(3)(c) for the reference to the debts of a disclosing entity that is a registered scheme.

             (5)  The declaration must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the day on which the declaration is made; and

                     (c)  be signed by a director.

304  Compliance with accounting standards and regulations

                   The financial report for a half‑year must comply with the accounting standards and any further requirements in the regulations.

305  True and fair view

                   The financial statements and notes for a half‑year must give a true and fair view of:

                     (a)  the financial position and performance of the disclosing entity; or

                     (b)  if consolidated financial statements are required—the financial position and performance of the consolidated entity.

This section does not affect the obligation under section 304 for financial reports to comply with accounting standards.

Note:          If the financial statements prepared in compliance with the accounting standards would not give a true and fair view, additional information must be included in the notes to the financial statements under paragraph 303(3)(c).

306  Half‑year directors’ report

             (1)  The directors of the disclosing entity must prepare a directors’ report for each half‑year that consists of:

                     (a)  a review of the entity’s operations during the half‑year and the results of those operations; and

                     (b)  the name of each person who has been a director of the disclosing entity at any time during or since the end of the half‑year and the period for which they were a director.

If consolidated financial statements are required, the review under paragraph (a) must cover the consolidated entity.

          (1A)  The directors’ report must include a copy of the auditor’s declaration under section 307C in relation to the audit or review for the half‑year.

             (2)  If the financial report for a half‑year includes additional information under paragraph 303(3)(c) (information included to give true and fair view of financial position and performance), the directors’ report for the half‑year must also:

                     (a)  set out the directors’ reasons for forming the opinion that the inclusion of that additional information was necessary to give the true and fair view required by section 305; and

                     (b)  specify where that information can be found in the financial report.

             (3)  The report must:

                     (a)  be made in accordance with a resolution of the directors; and

                     (b)  specify the date on which the report is made; and

                     (c)  be signed by a director.

Division 3Audit and auditor’s report

307  Audit

                   An auditor who conducts an audit of the financial report for a financial year or half‑year must form an opinion about:

                     (a)  whether the financial report is in accordance with this Act, including:

                              (i)  section 296 or 304 (compliance with accounting standards); and

                             (ii)  section 297 or 305 (true and fair view); and

                    (aa)  if the financial report includes additional information under paragraph 295(3)(c) or 303(3)(c) (information included to give true and fair view of financial position and performance)—whether the inclusion of that additional information was necessary to give the true and fair view required by section 297 or 305; and

                     (b)  whether the auditor has been given all information, explanation and assistance necessary for the conduct of the audit; and

                     (c)  whether the company, registered scheme or disclosing entity has kept financial records sufficient to enable a financial report to be prepared and audited; and

                     (d)  whether the company, registered scheme or disclosing entity has kept other records and registers as required by this Act.

307A  Audit to be conducted in accordance with auditing standards

             (1)  If an individual auditor, or an audit company, conducts:

                     (a)  an audit or review of the financial report for a financial year; or

                     (b)  an audit or review of the financial report for a half‑year;

the individual auditor or audit company must conduct the audit or review in accordance with the auditing standards.

             (2)  If an audit firm, or an audit company, conducts:

                     (a)  an audit or review of the financial report for a financial year; or

                     (b)  an audit or review of the financial report for a half‑year;

the lead auditor for the audit or review must ensure that the audit or review is conducted in accordance with the auditing standards.

             (3)  An offence based on subsection (1) or (2) is an offence of strict liability.

Note:          For strict liability see section 6.1 of the Criminal Code.

307B  Audit working papers to be retained for 7 years

Contravention by individual auditor or audit company

             (1)  An auditor contravenes this subsection if:

                     (a)  the auditor is an individual auditor or an audit company; and

                     (b)  the auditor conducts:

                              (i)  an audit or review of the financial report for a financial year; or

                             (ii)  an audit or review of the financial report for a half‑year; and

                     (c)  the auditor does not retain all audit working papers prepared by or for, or considered or used by, the auditor in accordance with the requirements of the auditing standards until:

                              (i)  the end of 7 years after the date of the audit report prepared in relation to the audit or review to which the audit working papers relate; or

                             (ii)  an earlier date determined for the audit working papers by ASIC under subsection (6).

             (2)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability see section 6.1 of the Criminal Code.

Contravention by member of audit firm

             (3)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm conducts:

                              (i)  an audit or review of the financial report for a financial year; or

                             (ii)  an audit or review of the financial report for a half‑year; and

                     (b)  the audit firm fails, at a particular time, to retain all audit working papers prepared by or for, or considered or used by, the audit firm in accordance with the requirements of the auditing standards until:

                              (i)  the end of 7 years after the date of the audit report prepared in relation to the audit or review to which the documents relate; or

                             (ii)  the earlier date determined by ASIC for the audit working papers under subsection (6); and

                     (c)  the defendant is a member of the firm at that time.

             (4)  An offence based on subsection (3) is an offence of strict liability.

Note 1:       For strict liability see section 6.1 of the Criminal Code.

Note 2:       Subsection (5) provides a defence.

             (5)  A member of an audit firm does not commit an offence at a particular time because of a contravention of subsection (3) if the member either:

                     (a)  does not know at that time of the circumstances that constitute the contravention of subsection (3); or

                     (b)  knows of those circumstances at that time but takes all reasonable steps to correct the contravention as soon as possible after the member becomes aware of those circumstances.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Earlier retention date for audit working papers

             (6)  ASIC may, on application by a person, determine, in writing, an earlier date for the audit working papers for the purposes of paragraphs (1)(c) and (3)(b) if:

                     (a)  the auditor is an individual auditor and the auditor:

                              (i)  dies; or

                             (ii)  ceases to be a registered company auditor; or

                     (b)  the auditor is an audit firm and the firm is dissolved (otherwise than simply as part of a reconstitution of the firm because of the death, retirement or withdrawal of a member or members or because of the admission of a new member or members); or

                     (c)  the auditor is an audit company and the company:

                              (i)  is wound up; or

                             (ii)  ceases to be an authorised audit company.

             (7)  In deciding whether to make a determination under subsection (6), ASIC must have regard to:

                     (a)  whether ASIC is inquiring into or investigating any matters in respect of:

                              (i)  the auditor; or

                             (ii)  the audited body for the audit to which the documents relate; and

                     (b)  whether the professional accounting bodies have any investigations or disciplinary action pending in relation to the auditor; and

                     (c)  whether civil or criminal proceedings in relation to:

                              (i)  the conduct of the audit; or

                             (ii)  the contents of the financial report to which the audit working papers relate;

                            have been, or are about to be, commenced; and

                     (d)  any other relevant matter.

Audit working papers kept in electronic form

             (8)  For the purposes of this section, if audit working papers are in electronic form they are taken to be retained only if they are convertible into hard copy.

307C  Auditor’s independence declaration

Contravention by individual auditor

             (1)  If an individual auditor conducts:

                     (a)  an audit or review of the financial report for a financial year; or

                     (b)  an audit or review of the financial report for a half‑year;

the individual auditor must give the directors of the company, registered scheme or disclosing entity:

                     (c)  a written declaration that, to the best of the individual auditor’s knowledge and belief, there have been:

                              (i)  no contraventions of the auditor independence requirements of this Act in relation to the audit or review; and

                             (ii)  no contraventions of any applicable code of professional conduct in relation to the audit or review; or

                     (d)  a written declaration that, to the best of the individual auditor’s knowledge and belief, the only contraventions of:

                              (i)  the auditor independence requirements of this Act in relation to the audit or review; or

                             (ii)  any applicable code of professional conduct in relation to the audit or review;

                            are those contraventions details of which are set out in the declaration.

             (2)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability see section 6.1 of the Criminal Code.

Contravention by lead auditor

             (3)  If an audit firm or audit company conducts:

                     (a)  an audit or review of the financial report for a financial year; or

                     (b)  an audit or review of the financial report for a half‑year;

the lead auditor for the audit must give the directors of the company, registered scheme or disclosing entity:

                     (c)  a written declaration that, to the best of the lead auditor’s knowledge and belief, there have been:

                              (i)  no contraventions of the auditor independence requirements of this Act in relation to the audit or review; and

                             (ii)  no contraventions of any applicable code of professional conduct in relation to the audit or review; or

                     (d)  a written declaration that, to the best of the lead auditor’s knowledge and belief, the only contraventions of:

                              (i)  the auditor independence requirements of this Act in relation to the audit or review; or

                             (ii)  any applicable code of professional conduct in relation to the audit or review;

                            are those contraventions details of which are set out in the declaration.

             (4)  An offence based on subsection (3) is an offence of strict liability.

Note:          For strict liability see section 6.1 of the Criminal Code.

             (5)  The declaration under subsection (1) or (3):

                     (a)  either:

                              (i)  must be given when the audit report is given to the directors of the company, registered scheme or disclosing entity; or

                             (ii)  must satisfy the conditions in subsection (5A); and

                     (b)  must be signed by the person making the declaration.

          (5A)  A declaration under subsection (1) or (3) in relation to a financial report for a financial year or half‑year satisfies the conditions in this subsection if:

                     (a)  the declaration is given to the directors of the company, registered scheme or disclosing entity before the directors pass a resolution under subsection 298(2) or 306(3) (as the case requires) in relation to the directors’ report for the financial year or half‑year; and

                     (b)  a director signs the directors’ report within 7 days after the declaration is given to the directors; and

                     (c)  the auditor’s report on the financial report is made within 7 days after the directors’ report is signed; and

                     (d)  the auditor’s report includes either of the following statements:

                              (i)  a statement to the effect that the declaration would be in the same terms if it had been given to the directors at the time the auditor’s report was made;

                             (ii)  a statement to the effect that circumstances have changed since the declaration was given to the directors, and setting out how the declaration would differ if it had been given to the directors at the time the auditor’s report was made.

          (5B)  An individual auditor or a lead auditor is not required to give a declaration under subsection (1) or (3) in respect of a contravention if:

                     (a)  the contravention was a contravention by a person of subsection 324CE(2), 324CF(2) or 324CG(2); and

                     (b)  the person does not commit an offence because of subsection 324CE(4), 324CF(4) or 324CG(4).

Self‑incrimination

             (6)  An individual is not excused from giving a declaration under subsection (1) or (3) on the ground that giving the declaration might tend to incriminate the individual or expose the individual to a penalty.

Use/derivative use indemnity

             (7)  However, neither:

                     (a)  the information included in the declaration; nor

                     (b)  any information, document or thing obtained as a direct or indirect consequence of including the information in the declaration;

is admissible in evidence against the individual in any criminal proceedings, or in any proceedings that would expose the person to a penalty, other than:

                     (c)  proceedings for an offence against section 1308 or 1309 in relation to the declaration; or

                     (d)  proceedings for an offence against section 137.1 or 137.2 of the Criminal Code (false or misleading information or documents) in relation to the declaration.

308  Auditor’s report on annual financial report

             (1)  An auditor who audits the financial report for a financial year must report to members on whether the auditor is of the opinion that the financial report is in accordance with this Act, including:

                     (a)  section 296 (compliance with accounting standards); and

                     (b)  section 297 (true and fair view).

If not of that opinion, the auditor’s report must say why.

             (2)  If the auditor is of the opinion that the financial report does not comply with an accounting standard, the auditor’s report must, to the extent it is practicable to do so, quantify the effect that non‑compliance has on the financial report. If it is not practicable to quantify the effect fully, the report must say why.

             (3)  The auditor’s report must describe:

                     (a)  any defect or irregularity in the financial report; and

                     (b)  any deficiency, failure or shortcoming in respect of the matters referred to in paragraph 307(b), (c) or (d).

       (3AA)  An auditor who reviews the financial report for a company limited by guarantee must report to members on whether the auditor became aware of any matter in the course of the review that makes the auditor believe that the financial report does not comply with Division 1.

       (3AB)  A report under subsection (3AA) must:

                     (a)  describe any matter referred to in subsection (3AA); and

                     (b)  say why that matter makes the auditor believe that the financial report does not comply with Division 1.

          (3A)  The auditor’s report must include any statements or disclosures required by the auditing standards.

          (3B)  If the financial report includes additional information under paragraph 295(3)(c) (information included to give true and fair view of financial position and performance), the auditor’s report must also include a statement of the auditor’s opinion on whether the inclusion of that additional information was necessary to give the true and fair view required by section 297.

          (3C)  If the directors’ report for the financial year includes a remuneration report, the auditor must also report to members on whether the auditor is of the opinion that the remuneration report complies with section 300A. If not of that opinion, the auditor’s report must say why.

             (4)  A report under subsection (1) or (3AA) must specify the date on which it is made.

             (5)  An offence based on subsection (1), (3), (3AA), (3AB), (3A), (3C) or (4) is an offence of strict liability.

Note:          For strict liability see section 6.1 of the Criminal Code.

309  Auditor’s report on half‑year financial report

Audit of financial report

             (1)  An auditor who audits the financial report for a half‑year must report to members on whether the auditor is of the opinion that the financial report is in accordance with this Act, including:

                     (a)  section 304 (compliance with accounting standards); and

                     (b)  section 305 (true and fair view).

If not of that opinion, the auditor’s report must say why.

             (2)  If the auditor is of the opinion that the financial report does not comply with an accounting standard, the auditor’s report must, to the extent that it is practicable to do so, quantify the effect that non‑compliance has on the financial report. If it is not practicable to quantify the effect fully, the report must say why.

             (3)  The auditor’s report must describe:

                     (a)  any defect or irregularity in the financial report; and

                     (b)  any deficiency, failure or shortcoming in respect of the matters referred to in paragraph 307(b), (c) or (d).

Review of financial report

             (4)  An auditor who reviews the financial report for a half‑year must report to members on whether the auditor became aware of any matter in the course of the review that makes the auditor believe that the financial report does not comply with Division 2.

             (5)  A report under subsection (4) must:

                     (a)  describe any matter referred to in subsection (4); and

                     (b)  say why that matter makes the auditor believe that the financial report does not comply with Division 2.

          (5A)  The auditor’s report must include any statements or disclosures required by the auditing standards.

          (5B)  If the financial report includes additional information under paragraph 303(3)(c) (information included to give true and fair view of financial position and performance), the auditor’s report must also include a statement of the auditor’s opinion on whether the inclusion of that additional information was necessary to give the true and fair view required by section 305.

Report to specify day made

             (6)  A report under subsection (1) or (4) must specify the date on which it is made.

             (7)  An offence based on subsection (1), (3), (4), (5), (5A) or (6) is an offence of strict liability.

Note:          For strict liability see section 6.1 of the Criminal Code.

310  Auditor’s power to obtain information

                   The auditor:

                     (a)  has a right of access at all reasonable times to the books of the company, registered scheme or disclosing entity; and

                     (b)  may require any officer to give the auditor information, explanations or other assistance for the purposes of the audit or review.

A request under paragraph (b) must be a reasonable one.

311  Reporting to ASIC

Contravention by individual auditor

             (1)  An individual auditor conducting an audit contravenes this subsection if:

                     (a)  the auditor is aware of circumstances that:

                              (i)  the auditor has reasonable grounds to suspect amount to a contravention of this Act; or

                             (ii)  amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a person involved in the conduct of the audit (see subsection (6)); or

                            (iii)  amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and

                     (b)  if subparagraph (a)(i) applies:

                              (i)  the contravention is a significant one; or

                             (ii)  the contravention is not a significant one and the auditor believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor’s report or bringing it to the attention of the directors; and

                     (c)  the auditor does not notify ASIC in writing of those circumstances as soon as practicable, and in any case within 28 days, after the auditor becomes aware of those circumstances.

Contravention by audit company

             (2)  An audit company conducting an audit contravenes this subsection if:

                     (a)  the lead auditor for the audit is aware of circumstances that:

                              (i)  the lead auditor has reasonable grounds to suspect amount to a contravention of this Act; or

                             (ii)  amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a person involved in the conduct of the audit (see subsection (6)); or

                            (iii)  amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and

                     (b)  if subparagraph (a)(i) applies:

                              (i)  the contravention is a significant one; or

                             (ii)  the contravention is not a significant one and the lead auditor believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor’s report or bringing it to the attention of the directors; and

                     (c)  the lead auditor does not notify ASIC in writing of those circumstances as soon as practicable, and in any case within 28 days, after the lead auditor becomes aware of those circumstances.

Contravention by lead auditor

             (3)  A person contravenes this subsection if:

                     (a)  the person is the lead auditor for an audit; and

                     (b)  the person is aware of circumstances that:

                              (i)  the person has reasonable grounds to suspect amount to a contravention of this Act; or

                             (ii)  amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a person involved in the conduct of the audit (see subsection (6)); or

                            (iii)  amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and

                     (c)  if subparagraph (b)(i) applies:

                              (i)  the contravention is a significant one; or

                             (ii)  the contravention is not a significant one and the person believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor’s report or bringing it to the attention of the directors; and

                     (d)  the person does not notify ASIC in writing of those circumstances as soon as practicable, and in any case within 28 days, after the person becomes aware of those circumstances.

Significant contraventions

             (4)  In determining for the purposes of this section whether a contravention of this Act is a significant one, have regard to:

                     (a)  the level of penalty provided for in relation to the contravention; and

                     (b)  the effect that the contravention has, or may have, on:

                              (i)  the overall financial position of the company, registered scheme or disclosing entity; or

                             (ii)  the adequacy of the information available about the overall financial position of the company, registered scheme or disclosing entity; and

                     (c)  any other relevant matter.

             (5)  Without limiting paragraph (4)(a), a penalty provided for in relation to a contravention of a provision of Part 2M.2 or 2M.3, or section 324DAA, 324DAB or 324DAC, includes a penalty imposed on a director, because of the operation of section 344, for failing to take reasonable steps to comply with, or to secure compliance with, that provision.

Person involved in an audit

             (6)  In this section:

person involved in the conduct of an audit means:

                     (a)  the auditor; or

                     (b)  the lead auditor for the audit; or

                     (c)  the review auditor for the audit; or

                     (d)  a professional member of the audit team for the audit; or

                     (e)  any other person involved in the conduct of the audit.

312  Assisting auditor

             (1)  An officer of a company, registered scheme or disclosing entity must:

                     (a)  allow the auditor access to the books of the company, scheme or entity; and

                     (b)  give the auditor any information, explanation or assistance required under section 310.

Note:          Books include registers and documents generally (not only the accounting “books”): see the definition of books in section 9.

             (2)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

313  Special provisions on audit of debenture issuers and guarantors

Auditor to give trustee for debenture holders copies of reports, certificates etc.

             (1)  The auditor of a borrower in relation to debentures must give the trustee for debenture holders:

                     (a)  a copy of any report, certificate or other document that the auditor must give the borrower or its members under this Act, the debentures or the trust deed; and

                     (b)  a copy of any document that accompanies it.

The copies must be given within 7 days after the auditor gives the originals to the borrower or its members.

Auditor to report on matters prejudicial to debenture holders’ interests

             (2)  The auditor of a borrower, or guarantor, in relation to debentures must give the borrower or guarantor a written report about any matter that:

                     (a)  the auditor became aware of in conducting the audit or review; and

                     (b)  in the auditor’s opinion, is or is likely to be prejudicial to the interests of debenture holders; and

                     (c)  in the auditor’s opinion, is relevant to the exercise of the powers of the trustee for debenture holders, or the performance of the trustee’s duties, under this Act or the trust deed.

The auditor must give a copy of the report to the trustee for debenture holders. The report and the copy must be given within 7 days after the auditor becomes aware of the matter.

             (3)  An offence based on subsection (1) or (2) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

Division 4Annual financial reporting to members

314  Annual financial reporting to members

             (1)  A company, registered scheme or disclosing entity must report to members for a financial year by providing either of the following in accordance with subsection (1AA) or (1AE):

                     (a)  all of the following reports:

                              (i)  the financial report for the year;

                             (ii)  the directors’ report for the year (see sections 298 to 300A);

                            (iii)  the auditor’s report on the financial report;

                     (b)  a concise report for the year that complies with subsection (2).

    (1AAA)  This section does not apply to a company limited by guarantee.

Note:          The requirement for annual financial reporting to members for those companies is in section 316A.

       (1AA)  A company, registered scheme or disclosing entity may provide the reports, or the concise report, for a financial year by doing all of the following:

                     (a)  sending, to each member who has made the election referred to in paragraph (1AB)(a):

                              (i)  a hard copy of the reports, or the concise report; or

                             (ii)  if the member has elected to receive the reports, or the concise report, as an electronic copy in accordance paragraph (1AB)(c)—an electronic copy of the reports, or the concise reports;

                     (b)  making a copy of the reports, or the concise report, readily accessible on a website;

                     (c)  directly notifying, in writing, all members who did not make the election referred to in paragraph (1AB)(a) that the copy is accessible on the website, and specifying the direct address on the website where the reports, or the concise report, may be accessed.

Note:          A direct address may be specified, for example, by specifying the URL of the reports or the concise report.

       (1AB)  For the purposes of paragraph (1AA)(a), a company, registered scheme or disclosing entity must, on at least one occasion, directly notify in writing each member that:

                     (a)  the member may elect to receive, free of charge, a copy of the reports for each financial year, or a copy of the concise report for each financial year; and

                     (b)  if the member does not so elect—the member may access the reports, or the concise report, on a specified website; and

                     (c)  if the member does so elect and the company, scheme or entity offers to send the report either as a hard copy or an electronic copy—the member may elect to receive the copy as either a hard copy or an electronic copy.

       (1AC)  An election made under subsection (1AB) is a standing election for each later financial year until the member changes his, her or its election.

Note:          The member may request, under section 316, the company, registered scheme or disclosing entity not to send them material under this section.

       (1AD)  A member may, for the purposes of paragraph (1AA)(c) or subsection (1AB), be notified by electronic means only if the member has previously nominated that means as one by which the member may be notified.

        (1AE)  A company, registered scheme or disclosing entity may provide the reports, or the concise report, by sending each member:

                     (a)  a hard copy of the reports, or the concise report; or

                     (b)  an electronic copy of the reports, or the concise report, if the member has nominated that means as one by which the member may be sent the reports or the concise report.

          (1A)  An offence based on subsection (1) or (1AB) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

Concise report

             (2)  A concise report for a financial year consists of:

                     (a)  a concise financial report for the year drawn up in accordance with accounting standards made for the purposes of this paragraph; and

                     (b)  the directors’ report for the year (see sections 298‑300A); and

                     (c)  a statement by the auditor:

                              (i)  that the financial report has been audited; and

                             (ii)  whether, in the auditor’s opinion, the concise financial report complies with the accounting standards made for the purposes of paragraph (a); and

                     (d)  a copy of any qualification in, and of any statements included in the emphasis of matter section of, the auditor’s report on the financial report; and

                     (e)  a statement that the report is a concise report and that the full financial report and auditor’s report will be sent to the member free of charge if the member asks for them.

             (3)  If the accounting standards made for the purposes of paragraph (2)(a) require a discussion and analysis to be included in a concise financial report:

                     (a)  the auditor must report on whether the discussion and analysis complies with the requirements that the accounting standards lay down for the discussion and analysis; and

                     (b)  the auditor does not otherwise need to audit the statements made in the discussion and analysis.

315  Deadline for reporting to members

Public companies and disclosing entities that are not registered schemes

             (1)  A public company, or a disclosing entity that is not a registered scheme, must report to members under section 314 by the earlier of:

                     (a)  21 days before the next AGM after the end of the financial year; or

                     (b)  4 months after the end of the financial year.

Note:          For the deadline for holding an AGM, see section 250N.

Small proprietary companies (shareholder direction under section 293)

             (2)  If a shareholder direction is given to a small proprietary company under section 293 after the end of the financial year, the company must report to members under section 314 by the later of:

                     (a)  2 months after the date on which the direction is given; and

                     (b)  4 months after the end of the financial year.

Registered schemes

             (3)  A registered scheme must report to members under section 314 within 3 months after the end of the financial year.

Other proprietary companies

             (4)  A proprietary company that is not covered by subsection (1) or (2) must report to members under section 314 within 4 months after the end of the financial year.

             (5)  For the purposes of this section, a company, registered scheme or disclosing entity that reports in accordance with subsection 314(1AA) is taken to report at the time that the company, scheme or entity has fully complied with the requirements of that subsection.

316  Member’s choices for annual financial information

             (1)  A member may request the company, registered scheme or disclosing entity:

                     (a)  not to send them the material required by section 314; or

                     (b)  to send them a full financial report and the directors’ report and auditor’s report.

A request may be a standing request or for a particular financial year. The member is not entitled to a report for a financial year earlier than the one before the financial year in which the request is made.

             (2)  The time for complying with a request under paragraph (1)(b) is:

                     (a)  7 days after the request is received; or

                     (b)  the deadline for reporting under section 315;

whichever is later.

             (3)  A full financial report, directors’ report and auditor’s report are to be sent free of charge unless the member has already received a copy of them free of charge.

             (4)  An offence based on subsection (2) or (3) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (5)  This section does not apply in relation to a company limited by guarantee.

316A  Annual financial reporting to members of companies limited by guarantee

             (1)  A member of a company limited by guarantee may, by notice in writing to the company, elect to receive a hard copy or an electronic copy of the following reports:

                     (a)  the financial reports;

                     (b)  the directors’ reports;

                     (c)  the auditor’s reports.

             (2)  If a member makes an election in a financial year, the election:

                     (a)  is made by the member for that financial year; and

                     (b)  is a standing election made by the member for each later financial year until the member changes the election.

             (3)  If the company prepares a financial report or a directors’ report for a financial year, or obtains an auditor’s report on the financial report, the company must send a copy of the report, free of charge, to each member who has made an election for that financial year, in accordance with the election, by the earlier of:

                     (a)  21 days before the next AGM after the end of the financial year; and

                     (b)  4 months after the end of the financial year.

Note:          For the deadline for holding an AGM, see section 250N.

             (4)  If a member direction is given to a small company limited by guarantee under section 294A after the end of a financial year, subsection (3) does not apply and the company must send a copy of the reports that the company prepares or obtains as a result of the direction to each member who has made an election for that financial year, in accordance with the election, by the later of:

                     (a)  2 months after the date on which the direction was given; and

                     (b)  4 months after the end of the financial year.

             (5)  An offence based on subsection (3) or (4) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

317  Consideration of reports at AGM

             (1)  The directors of a public company that is required to hold an AGM must lay before the AGM:

                     (a)  the financial report; and

                     (b)  the directors’ report; and

                     (c)  the auditor’s report;

for the last financial year that ended before the AGM.

Note 1:       If the company’s first AGM is held before the end of its first financial year, there will be no reports to lay before the meeting.

Note 2:       A public company that has only 1 member is not required to hold an AGM (see section 250N).

Note 3:       Section 250RA imposes on the auditor of a listed public company an obligation to attend or be represented at the AGM.

          (1A)  Subsection (1) does not apply to a small company limited by guarantee in relation to a report if the company is not required under a member direction made under section 294A or an ASIC direction made under section 294B to prepare or obtain the report.

             (2)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

318  Additional reporting by debenture issuers

             (1)  A company or disclosing entity that was a borrower in relation to debentures at the end of a financial year must give a copy of the annual financial report, directors’ report and auditor’s report to the trustee for debenture holders by the deadline for the financial year set by section 315.

             (2)  A debenture holder may ask the company or disclosing entity that issued the debenture for copies of:

                     (a)  the last reports provided to members under section 314; or

                     (b)  the full financial report and the directors’ report and auditor’s report for the last financial year.

             (3)  The company or entity must give the debenture holder the copies as soon as practicable after the request and free of charge.

             (4)  A disclosing entity that was a borrower in relation to debentures at the end of a half‑year must give a copy of the half‑year financial report, directors’ report and auditor’s report to the trustee for debenture holders within 75 days after the end of the half‑year.

             (5)  An offence based on subsection (1), (3) or (4) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

Division 5Lodging reports with ASIC

319  Lodgment of annual reports with ASIC

             (1)  A company, registered scheme or disclosing entity that has to prepare or obtain a report for a financial year under Division 1 must lodge the report with ASIC. This obligation extends to a concise report provided to members under section 314.

          (1A)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (2)  Subsection (1) does not apply to:

                     (a)  a small proprietary company that prepares a report in response to a shareholder direction under section 293 or an ASIC direction under section 294; and

                     (b)  a small company limited by guarantee that prepares a report in response to a member direction under section 294A or an ASIC direction under section 294B.

             (3)  The time for lodgment is:

                     (a)  within 3 months after the end of the financial year for a disclosing entity or registered scheme; and

                     (b)  within 4 months after the end of the financial year for anyone else.

320  Lodgment of half‑year reports with ASIC

             (1)  A disclosing entity that has to prepare or obtain a report for a half‑year under Division 2 must lodge the report with ASIC within 75 days after the end of the half‑year.

             (2)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

321  ASIC power to require lodgment

             (1)  ASIC may give a company, registered scheme or disclosing entity a direction to lodge with ASIC a copy of reports prepared or obtained by it under Division 1 or 2.

          (1A)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (2)  The direction must:

                     (a)  be made in writing; and

                     (b)  specify the period or periods concerned; and

                     (c)  be made no later than 6 years after the end of the period or periods; and

                     (d)  specify the date by which the documents have to be lodged.

The date specified under paragraph (d) must be at least 14 days after the date on which the direction is given.

322  Relodgment if financial statements or directors’ reports amended after lodgment

             (1)  If a financial report or directors’ report is amended after it is lodged with ASIC, the company, registered scheme or disclosing entity must:

                     (a)  lodge the amended report with ASIC within 14 days after the amendment; and

                     (b)  give a copy of the amended report free of charge to any member who asks for it.

             (2)  If the amendment is a material one, the company, registered scheme or disclosing entity must also notify members as soon as practicable of:

                     (a)  the nature of the amendment; and

                     (b)  their right to obtain a copy of the amended report under subsection (1).

             (3)  An offence based on subsection (1) or (2) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

Division 6Special provisions about consolidated financial statements

323  Directors and officers of controlled entity to give information

             (1)  If a company, registered scheme or disclosing entity has to prepare consolidated financial statements, a director or officer of a controlled entity must give the company, registered scheme or disclosing entity all information requested that is necessary to prepare the consolidated financial statements and the notes to those statements.

             (2)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

323A  Auditor’s power to obtain information from controlled entity

             (1)  An auditor who audits or reviews a financial report that includes consolidated financial statements:

                     (a)  has a right of access at all reasonable times to the books of any controlled entity; and

                     (b)  may require any officer of the entity to give the auditor information, explanations or other assistance for the purposes of the audit or review.

A request under paragraph (b) must be a reasonable one.

             (2)  The information, explanations or other assistance required under paragraph (1)(b) is to be given at the expense of the company, registered scheme or disclosing entity whose financial report is being audited or reviewed.

323B  Controlled entity to assist auditor

             (1)  If a company, registered scheme or disclosing entity has to prepare a financial report that includes consolidated financial statements, an officer or auditor of a controlled entity must:

                     (a)  allow the auditor for the company, scheme or entity access to the controlled entity’s books; and

                     (b)  give the auditor any information, explanation or assistance required under section 323A.

             (2)  An offence based on subsection (1) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

323C  Application of Division to entity that has ceased to be controlled

                   Sections 323, 323A and 323B apply to the preparation or audit of a financial report that covers a controlled entity even if the entity is no longer controlled by the company, registered scheme or disclosing entity whose financial report is being prepared or audited.

Division 7Financial years and half‑years

323D  Financial years and half‑years

First financial year

             (1)  The first financial year for a company, registered scheme or disclosing entity starts on the day on which it is registered or incorporated. It lasts for 12 months or the period (not longer than 18 months) determined by the directors.

Financial years after first year

             (2)  Subject to subsections (2A) and (4), subsequent financial years must:

                     (a)  start at the end of the previous financial year; and

                     (b)  be 12 months long.

The directors may determine that the financial year is to be shorter or longer (but not by more than 7 days).

          (2A)  A subsequent financial year may last for a period of less than 12 months determined by the directors if:

                     (a)  the subsequent financial year starts at the end of the previous financial year; and

                     (b)  there has not been a period during the previous 5 financial years in which there was a financial year of less than 12 months in reliance on this subsection; and

                     (c)  the change to the subsequent financial year is made in good faith in the best interests of the company, registered scheme or disclosing entity.

Note:          For the purposes of paragraph (b), financial years that, in reliance on subsection (2) or (4), were less than 12 months are disregarded.

Synchronisation of financial years where consolidated financial statements are required

             (3)  A company, registered scheme or disclosing entity that has to prepare consolidated financial statements must do whatever is necessary to ensure that the financial years of the consolidated entities are synchronised with its own financial years. It must achieve this synchronisation by the end of 12 months after the situation that calls for consolidation arises.

          (3A)  An offence based on subsection (3) is an offence of strict liability.

Note:          For strict liability, see section 6.1 of the Criminal Code.

             (4)  To facilitate this synchronisation, the financial year for a controlled entity may be extended or shortened. The extended financial year cannot be longer than 18 months.

Half‑years

             (5)  A half‑year for a company, registered scheme or disclosing entity is the first 6 months of a financial year. The directors may determine that the half‑year is to be shorter or longer (but not by more than 7 days).

Division 8Disclosure by listed companies of information filed overseas

323DA  Listed companies to disclose information filed overseas

             (1)  A company that discloses information to, or as required by:

                     (a)  the Securities and Exchange Commission of the United States of America; or

                     (b)  the New York Stock Exchange; or

                     (c)  a financial market in a foreign country if that financial market is prescribed by regulations made for the purposes of this paragraph;

must disclose that information in English to each relevant market operator, if the company is listed on the next business day after doing so.

             (3)  This section applies despite anything in the company’s constitution.

Part 2M.4Appointment and removal of auditors

Division 1Entities that may be appointed as an auditor for a company or registered scheme

324AA  Individual auditors, audit firms and authorised audit companies

                   Subject to this Part, the following may be appointed as auditor for a company or a registered scheme for the purposes of this Act:

                     (a)  an individual;

                     (b)  a firm;

                     (c)  a company.

The company or registered scheme may have more than one auditor.

324AB  Effect of appointing firm as auditor—general

             (1)  The appointment of a firm as auditor of a company or registered scheme is taken to be an appointment of all persons who, at the date of the appointment, are:

                     (a)  members of the firm; and

                     (b)  registered company auditors.

This is so whether or not those persons are resident in Australia.

             (2)  The appointment of the members of a firm as auditors of a company or registered scheme that is taken by subsection (1) to have been made because of the appointment of the firm as auditor of the company or scheme is not affected by the dissolution of the firm. This subsection has effect subject to section 324AC.

             (3)  A report or notice that purports to be made or given by a firm appointed as auditor of a company or registered scheme is not taken to be duly made or given unless it is signed by a member of the firm who is a registered company auditor both:

                     (a)  in the firm name; and

                     (b)  in his or her own name.

             (4)  A notice required or permitted to be given to an audit firm under the Corporations legislation may be given to the firm by giving the notice to a member of the firm.

             (5)  For the purposes of criminal proceedings under this Act against a member of an audit firm, an act or omission by:

                     (a)  a member of the firm; or

                     (b)  an employee or agent of the audit firm;

acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority, is also to be attributed to the audit firm.

324AC  Effect of appointing firm as auditor—reconstitution of firm

Reconstitution of firm

             (1)  This section deals with the situation in which:

                     (a)  a firm is appointed as auditor of a company or registered scheme; and

                     (b)  the firm is reconstituted because of either or both of the following:

                              (i)  the death, retirement or withdrawal of a member or members; or

                             (ii)  the admission of a new member or new members.

Retiring or withdrawing member

             (2)  A person who:

                     (a)  is taken under subsection 324AB(1) to be an auditor of the company; and

                     (b)  retires or withdraws from the firm as previously constituted as mentioned in subparagraph (1)(b)(i) of this section;

is taken to resign as auditor of the company as from the day of his or her retirement or withdrawal.

             (3)  Section 329 does not apply to the resignation that is taken to occur under subsection (2) unless:

                     (a)  the person who is taken to have resigned was the only member of the firm who was a registered company auditor; and

                     (b)  there is no member of the firm who is a registered company auditor after that person retires or withdraws from the firm.

New member

             (4)  A person who:

                     (a)  is a registered company auditor; and

                     (b)  is admitted to the firm as mentioned in subparagraph (1)(b)(ii);

is taken to have been appointed as an auditor of the company or registered scheme as from the day of his or her admission to the firm.

Appointments of continuing members not affected

             (5)  The reconstitution of the firm does not affect the appointment of the continuing members of the firm who are registered company auditors as auditors of the company or registered scheme.

             (6)  Nothing in this section affects the operation of section 324BB.

324AD  Effect of appointing company as auditor

             (1)  A report or notice that purports to be made or given by an audit company appointed as auditor of a company or registered scheme is not taken to be duly made or given unless it is signed by a director of the audit company (or the lead auditor or review auditor for the audit) both:

                     (a)  in the audit company’s name; and

                     (b)  in his or her own name.

             (2)  For the purposes of criminal proceedings under this Act against a director of an audit company, an act or omission by:

                     (a)  an officer of the audit company; or

                     (b)  an employee or agent of the audit company;

acting within the actual or apparent scope of his or her employment, or within his or her actual or apparent authority, is also to be attributed to the audit company.

324AE  Professional members of the audit team

                   If an individual auditor, audit firm or audit company conducts an audit of a company or registered scheme, the professional members of the audit team are:

                     (a)  any registered company auditor who participates in the conduct of the audit; and

                     (b)  any other person who participates in the conduct of the audit and, in the course of doing so, exercises professional judgment in relation to the application of or compliance with:

                              (i)  accounting standards; or

                             (ii)  auditing standards; or

                            (iii)  the provisions of this Act dealing with financial reporting and the conduct of audits; and

                     (c)  any other person who is in a position to directly influence the outcome of the audit because of the role they play in the design, planning, management, supervision or oversight of the audit; and

                     (d)  any person who recommends or decides what the lead auditor is to be paid in connection with the performance of the audit; and

                     (e)  any person who provides, or takes part in providing, quality control for the audit.

324AF  Lead and review auditors

Lead auditor

             (1)  If an audit firm or audit company conducts an audit of a company or registered scheme, the lead auditor for the audit is the registered company auditor who is primarily responsible to the audit firm or the audit company for the conduct of the audit.

Review auditor

             (2)  If an individual auditor, audit firm or audit company conducts an audit of a company or registered scheme, the review auditor for the audit is the registered company auditor (if any) who is primarily responsible to the individual auditor, the audit firm or the audit company for reviewing the conduct of the audit.

Division 2Registration requirements

324BA  Registration requirements for appointment of individual as auditor

                   Subject to section 324BD, an individual contravenes this section if:

                     (a)  the individual:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  the person is not a registered company auditor.

324BB  Registration requirements for appointment of firm as auditor

Contraventions by members of firm

             (1)  A person (the defendant) contravenes this subsection if:

                     (a)  at a particular time, a firm:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  at that time, the firm:

                              (i)  does not satisfy subsection (5); or

                             (ii)  does not satisfy subsection (6); and

                     (c)  the defendant is a member of the firm at that time; and

                     (d)  the defendant is aware of the circumstances referred to in paragraphs (a) and (b) at that time.

             (2)  A person (the defendant) contravenes this subsection if:

                     (a)  at a particular time, a firm:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  at that time, the firm:

                              (i)  does not satisfy subsection (5); or

                             (ii)  does not satisfy subsection (6); and

                     (c)  the defendant is a member of the firm at that time.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a) and (b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (4) provides a defence.

             (4)  A member of an audit firm does not commit an offence at a particular time because of a contravention of subsection (2) if the member either:

                     (a)  does not know at that time of the circumstances that constitute the contravention of subsection (2); or

                     (b)  does know of those circumstances at that time but takes all reasonable steps to correct the contravention as soon as possible after the member becomes aware of those circumstances.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Registered company auditor requirement

             (5)  The firm satisfies this subsection if at least 1 member of the firm is a registered company auditor who is ordinarily resident in Australia.

Business name or members names requirement

             (6)  The firm satisfies this subsection if:

                     (a)  the business name under which the firm is carrying on business is registered on the Business Names Register; or

                     (b)  a return in the prescribed form has been lodged showing, in relation to each member of the firm, the member’s full name and address as at the time when the firm so consents, acts or prepares a report.

324BC  Registration requirements for appointment of company as auditor

Contravention by company

             (1)  A company contravenes this subsection if:

                     (a)  the company:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  the company is not an authorised audit company.

Contraventions by directors of company

             (2)  A person (the defendant) contravenes this subsection if:

                     (a)  at a particular time, a company:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  at that time, the company is not an authorised audit company; and

                     (c)  the defendant is a director of the company at that time; and

                     (d)  the defendant is aware of the circumstances referred to in paragraphs (a) and (b) at that time.

             (3)  A person (the defendant) contravenes this subsection if:

                     (a)  at a particular time, a company:

                              (i)  consents to be appointed as auditor of a company or registered scheme; or

                             (ii)  acts as auditor of a company or registered scheme; or

                            (iii)  prepares a report required by this Act to be prepared by a registered company auditor or by an auditor of a company or registered scheme; and

                     (b)  at that time, the company is not an authorised audit company; and

                     (c)  the defendant is a director of the company at that time.

             (4)  For the purposes of an offence based on subsection (3), strict liability applies to the physical elements of the offence specified in paragraphs (3)(a) and (b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (5) provides a defence.

             (5)  A director of a company does not commit an offence at a particular time because of a contravention of subsection (3) if the director either:

                     (a)  does not know at that time of the circumstances that constitute the contravention of subsection (3); or

                     (b)  knows of those circumstances at that time but takes all reasonable steps to correct the contravention of subsection (3) as soon as possible after the director becomes aware of those circumstances.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

324BD  Exception from registration requirement for proprietary company

             (1)  An individual who is not a registered company auditor may be appointed as auditor of a proprietary company if:

                     (a)  ASIC is satisfied that it is impracticable for a proprietary company to obtain the services of:

                              (i)  an individual who could be appointed as auditor consistently with section 324BA; or

                             (ii)  a firm that could be appointed as auditor consistently with section 324BB; or

                            (iii)  a company that could be appointed consistently with section 324BC;

                            because of the place where the company carries on business; and

                     (b)  ASIC is satisfied that the individual is suitably qualified or experienced; and

                     (c)  ASIC approves the individual for the purposes of this Act in relation to the audit of the company’s financial reports.

The appointment is subject to such terms and conditions as are specified in the approval under paragraph (c).

             (2)  If an individual is appointed in accordance with subsection (1):

                     (a)  the individual is taken to be a registered company auditor in relation to the auditing of any of the company’s financial reports; and

                     (b)  the provisions of this Act apply, with the necessary modifications, in relation to the individual accordingly.

Paragraph (a) has effect subject to the terms and conditions of the approval under subsection (1).

             (3)  If an individual approved by ASIC under subsection (1) is acting as auditor of a company, ASIC may at any time, by notice in writing given to the company:

                     (a)  amend, revoke or vary the terms and conditions of its approval; or

                     (b)  terminate the appointment of that individual as auditor of the company.

             (4)  A notice under subsection (3) terminating the appointment of an individual as auditor of a company takes effect as if, on the date on which the notice is received by the company, the company had received from the individual notice of the individual’s resignation as auditor taking effect from that date.

324BE  Exception from registration requirement—reviewing financial reports of companies limited by guarantee

             (1)  An individual is taken to be a registered company auditor for the purposes of a review of a financial report of a company limited by guarantee if the individual:

                     (a)  is a member of a professional accounting body; and

                     (b)  has a designation, in respect of that membership, prescribed by the regulations for the purposes of this paragraph.

             (2)  The provisions of this Act apply, with the necessary modifications, in relation to the individual accordingly.

Division 3Auditor independence

Subdivision AGeneral requirement

324CA  General requirement for auditor independence—auditors

Contravention by individual auditor or audit company

             (1)  An individual auditor or audit company contravenes this subsection if:

                     (a)  the individual auditor or audit company engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at that time; and

                     (c)  at that time:

                              (i)  in the case of an individual auditor—the individual auditor is aware that the conflict of interest situation exists; or

                             (ii)  in the case of an audit company—the audit company is aware that the conflict of interest situation exists; and

                     (d)  the individual auditor or audit company does not, as soon as possible after the individual auditor or the audit company becomes aware that the conflict of interest situation exists, take all reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note:          For conflict of interest situation, see section 324CD.

Individual auditor or audit company to notify ASIC

          (1A)  An individual auditor or audit company contravenes this subsection if:

                     (a)  the individual auditor or audit company is the auditor of an audited body; and

                     (b)  a conflict of interest situation exists in relation to the audited body while the individual auditor or audit company is the auditor of the audited body; and

                     (c)  on a particular day (the start day):

                              (i)  in the case of an individual auditor—the individual auditor becomes aware that the conflict of interest situation exists; or

                             (ii)  in the case of an audit company—the audit company becomes aware that the conflict of interest situation exists; and

                     (d)  at the end of the period of 7 days from the start day:

                              (i)  the conflict of interest situation remains in existence; and

                             (ii)  the individual auditor or audit company has not informed ASIC in writing that the conflict of interest situation exists.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2A) or (2C) (public company) or 331AAA(2A) or (2C) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  A person is not excused from informing ASIC under subsection (1A) that a conflict of interest situation exists on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (1C)  However, if the person is a natural person:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (1D)  If the individual auditor or audit company gives ASIC a notice under paragraph (1A)(d), ASIC must, as soon as practicable after the notice has been received, give a copy of the notice to the audited body.

Conflict of interest situation of which individual auditor or audit company is not aware

             (2)  An individual auditor or audit company contravenes this subsection if:

                     (a)  the individual auditor or audit company engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at the time; and

                     (c)  at that time:

                              (i)  in the case of an individual auditor—the individual auditor is not aware that the conflict of interest situation exists; or

                             (ii)  in the case of an audit company—the audit company is not aware that the conflict of interest situation exists; and

                     (d)  the individual auditor or the audit company would have been aware of the existence of the conflict of interest situation at that time if the individual auditor or audit company had had in place a quality control system reasonably capable of making the individual auditor or audit company aware of the existence of such a conflict of interest situation.

Note:          For conflict of interest situation, see section 324CD.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical element of the offence specified in paragraph (2)(b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsections (4) and (5) provide defences.

             (4)  An individual auditor does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by the auditor at a particular time if the individual auditor has reasonable grounds to believe that the individual auditor had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the individual auditor) that the individual auditor and the individual auditor’s employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

             (5)  An audit company does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by the audit company at a particular time if the audit company has reasonable grounds to believe that the audit company had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit company) that the audit company and the audit company’s employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Relationship between obligations under this section and other obligations

             (6)  The obligations imposed by this section are in addition to, and do not derogate from, any obligation imposed by:

                     (a)  another provision of this Act; or

                     (b)  a code of professional conduct.

Note:          Paragraph (a)—see, for example, the specific obligations imposed by Subdivision B.

324CB  General requirement for auditor independence—member of audit firm

Contravention by member of audit firm

             (1)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at that time; and

                     (c)  the defendant is a member of the audit firm at that time; and

                     (d)  the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  the defendant does not, as soon as possible after the defendant becomes aware of those circumstances, take reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note:          For conflict of interest situation, see section 324CD.

Member of audit firm to notify ASIC

          (1A)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm is the auditor of an audited body; and

                     (b)  a conflict of interest situation exists in relation to the audited body while the audit firm is the auditor of the audited body; and

                     (c)  the defendant is a member of the audit firm at a time when the conflict of interest situation exists; and

                     (d)  on a particular day (the start day), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  at the end of the period of 7 days from the start day:

                              (i)  the conflict of interest situation remains in existence; and

                             (ii)  ASIC has not been informed in writing by the defendant, by another member of the audit firm or by someone else on behalf of the audit firm that the conflict of interest situation exists.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2B) (public company) or 331AAA(2B) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  A person is not excused from informing ASIC under subsection (1A) that a conflict of interest situation exists on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (1C)  However:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (1D)  If ASIC is given a notice under paragraph (1A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Conflict of interest situation of which another member of audit firm is aware

             (2)  A person contravenes this subsection if:

                     (a)  an audit firm engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at the time; and

                     (c)  the person is a member of the audit firm at that time; and

                     (d)  at that time, another member of the audit firm is aware that the conflict of interest situation exists; and

                     (e)  the audit firm does not, as soon as possible after the member referred to in paragraph (d) becomes aware that the conflict of interest situation exists, take all reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note:          For conflict of interest situation, see section 324CD.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a), (b), (d) and (e).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (6) provides a defence.

Conflict of interest situation of which members are not aware

             (4)  A person contravenes this subsection if:

                     (a)  an audit firm engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at the time; and

                     (c)  the person is a member of the audit firm at that time; and

                     (d)  at that time none of the members of the audit firm is aware that the conflict of interest situation exists; and

                     (e)  a member of the audit firm would have been aware of the existence of the conflict of interest situation if the audit firm had in place a quality control system reasonably capable of making the audit firm aware of the existence of such a conflict of interest situation.

Note:          For conflict of interest situation, see section 324CD.

             (5)  For the purposes of an offence based on subsection (4), strict liability applies to the physical elements of the offence specified in paragraphs (4)(a), (b), (d) and (e).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (6) provides a defence.

Defence

             (6)  A person does not commit an offence because of a contravention of subsection (2) or (4) in relation to audit activity engaged in by an audit firm at a particular time if the person has reasonable grounds to believe that the audit firm had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit firm) that the audit firm and its employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Relationship between obligations under this section and other obligations

             (7)  The obligations imposed by this section are in addition to, and do not derogate from, any obligation imposed by:

                     (a)  another provision of this Act; or

                     (b)  a code of professional conduct.

Note:          Paragraph (a)—see, for example, the specific obligations imposed by Subdivision B.

324CC  General requirement for auditor independence—director of audit company

Contravention by director of audit company

             (1)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at that time; and

                     (c)  the defendant is a director of the audit company at that time; and

                     (d)  the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  the defendant does not, as soon as possible after the defendant becomes aware of those circumstances, take reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       The audit company itself will commit an offence based on the contravention of subsection 324AA(1).

Director of audit company to notify ASIC

          (1A)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company is the auditor of an audited body; and

                     (b)  a conflict of interest situation exists in relation to the audited body while the audit company is the auditor of the audited body; and

                     (c)  the defendant is a director of the audit company at a time when the conflict of interest situation exists; and

                     (d)  on a particular day (the start day), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  at the end of the period of 7 days from the start day:

                              (i)  the conflict of interest situation remains in existence; and

                             (ii)  ASIC has not been informed in writing by the defendant, by another director of the audit company or by the audit company that the conflict of interest situation exists.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2C) (public company) or 331AAA(2C) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  A person is not excused from informing ASIC under subsection (1A) that a conflict of interest situation exists on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (1C)  However, if the person is a natural person:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (1D)  If ASIC is given a notice under paragraph (1A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Conflict of interest situation of which another director of audit company aware

             (2)  A person contravenes this subsection if:

                     (a)  an audit company engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at the time; and

                     (c)  the person is a director of the audit company at that time; and

                     (d)  at that time, another director of the audit company is aware that the conflict of interest situation exists; and

                     (e)  the audit company does not, as soon as possible after the director referred to in paragraph (d) becomes aware that the conflict of interest situation exists, take all reasonable steps to ensure that the conflict of interest situation ceases to exist.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       The company itself will commit an offence based on the contravention of subsection 324AA(1).

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a), (b), (d) and (e).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (6) provides a defence.

Conflict of interest situation of which directors of audit company not aware

             (4)  A person contravenes this subsection if:

                     (a)  an audit company engages in audit activity in relation to an audited body at a particular time; and

                     (b)  a conflict of interest situation exists in relation to the audited body at the time; and

                     (c)  the person is a director of the audit company at that time; and

                     (d)  at that time none of the directors of the audit company is aware that the conflict of interest situation exists; and

                     (e)  a director of the audit company would have been aware of the existence of the conflict of interest situation if the audit company had in place a quality control system reasonably capable of making the audit company aware of the existence of such a conflict of interest situation.

Note 1:       For conflict of interest situation, see section 324CD.

Note 2:       The company itself will commit an offence based on the contravention of subsection 324AA(2).

             (5)  For the purposes of an offence based on subsection (4), strict liability applies to the physical elements of the offence specified in paragraphs (4)(a), (b), (d) and (e).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (6) provides a defence.

Defence

             (6)  A person does not commit an offence because of a contravention of subsection (2) or (4) in relation to audit activity engaged in by an audit company at a particular time if the person has reasonable grounds to believe that the audit company had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit company) that the audit company and its employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Relationship between obligations under this section and other obligations

             (7)  The obligations imposed by this section are in addition to, and do not derogate from, any obligation imposed by:

                     (a)  another provision of this Act; or

                     (b)  a code of professional conduct.

Note:          Paragraph (a)—see, for example, the specific obligations imposed by Subdivision B.

324CD  Conflict of interest situation

             (1)  For the purposes of sections 324CA, 324CB and 324CC, a conflict of interest situation exists in relation to an audited body at a particular time if, because of circumstances that exist at that time:

                     (a)  the auditor, or a professional member of the audit team, is not capable of exercising objective and impartial judgment in relation to the conduct of the audit of the audited body; or

                     (b)  a reasonable person, with full knowledge of all relevant facts and circumstances, would conclude that the auditor, or a professional member of the audit team, is not capable of exercising objective and impartial judgment in relation to the conduct of the audit of the audited body.

             (2)  Without limiting subsection (1), have regard to circumstances arising from any relationship that exists, has existed, or is likely to exist, between:

                     (a)  the individual auditor; or

                     (b)  the audit firm or any current or former member of the firm; or

                     (c)  the audit company, any current or former director of the audit company or any person currently or formerly involved in the management of the audit company;

and any of the persons and bodies set out in the following table:

 

Relevant relationships

Item

If the audited body is…

have regard to any relationship with…

1

a company

the company; or

a current or former director of the company; or

a person currently or formerly involved in the management of the company.

2

a disclosing entity

the entity; or

a current or former director of the entity; or

a person currently or formerly involved in the management of the entity.

3

a registered scheme

the responsible entity for the registered scheme; or

a current or former director of the responsible entity; or

a person currently or formerly involved in the management of the scheme; or

a person currently or formerly involved in the management of the responsible entity.

Subdivision BSpecific requirements

324CE  Auditor independence—specific requirements for individual auditor

Specific independence requirements for individual auditor

             (1)  An individual auditor contravenes this subsection if:

                     (a)  the individual auditor engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (5) of this section; and

                     (c)  the individual auditor is or becomes aware of the circumstances referred to in paragraph (b); and

                     (d)  the individual auditor does not, as soon as possible after the individual auditor becomes aware of those circumstances, take all reasonable steps to ensure that the individual auditor does not continue to engage in audit activity in those circumstances.

Individual auditor to notify ASIC

          (1A)  An individual auditor contravenes this subsection if:

                     (a)  the individual auditor is the auditor of an audited body; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies to a person or entity covered by subsection (5) of this section while the individual auditor is the auditor of the audited body; and

                     (c)  on a particular day (the start day), the individual auditor becomes aware of the circumstances referred to in paragraph (b); and

                     (d)  at the end of the period of 7 days from the start day:

                              (i)  those circumstances remain in existence; and

                             (ii)  the individual auditor has not informed ASIC in writing of those circumstances.

Note:          If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2A) (public company) or 331AAA(2A) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  A person is not excused from informing ASIC under subsection (1A) that the circumstances referred to in paragraph (1A)(b) exist on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (1C)  However:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (1D)  If the individual auditor gives ASIC a notice under paragraph (1A)(d), ASIC must, as soon as practicable after the notice has been received, give a copy of the notice to the audited body.

Strict liability contravention of specific independence requirements by individual auditor

             (2)  An individual auditor contravenes this subsection if:

                     (a)  the individual auditor engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (5) of this section.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraph (2)(b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (4) provides a defence.

             (4)  An individual auditor does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by the individual auditor at a particular time if the individual auditor has reasonable grounds to believe that the individual auditor had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the individual auditor) that the individual auditor and the individual auditor’s employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

People and entities covered

             (5)  The following table sets out:

                     (a)  the persons and entities covered by this subsection in relation to audit activity engaged in by an individual auditor; and

                     (b)  the items of the table in subsection 324CH(1) that are the relevant items for each of those persons and entities:

 

Individual auditor

Item

For this person or entity...

the relevant items of the table in subsection 324CH(1) are...

1

the individual auditor

1 to 19

2

a service company or trust acting for, or on behalf of, the individual auditor, or another entity performing a similar function

1 to 19

3

a professional member of the audit team conducting the audit of the audited body

1 to 6

8 to 19

4

an immediate family member of a professional member of the audit team conducting the audit of the audited body

1 and 2

10 to 19

5

a person who is a non‑audit services provider and who does not satisfy the maximum hours test in subsection (6)

10 to 12

6

an immediate family member of a person who is a non‑audit services provider and who does not satisfy the maximum hours test in subsection (6)

10 to 12

7

an entity that the auditor (or a service company or trust acting for, or on behalf of, the individual auditor, or another entity performing a similar function) controls

15

8

a body corporate in which the auditor (or a service company or trust acting for, or on behalf of, the individual auditor, or another entity performing a similar function) has a substantial holding

15

9

a person who:

(a) is a former professional employee of the auditor; and

(b) does not satisfy the independence test in subsection (7)

1 and 2

10

an individual who:

(a) is the former owner of the individual auditor’s business; and

(b) does not satisfy the independence test in subsection (7)

1 and 2

Maximum hours test

             (6)  A non‑audit services provider satisfies the maximum hours test in this subsection if:

                     (a)  the number of hours for which the person provides services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the period to which the audit relates does not exceed 10 hours; and

                     (b)  the number of hours for which the person provides services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the 12 months immediately before the beginning of the period to which the audit relates does not exceed 10 hours.

In a prosecution for an offence based on subsection (1) or (2), the prosecution must prove that the non‑audit services provider did not satisfy the maximum hours test in this subsection.

Independence test

             (7)  A person satisfies the independence test in this subsection in relation to an individual auditor if the person:

                     (a)  does not influence the operations or financial policies of the accounting and audit practice conducted by the auditor; and

                     (b)  does not participate, or appear to participate, in the business or professional activities of the accounting and audit practice conducted by the auditor; and

                     (c)  does not have any rights against the auditor in relation to the accounting and audit practice conducted by the auditor in relation to the termination of the person’s former employment by the auditor; and

                     (d)  has no financial arrangements with the auditor in relation to the accounting and audit practice conducted by the auditor, other than:

                              (i)  an arrangement providing for regular payments of a fixed pre‑determined dollar amount which is not dependent, directly or indirectly, on the revenues, profits or earnings of the auditor; or

                             (ii)  an arrangement providing for regular payments of a dollar amount where the method of calculating the dollar amount is fixed and is not dependent, directly or indirectly, on the revenues, profits or earnings of the auditor; and

                     (e)  without limiting paragraph (d), has no financial arrangement with the auditor to receive a commission or similar payment in relation to business generated by the person for the accounting and audit practice conducted by the auditor.

In a prosecution for an offence based on subsection (1) or (2), the prosecution must prove that the person did not satisfy the independence test in this subsection in relation to the individual auditor.

             (8)  In applying subsection (7), disregard any rights that the person has against the auditor by way of an indemnity for, or contribution in relation to, liabilities incurred by the person when the person was an employee of the auditor or the owner of the auditor’s business.

324CF  Auditor independence—specific requirements for audit firm

Contraventions by members of audit firm

             (1)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (5) of this section; and

                     (c)  the defendant is a member of the audit firm at that time; and

                     (d)  the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  the defendant does not, as soon as possible after the defendant becomes aware of those circumstances, take all reasonable steps to ensure that the audit firm does not continue to engage in audit activity in those circumstances.

Member of audit firm to notify ASIC

          (1A)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm is the auditor of an audited body; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies to a person or entity covered by subsection (5) of this section while the audit firm is the auditor of the audited body; and

                     (c)  the defendant is a member of the audit firm at a time when the circumstances referred to in paragraph (b) exist; and

                     (d)  on a particular day (the start day), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  at the end of the period of 7 days from the start day:

                              (i)  the circumstances referred to in paragraph (b) remain in existence; and

                             (ii)  ASIC has not been informed in writing of those circumstances by the defendant, by another member of the audit firm or by someone else on behalf of the audit firm.

Note:          If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2B) (public company) or 331AAA(2B) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  A person is not excused from informing ASIC under subsection (1A) that the circumstances referred to in paragraph (1A)(b) exist on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (1C)  However:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (1D)  If ASIC is given a notice under paragraph (1A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Contravention of independence requirements by members of audit firm

             (2)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (5) of this section; and

                     (c)  the defendant is a member of the audit firm at that time.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a) and (b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (4) provides a defence.

             (4)  A person does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by an audit firm at a particular time if the person has reasonable grounds to believe that the audit firm had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit firm) that the audit firm and its employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

People and entities covered

             (5)  The following table sets out:

                     (a)  the persons and entities covered by this subsection in relation to audit activity engaged in by an audit firm; and

                     (b)  the items of the table in subsection 324CH(1) that are the relevant items for each of those persons and entities:

 

Audit firm

Item

For this person or entity...

the relevant items of the table in subsection 324CH(1) are...

1

the firm

4

7

10 to 19

2

a service company or trust acting for, or on behalf of, the firm, or another entity performing a similar function

4

7

10 to 19

3

a member of the firm

1 to 7

9

15

4

a professional member of the audit team conducting the audit of the audited body

1 to 6

8 to 19

5

an immediate family member of a professional member of the audit team conducting the audit of the audited body

1 and 2

10 to 19

6

a person who:

(a) is a non‑audit services provider; and

(b) does not satisfy the maximum hours test in subsection (6)

10 to 12

7

an immediate family member of a person who:

(a) is a non‑audit services provider; and

(b) does not satisfy the maximum hours test in subsection (6)

10 to 12

8

an entity that the firm (or a service company or trust acting for, or on behalf of, the firm, or another entity performing a similar function) controls

15

9

a body corporate in which the firm (or a service company or trust acting for, or on behalf of, the firm, or another entity performing a similar function) has a substantial holding

15

10

an entity that a member of the firm controls or a body corporate in which a member of the firm has a substantial holding

15

11

a person who:

(a) is a former member of the firm; and

(b) does not satisfy the independence test in subsection (7)

1 and 2

12

a person who:

(a) is a former professional employee of the firm; and

(b) does not satisfy the independence test in subsection (7)

1 and 2

Maximum hours test

             (6)  A non‑audit services provider satisfies the maximum hours test in this subsection if:

                     (a)  the number of hours for which the person provides services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the period to which the audit relates does not exceed 10 hours; and

                     (b)  the number of hours for which the person provided services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the 12 months immediately before the beginning of the period to which the audit relates does not exceed 10 hours.

In a prosecution for an offence based on subsection (1) or (2), the prosecution must prove that the non‑audit services provider did not satisfy the maximum hours test in this subsection.

Independence test

             (7)  A person satisfies the independence test in this subsection in relation to a firm if the person:

                     (a)  does not influence the operations or financial policies of the accounting and audit practice conducted by the firm; and

                     (b)  does not participate, or appear to participate, in the business or professional activities of the accounting and audit practice conducted by the firm; and

                     (c)  does not have any rights against the firm, or the members of the firm, in relation to the accounting and audit practice conducted by the firm in relation to the termination of, or the value of, the person’s former partnership interest in the firm; and

                     (d)  has no financial arrangements with the firm in relation to the accounting and audit practice conducted by the firm, other than:

                              (i)  an arrangement providing for regular payments of a fixed pre‑determined dollar amount which is not dependent, directly or indirectly, on the revenues, profits or earnings of the firm; or

                             (ii)  an arrangement providing for regular payments of a dollar amount where the method of calculating the dollar amount is fixed and is not dependent, directly or indirectly, on the revenues, profits or earnings of the firm; and

                     (e)  without limiting paragraph (d), has no financial arrangement with the firm to receive a commission or similar payment in relation to business generated by the person for the accounting and audit practice conducted by the firm.

In a prosecution for an offence based on subsection (1) or (2), the prosecution must prove that the person did not satisfy the independence test in this subsection in relation to the firm.

             (8)  In applying subsection (7), disregard any rights that the person has against the firm, or the members of the firm, by way of an indemnity for, or contribution in relation to, liabilities incurred by the person when the person was a member or employee of the firm.

Meaning of holding by firm in body corporate

             (9)  For the purposes of item 9 in the table in subsection (5), a firm is taken to have a holding in a body corporate if the holding is one of the firm’s partnership assets.

324CG  Auditor independence—specific requirements for audit company

Specific independence requirements for audit company

             (1)  An audit company contravenes this subsection if:

                     (a)  the audit company engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (9) of this section; and

                     (c)  the audit company is or becomes aware of the circumstances referred to in paragraph (b); and

                     (d)  the audit company does not, as soon as possible after the audit company becomes aware of those circumstances, take all reasonable steps to ensure that the audit company does not continue to engage in audit activity in those circumstances.

Audit company to notify ASIC

          (1A)  An audit company contravenes this subsection if:

                     (a)  the audit company is the auditor of an audited body; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies to a person or entity covered by subsection (9) of this section while the audit company is the auditor of the audited body; and

                     (c)  on a particular day (the start day), the audit company becomes aware of the circumstances referred to in paragraph (b); and

                     (d)  at the end of the period of 7 days from the start day:

                              (i)  those circumstances remain in existence; and

                             (ii)  the audit company has not informed ASIC in writing of those circumstances.

Note:          If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2C) (public company) or 331AAA(2C) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (1B)  If the audit company gives ASIC a notice under paragraph (1A)(d), ASIC must, as soon as practicable after the notice has been received, give a copy of the notice to the audited body.

Strict liability contravention of specific independence requirements by audit company

             (2)  An audit company contravenes this subsection if:

                     (a)  the audit company engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (9) of this section.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraph (2)(b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (4) provides a defence.

             (4)  An audit company does not commit an offence because of a contravention of subsection (2) in relation to audit activity engaged in by the audit company at a particular time if the audit company has reasonable grounds to believe that the audit company had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit company) that the audit company and the audit company’s employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Contraventions by directors of audit company

             (5)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (9) of this section; and

                     (c)  the defendant is a director of the audit company at that time; and

                     (d)  the defendant is or becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  the defendant does not, as soon as possible after the defendant becomes aware of those circumstances, take all reasonable steps to ensure that the audit company does not continue to engage in audit activity in those circumstances.

Director of audit company to notify ASIC

          (5A)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company is the auditor of an audited body; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies to a person or entity covered by subsection (9) of this section while the audit company is the auditor of the audited body; and

                     (c)  the defendant is a director of the audit company at a time when the circumstances referred to in paragraph (b) exist; and

                     (d)  on a particular day (the start day), the defendant becomes aware of the circumstances referred to in paragraphs (a) and (b); and

                     (e)  at the end of the period of 7 days from the start day:

                              (i)  the circumstances referred to in paragraph (b) remain in existence; and

                             (ii)  ASIC has not been informed in writing of those circumstances by the defendant, by another director of the company or by the audit company.

Note:          If the audited body is a public company or a registered scheme and the notice under this subsection is not followed up by a notice under subsection 327B(2C) (public company) or 331AAA(2C) (registered scheme) within the period of 21 days (or a longer period that has been approved by ASIC) from the day the notice under this subsection is given, the audit appointment will be terminated at the end of that period.

          (5B)  A person is not excused from informing ASIC under subsection (5A) that the circumstances referred to in paragraph (5A)(b) exist on the ground that the information might tend to incriminate the person or expose the person to a penalty.

          (5C)  However, if the person is a natural person:

                     (a)  the information; and

                     (b)  the giving of the information;

are not admissible in evidence against the person in a criminal proceeding, or any other proceeding for the recovery of a penalty, other than proceedings for an offence based on the information given being false or misleading.

          (5D)  If ASIC is given a notice under paragraph (5A)(e), ASIC must, as soon as practicable after the notice is received, give a copy of the notice to the audited body.

Strict liability contravention of specific independence requirements by director of audit company

             (6)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company engages in audit activity at a particular time; and

                     (b)  a relevant item of the table in subsection 324CH(1) applies at that time to a person or entity covered by subsection (9) of this section; and

                     (c)  the defendant is a director of the audit company at that time.

             (7)  For the purposes of an offence based on subsection (6), strict liability applies to the physical elements of the offence specified in paragraphs (6)(a) and (b).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (8) provides a defence.

             (8)  A person does not commit an offence because of a contravention of subsection (6) in relation to audit activity engaged in by an audit company at a particular time if the person has reasonable grounds to believe that the audit company had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit company) that the audit company and its employees complied with the requirements of this Subdivision.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

People and entities covered

             (9)  The following table sets out:

                     (a)  the persons and entities covered by this subsection in relation to audit activity engaged in by an audit company; and

                     (b)  the items of the table in subsection 324CH(1) that are the relevant items for each of those persons and entities:

 

Audit company

Item

For this person or entity...

the relevant items of the table in subsection 324CH(1) are...

1

the audit company

4

7

10 to 19

2

a service company or trust acting for, or on behalf of, the audit company, or another entity performing a similar function

4

7

10 to 19

3

a director or senior manager of the audit company

1 to 7

9

15

4

a professional member of the audit team conducting the audit of the audited body

1 to 6

8 to 19

5

an immediate family member of a professional member of the audit team conducting the audit of the audited body

1 and 2

10 to 19

6

a person who:

(a) is a non‑audit services provider; and

(b) does not satisfy the maximum hours test in subsection (10)

10 to 12

7

an immediate family member of a person who:

(a) is a non‑audit services provider; and

(b) does not satisfy the maximum hours test in subsection (10)

10 to 12

8

an entity that the audit company (or a service company or trust acting for, or on behalf of, the audit company, or another entity performing a similar function) controls

15

9

a body corporate in which the audit company (or a service company or trust acting for, or on behalf of, the audit company, or another entity performing a similar function) has a substantial holding

15

10

an entity that an officer of the audit company controls or a body corporate in which an officer of the audit company has a substantial holding

16

11

a person who:

(a) is a former officer of the audit company; and

(b) does not satisfy the independence test in subsection (11)

1 and 2

12

a person who:

(a) is a former professional employee of the audit company; and

(b) does not satisfy the independence test in subsection (11)

1 and 2

Maximum hours test

           (10)  A non‑audit services provider satisfies the maximum hours test in this subsection if:

                     (a)  the number of hours for which the person provides services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the period to which the audit relates does not exceed 10 hours; and

                     (b)  the number of hours for which the person provided services (other than services related to the conduct of an audit) to the audited body on behalf of the auditor during the 12 months immediately before the beginning of the period to which the audit relates does not exceed 10 hours.

In a prosecution for an offence based on subsection (1), (2), (5) or (6), the prosecution must prove that the non‑audit services provider did not satisfy the maximum hours test in this subsection.

Independence test

           (11)  A person satisfies the independence test in this subsection in relation to an audit company if the person:

                     (a)  does not influence the operations or financial policies of the accounting and audit practice conducted by the audit company; and

                     (b)  does not participate, or appear to participate, in the business or professional activities of the accounting and audit practice conducted by the audit company; and

                     (c)  does not have any rights against the audit company in relation to the accounting and audit practice conducted by the audit company in relation to the termination of the person’s former position as an officer of the audit company; and

                     (d)  has no financial arrangements with the audit company in relation to the accounting and audit practice conducted by the audit company, other than:

                              (i)  an arrangement providing for regular payments of a fixed pre‑determined dollar amount which is not dependent, directly or indirectly, on the revenues, profits or earnings of the audit company; or

                             (ii)  an arrangement providing for regular payments of a dollar amount where the method of calculating the dollar amount is fixed and is not dependent, directly or indirectly, on the revenues, profits or earnings of the audit company; and

                     (e)  without limiting paragraph (d), has no financial arrangement with the audit company to receive a commission or similar payment in relation to business generated by the person for the accounting and audit practice conducted by the audit company.

In a prosecution for an offence based on subsection (1), (2), (5) or (6), the prosecution must prove that the person did not satisfy the independence test in this subsection in relation to the audit company.

           (12)  In applying subsection (11), disregard any rights that the person has against the audit company by way of an indemnity for, or contribution in relation to, liabilities incurred by the person when the person was an officer or employee of the audit company.

324CH  Relevant relationships

Table of relevant relationships

             (1)  The following table lists the relationships between:

                     (a)  a person or a firm; and

                     (b)  the audited body for an audit;

that are relevant for the purposes of sections 324CE, 324CF and 324CG:

 

Relevant relationships

Item

This item applies to a person (or, if applicable, to a firm) at a particular time if at that time the person (or firm)...

1

is an officer of the audited body

This item does not apply if the audited body is a small proprietary company for the relevant financial year.

2

is an audit‑critical employee of the audited body

This item does not apply if the audited body is a small proprietary company for the relevant financial year.

3

is a partner of:

(a) an officer of the audited body; or

(b) an audit‑critical employee of the audited body

This item does not apply if the audited body is a small proprietary company for the relevant financial year.

4

is an employer of:

(a) an officer of the audited body; or

(b) an audit‑critical employee of the audited body

This item does not apply if the audited body is a small proprietary company for the relevant financial year.

5

is an employee of:

(a) an officer of the audited body; or

(b) an audit‑critical employee of the audited body

This item does not apply if the audited body is a small proprietary company for the relevant financial year.

6

is a partner or employee of an employee of:

(a) an officer of the company; or

(b) an audit‑critical employee of the company

This item does not apply if the audited body is a small proprietary company for the relevant financial year.

7

provides remuneration to:

(a) an officer of the audited body; or

(b) an audit‑critical employee of the audited body;

for acting as a consultant to the person

This item does not apply if the audited body is a small proprietary company for the relevant financial year.

8

was an officer of the audited body at any time during:

(a) the period to which the audit relates; or

(b) the 12 months immediately preceding the beginning of the period to which the audit relates; or

(c) the period during which the audit is being conducted or the audit report is being prepared

This item does not apply if the audited body is a small proprietary company for the relevant financial year.

9

was an audit‑critical employee of the audited body at any time during:

(a) the period to which the audit relates; or

(b) the 12 months immediately preceding the beginning of the period to which the audit relates; or

(c) the period during which the audit is being conducted or the audit report is being prepared

This item does not apply if the audited body is a small proprietary company for the relevant financial year.

10

has an asset that is an investment in the audited body

11

has an asset that is a beneficial interest in an investment in the audited body and has control over that asset

12

has an asset that is a beneficial interest in an investment in the audited body that is a material interest

13

has an asset that is a material investment in an entity that has a controlling interest in the audited body

14

has an asset that is a material beneficial interest in an investment in an entity that has a controlling interest in the audited body

15

owes an amount to:

(a) the audited body; or

(b) a related body corporate; or

(c) an entity that the audited body controls;

unless the debt is disregarded under subsection (5), (5A) or (5B)

16

is owed an amount by:

(a) the audited body; or

(b) a related body corporate; or

(c) an entity that the audited body controls;

under a loan that is not disregarded under subsection (6) or (6A)

17

is liable under a guarantee of a loan made to:

(a) the audited body; or

(b) a related body corporate; or

(c) an entity that the audited body controls

19

is entitled to the benefit of a guarantee given by:

(a) the audited body; or

(b) a related body corporate; or

(c) an entity that the audited body controls

in relation to a loan unless the guarantee is disregarded under subsection (8)

Applying table if audited body is registered scheme

             (2)  If the audited body is a registered scheme, apply the table in subsection (1) as if:

                     (a)  references to the audited body in items 1 to 9, and items 15 to 19, in the table were references to the responsible entity for the registered scheme; and

                     (b)  references to an interest in the audited body in items 10 to 12 in the table were references to an interest in either:

                              (i)  the registered scheme; or

                             (ii)  the responsible entity for the registered scheme; and

                     (c)  references to an investment in an entity that has a controlling interest in the audited body in items 13 and 14 of the table were references to an investment in an entity that has a controlling interest in the responsible entity for the registered scheme.

Applying table if audited body is listed entity (other than registered scheme)

             (3)  If the audited body is a listed entity (other than a registered scheme), apply the table in subsection (1) as if references in the table to the audited body included references to an associated entity of the audited body.

Note:          See section 50AAA for the definition of associated entity.

Firm assets

             (4)  For the purpose of applying items 10 to 14 in the table in subsection (1) to an audit firm, the firm is taken to have a particular asset if the asset is one of the firm’s partnership assets.

Housing loan exception

             (5)  For the purposes of item 15 of the table in subsection (1), disregard a debt owed by an individual to a body corporate or entity if:

                     (a)  the body corporate or entity is:

                              (i)  an Australian ADI; or

                             (ii)  a body corporate registered under section 21 of the Life Insurance Act 1995; and

                     (b)  the debt arose because of a loan that the body corporate or entity made to the person in the ordinary course of its ordinary business; and

                     (c)  the person used the amount of the loan to pay the whole or part of the purchase price of premises that the person uses as their principal place of residence.

Goods and services exception

          (5A)  For the purposes of item 15 of the table in subsection (1), disregard a debt owed by a person or firm to a body corporate or entity if:

                     (a)  the debt arises from the acquisition of goods or services from:

                              (i)  the audited body; or

                             (ii)  an entity that the audited body controls; or

                            (iii)  a related body corporate; and

                     (b)  the acquisition of goods and services was on the terms and conditions that would normally apply to goods or services acquired from the body, entity or related body corporate; and

                     (c)  the debt is owed on the terms and conditions that would normally apply to a debt owing to the body, entity or related body corporate; and

                     (d)  the goods or services will be used by the person or firm:

                              (i)  for the personal use of the person or firm; or

                             (ii)  in the ordinary course of business of the person or firm.

Ordinary commercial loan exception

          (5B)  For the purposes of item 15 of the table in subsection (1), disregard a debt owed under a loan that:

                     (a)  is made or given in the ordinary course of business of:

                              (i)  the audited body; or

                             (ii)  the related body corporate; or

                            (iii)  the controlled entity; and

                     (b)  is made or given on the terms and conditions that would normally apply to a loan made or given by the audited body, the related body corporate or the controlled entity.

Loans by immediate family members in ordinary business dealing with client

             (6)  For the purposes of item 16 of the table in subsection (1), disregard a debt owed to a person by a body corporate or entity if:

                     (a)  the item applies to the person because the person is an immediate family member of:

                              (i)  a professional member of the audit team conducting the audit of the audited body; or

                             (ii)  a non‑audit services provider; and

                     (b)  the debt is incurred in the ordinary course of business of the body corporate or entity.

          (6A)  For the purposes of item 16 in the table in subsection (1), disregard an amount owed under a loan to a person or firm by the audited body, a related body corporate or an entity that the audited body controls if:

                     (a)  the body, body corporate or entity is an Australian ADI; and

                     (b)  the amount is deposited in a basic deposit product (within the meaning of section 761A) provided by the body, body corporate or entity; and

                     (c)  the amount was deposited, in the ordinary course of business of the audited body, body corporate or entity, on the terms and conditions that would normally apply to a basic deposit product provided by the body, body corporate or entity.

Ordinary commercial guarantee exception

             (8)  For the purposes of item 19 of the table in subsection (1), disregard any guarantee that:

                     (a)  is made or given in the ordinary course of the business of:

                              (i)  the audited body; or

                             (ii)  the related body corporate; or

                            (iii)  the controlled entity; and

                     (b)  is made or given on the terms and conditions that would normally apply to a guarantee made or given by the audited body, the related body corporate or the controlled entity.

Future debts and liabilities

          (8A)  In this section:

                     (a)  a reference to a debt or amount that is owed by one entity to another entity includes a reference to a debt or amount that will (or may) be owed by the first entity to the other entity under an existing agreement between the entities; and

                     (b)  a reference to a liability under a guarantee of a loan includes a reference to a liability that will arise under the guarantee if the loan is not repaid.

Relevant financial year

             (9)  In this section:

relevant financial year, in relation to audit activities undertaken in relation to an audit or review of a financial report for a financial year or an audit or review of a financial report for a half‑year in a financial year, means the financial year immediately before that financial year.

324CI  Special rule for retiring partners of audit firms and retiring directors of authorised audit companies

                   A person contravenes this section if:

                     (a)  the person ceases to be:

                              (i)  a member of an audit firm; or

                             (ii)  a director of an audit company;

                            at a particular time (the departure time); and

                     (b)  at any time before the departure time, the audit firm or audit company has engaged in an audit of an audited body; and

                     (c)  the person was a professional member of the audit team for the audit; and

                     (d)  within the period of 2 years starting on the date the report under section 308 or 309 was made on the latest audit to which paragraphs (b) and (c) apply, the person becomes, or continues to be, an officer of the audited body; and

                     (e)  the audited body is not a small proprietary company for the most recently ended financial year.

If the audited body is a listed entity (other than a registered scheme), apply paragraph (d) as if references in that paragraph to the audited body included references to a related body corporate of the audited body.

324CJ  Special rule for retiring professional member of audit company

                   A person contravenes this section if:

                     (a)  the person who is not a director of an audit company ceases to be a professional employee of the audit company at a particular time (the departure time); and

                     (b)  at any time before the departure time, the audit company has engaged in an audit of an audited body; and

                     (c)  the person was a lead auditor or review auditor for the audit; and

                     (d)  within the period of 2 years starting on the date the report under section 308 or 309 was made on the latest audit to which paragraphs (b) and (c) apply, the person becomes, or continues to be, an officer of the audited body; and

                     (e)  the audited body is not a small proprietary company for the most recently ended financial year.

If the audited body is a listed entity (other than a registered scheme), apply paragraph (d) as if references in that paragraph to the audited body included references to a related body corporate of the audited body.

324CK  Multiple former audit firm partners or audit company directors

                   A person contravenes this section if:

                     (a)  an audit firm, or audit company, is an auditor of an audited body for a financial year; and

                     (b)  the person has at any time been a member of the audit firm or a director of the audit company; and

                     (c)  the person becomes an officer of the audited body within a period of 5 years after the person ceased (or last ceased) to be a member of the audit firm or a director of the audit company (as the case may be); and

                     (d)  at the time when paragraph (c) is satisfied another person who is or who also has at any time been a member of the audit firm, or a director of the audit company, at a time when the audit firm, or audit company, undertook an audit of the audited body is also an officer of the audited body; and

                     (e)  the audited body is not a small proprietary company for the most recently ended financial year.

If the audited body is a listed entity (other than a registered scheme), apply paragraphs (c) and (d) as if references in those paragraphs to the audited body included references to a related body corporate of the audited body.

Subdivision CCommon provisions

324CL  People who are regarded as officers of a company for the purposes of this Division

             (1)  For the purposes of this Division, a person is taken to be an officer of a company if:

                     (a)  the person is an officer of:

                              (i)  a related body corporate; or

                             (ii)  an entity that the company controls; or

                     (b)  the person has, at any time within the immediately preceding period of 12 months, been an officer or promoter of:

                              (i)  the company; or

                             (ii)  a related body corporate; or

                            (iii)  an entity that the company controlled at that time.

             (2)  Paragraph (b) does not apply if ASIC directs that it does not apply in relation to the person in relation to the company. ASIC may give the direction only if ASIC thinks that it is appropriate to do so in the circumstances of the case.

             (3)  For the purposes of this Division, a person is not taken to be an officer of a company by reason only of being, or having been, the liquidator of:

                     (a)  the company; or

                     (b)  a related body corporate; or

                     (c)  an entity that the company controls or has controlled.

             (4)  For the purposes of this Division, a person is not taken to be an officer of a company merely because of one or more of the following:

                     (a)  having been appointed as auditor of:

                              (i)  the company; or

                             (ii)  a related body corporate; or

                            (iii)  an entity that the company controls or has controlled;

                     (b)  having been appointed, for any purpose relating to taxation, as public officer of:

                              (i)  a body corporate; or

                             (ii)  an unincorporated body; or

                            (iii)  a trust estate;

                     (c)  being or having been authorised to accept service of process or notices on behalf of:

                              (i)  the company; or

                             (ii)  a related body corporate; or

                            (iii)  an entity that the company controls or has controlled.

Division 4Deliberately disqualifying auditor

324CM  Deliberately disqualifying auditor

Individual auditor

             (1)  An individual contravenes this subsection if:

                     (a)  the individual is appointed auditor of a company or registered scheme; and

                     (b)  while the appointment continues, the individual brings about a state of affairs; and

                     (c)  the individual cannot, while that state of affairs continues, act as auditor of the company or scheme without contravening Division 2 or 3.

Audit firm

             (2)  A member of a firm contravenes this subsection if:

                     (a)  the firm is appointed auditor of a company or a registered scheme; and

                     (b)  while the appointment continues, the member brings about a state of affairs; and

                     (c)  the firm cannot, while that state of affairs continues, act as auditor of the company or scheme without a person contravening Division 2 or 3.

Audit company

             (3)  A person who is:

                     (a)  a member of a company; or

                     (b)  a director of a company; or

                     (c)  a lead auditor in relation to an audit conducted by a company;

contravenes this subsection if:

                     (d)  the company is appointed auditor of a company or a registered scheme; and

                     (e)  while the appointment continues, the person brings about a state of affairs; and

                      (f)  the company cannot, while that state of affairs continues, act as auditor of the company or scheme without contravening Division 2 or 3.

Division 5Auditor rotation for listed companies

324DA  Limited term for eligibility to play significant role in audit of a listed company or listed registered scheme

             (1)  If an individual plays a significant role in the audit of a listed company or listed registered scheme for 5 successive financial years (the extended audit involvement period), the individual is not eligible to play a significant role in the audit of the company or the scheme for a later financial year (the subsequent financial year) unless:

                     (a)  the individual has not played a significant role in the audit of the company or the scheme for at least 2 successive financial years (the intervening financial years); and

                     (b)  the intervening financial years:

                              (i)  commence after the end of the extended audit involvement period; and

                             (ii)  end before the beginning of the subsequent financial year.

Note:          Play a significant role in an audit is defined in section 9.

             (2)  An individual is not eligible to play a significant role in the audit of a listed company or listed registered scheme for a financial year if, were the individual to do so, the individual would play a significant role in the audit of the company or scheme for more than 5 out of 7 successive financial years.

             (3)  For the purposes of subsection (2), disregard an individual’s playing of a significant role in the audit of a company or scheme for a financial year if:

                     (a)  either:

                              (i)  the directors of the company or scheme grant an approval under section 324DAA in relation to the individual; or

                             (ii)  ASIC makes a declaration under paragraph 342A(1)(a) in relation to the individual; and

                     (b)  because of the approval or the declaration, subsection (1) of this section does not operate to make the individual not eligible to play a significant role in the audit of the company or scheme for that financial year.

324DAA  Directors may extend eligibility term

             (1)  Subject to section 324DAB, the directors of a listed company, or of a listed registered scheme, may, by resolution, grant an approval for an individual to play a significant role in the audit of the company or scheme for not more than 2 successive financial years in addition to the 5 successive financial years mentioned in subsection 324DA(1).

             (2)  The approval must be granted before the end of those 5 successive financial years.

             (3)  If the directors grant the approval, subsection 324DA(1) applies to the individual, in relation to the audit of the company or scheme, as if the references in that subsection to 5 successive financial years were references to:

                     (a)  if the approval is for one additional successive financial year—6 successive financial years; or

                     (b)  if the approval is for an additional 2 successive financial years—7 successive financial years.

             (4)  If the directors grant the approval for one successive financial year, the directors may, by resolution before the end of that year, grant an approval for an additional successive year.

             (5)  If the directors grant the approval for the additional successive year, subsection 324DA(1) applies to the individual, in relation to the audit of the company or scheme, as if the references in that subsection to 5 successive financial years were references to 7 successive financial years.

324DAB  Requirements for directors to approve extension of eligibility term

Requirements if company or scheme has audit committee

             (1)  If a listed company, or the responsible entity of a listed registered scheme, has an audit committee:

                     (a)  an approval under section 324DAA must not be granted unless it is in accordance with a recommendation provided by the audit committee; and

                     (b)  the resolution granting the approval must set out the reasons why the audit committee is satisfied as mentioned in paragraph (2)(d) of this section.

Note:          Directors are not required to grant an approval merely because the audit committee has recommended that an approval be granted.

             (2)  An approval is taken to be made in accordance with a recommendation provided by the audit committee only if:

                     (a)  the approval is consistent with the audit committee’s recommendation; and

                     (b)  the recommendation is endorsed by a resolution passed by the members of the audit committee; and

                     (c)  the recommendation is in writing signed by a member of the audit committee on behalf of the audit committee and given to the directors of the company or scheme; and

                     (d)  the recommendation states that the audit committee is satisfied that the approval:

                              (i)  is consistent with maintaining the quality of the audit provided to the company or scheme; and

                             (ii)  would not give rise to a conflict of interest situation (as defined in section 324CD);

                            and sets out the reasons why the committee is so satisfied.

Requirements if company or scheme does not have audit committee

             (3)  If a listed company, or the responsible entity of a listed registered scheme, does not have an audit committee:

                     (a)  an approval under section 324DAA must not be granted unless the directors of the company or scheme are satisfied that the approval:

                              (i)  is consistent with maintaining the quality of the audit provided to the company or scheme; and

                             (ii)  would not give rise to a conflict of interest situation (as defined in section 324CD); and

                     (b)  the resolution granting the approval must set out the reasons why the directors are so satisfied.

Auditor must have agreed to extension

             (4)  The directors of a listed company, or of a listed registered scheme, must not grant an approval under section 324DAA unless:

                     (a)  if the individual to whom the approval relates does not act on behalf of an audit firm or company—the individual agrees, in writing, to the approval being granted; or

                     (b)  if the individual to whom the approval relates acts on behalf of an audit firm or company—the audit firm or company on whose behalf the individual acts agrees, in writing, to the approval being granted.

324DAC  Notifications about approval to extend eligibility term

                   If the directors of a listed company, or of a listed registered scheme, grant an approval under section 324DAA, the directors must, within 14 days of granting the approval:

                     (a)  lodge a copy of the resolution granting the approval with ASIC; and

                     (b)  give a copy of the resolution to:

                              (i)  if the individual to whom the approval relates does not act on behalf of an audit firm or company—the individual; and

                             (ii)  if the individual to whom the approval relates acts on behalf of an audit firm or company—the audit firm or company on whose behalf the individual acts.

Note:          Details of the approval, and the reasons for the approval, must be included in the directors’ report under section 300.

324DAD  Approval ineffective unless it complies with requirements

                   A purported grant of approval under section 324DAA is ineffective unless the requirements of sections 324DAA, 324DAB and 324DAC are complied with in relation to the approval.

324DB  Individual’s rotation obligation

                   An individual contravenes this section if the individual:

                     (a)  plays a significant role in the audit of a listed company or listed registered scheme for a financial year; and

                     (b)  is not eligible to play that role.

324DC  Audit firm’s rotation obligation

Contraventions by members of audit firm

             (1)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm consents to act as a listed company’s or listed registered scheme’s auditor for a financial year; and

                     (b)  an individual acts, on behalf of the firm, as a lead or review auditor in relation to the audit of the company’s or scheme’s financial report for that financial year; and

                     (c)  the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year; and

                     (d)  the defendant is a member of the firm; and

                     (e)  the defendant is not the individual and is or becomes aware that the individual is not eligible to play that role; and

                      (f)  the defendant fails to take the necessary steps, as soon as possible after the defendant becomes aware that the individual is not eligible to play that role, either:

                              (i)  to ensure that the audit firm resigns as auditor of the company or scheme; or

                             (ii)  to ensure that the individual ceases to act, on behalf of the audit firm, as a lead or review auditor in relation to the audit of the company or scheme for that financial year.

             (2)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit firm consents to act as a listed company’s or listed registered scheme’s auditor for a financial year; and

                     (b)  an individual acts, on behalf of the firm, as a lead or review auditor in relation to the audit of the company’s or scheme’s financial report for that financial year; and

                     (c)  the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year:

                              (i)  because of section 324DAD; or

                             (ii)  for any other reason; and

                     (d)  the defendant is a member of the firm.

             (3)  For the purposes of an offence based on subsection (2), strict liability applies to the physical elements of the offence specified in paragraphs (2)(a) and (b) and subparagraph (2)(c)(ii).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (4) provides a defence.

             (4)  A person does not commit an offence because of a contravention of subsection (2) in relation to an individual acting as lead or review auditor on behalf of an audit firm at a particular time if the person has reasonable grounds to believe that the audit firm had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit firm) that the audit firm and its employees complied with the requirements of this Division.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

324DD  Audit company’s rotation obligation

Contravention by audit company

             (1)  An audit company contravenes this subsection if:

                     (a)  the audit company consents to act as a listed company’s or listed registered scheme’s auditor for a financial year; and

                     (b)  an individual acts, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company’s or scheme’s financial report for that financial year; and

                     (c)  the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year; and

                     (d)  a director of the audit company (other than the individual) is aware that the individual is not eligible to play that role; and

                     (e)  the audit company fails to take the necessary steps, as soon as possible after the director becomes aware that the individual is not eligible to play that role, either:

                              (i)  to resign as auditor of the company or scheme; or

                             (ii)  to ensure that the individual ceases to act, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company or scheme for that financial year.

Contraventions by directors of audit company

             (2)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company consents to act as a listed company’s or listed registered scheme’s auditor for a financial year; and

                     (b)  an individual acts, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company’s or scheme’s financial report for that financial year; and

                     (c)  the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year; and

                     (d)  the defendant is a director of the audit company; and

                     (e)  the defendant is not the individual and is or becomes aware that the individual is not eligible to play that role; and

                      (f)  the defendant fails to take the necessary steps, as soon as possible after the defendant becomes aware that the individual is not eligible to play that role, either:

                              (i)  to ensure that the audit company resigns as auditor of the company or scheme; or

                             (ii)  to ensure that the individual ceases to act, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company or scheme for that financial year.

             (3)  A person (the defendant) contravenes this subsection if:

                     (a)  an audit company consents to act as a listed company’s or listed registered scheme’s auditor for a financial year; and

                     (b)  an individual acts, on behalf of the audit company, as a lead or review auditor in relation to the audit of the company’s or scheme’s financial report for that financial year; and

                     (c)  the individual is not eligible to play a significant role in the audit of the company or scheme for that financial year:

                              (i)  because of section 324DAD; or

                             (ii)  for any other reason; and

                     (d)  the defendant is a director of the audit company.

             (4)  For the purposes of an offence based on subsection (3), strict liability applies to the physical elements of the offence specified in paragraphs (3)(a) and (b) and subparagraph (3)(c)(ii).

Note 1:       For strict liability, see section 6.1 of the Criminal Code.

Note 2:       Subsection (5) provides a defence.

             (5)  A person does not commit an offence because of a contravention of subsection (3) in relation to an individual acting as lead or review auditor on behalf of an audit company at a particular time if the person has reasonable grounds to believe that the audit company had in place at that time a quality control system that provided reasonable assurance (taking into account the size and nature of the audit practice of the audit company) that the audit company and its employees complied with the requirements of this Division.

Note:          A defendant bears an evidential burden in relation to the matters in this subsection, see subsection 13.3(3) of the Criminal Code.

Division 6Appointment, removal and fees of auditors for companies

Subdivision AAppointment of company auditors

325  Appointment of auditor by proprietary company

                   The directors of a proprietary company may appoint an auditor for the company if an auditor has not been appointed by the company in general meeting.

327A  Public company auditor (initial appointment of auditor)

             (1)  The directors of a public company must appoint an auditor of the company within 1 month after the day on which a company is registered as a company unless the company at a general meeting has appointed an auditor.

          (1A)  Subsection (1) does not apply in relation to a company if:

                     (a)  the directors reasonably believe that subsection 301(3) will apply to the company’s financial reports; or

                     (b)  the company is a small company limited by guarantee.

             (2)  Subject to this Part, an auditor appointed under subsection (1) holds office until the company’s first AGM.

             (3)  A director of a company must take all reasonable steps to comply with, or to secure compliance with, subsection (1).

327B  Public company auditor (annual appointments at AGMs to fill vacancies)

             (1)  A public company must:

                     (a)  appoint an auditor of the company at its first AGM; and

                     (b)  appoint an auditor of the company to fill any vacancy in the office of auditor at each subsequent AGM.

          (1A)  Subsection (1) does not apply in relation to a company if:

                     (a)  subsection 301(3) applies to the company’s financial reports; or

                     (b)  the company is a small company limited by guarantee.

             (2)  An auditor appointed under subsection (1) holds office until the auditor:

                     (a)  dies; or

                     (b)  is removed, or resigns, from office in accordance with section 329; or

                     (c)  ceases to be capable of acting as auditor because of Division 2 of this Part; or

                     (d)  ceases to be auditor under subsection (2A), (2B) or (2C).

          (2A)  An individual auditor ceases to be auditor of a company under this subsection if:

                     (a)  on a particular day (the start day), the individual auditor:

                              (i)  informs ASIC of a conflict of interest situation in relation to the company under subsection 324CA(1A); or

                             (ii)  informs ASIC of particular circumstances in relation to the company under subsection 324CE(1A); and

                     (b)  the individual auditor does not give ASIC a notice, before the notification day (see subsection (2D)), that that conflict of interest situation has, or those circumstances have, ceased to exist before the end of the period (the remedial period) of 21 days, or such longer period as ASIC approves in writing, from the start day.

          (2B)  An audit firm ceases to be auditor of a company under this subsection if:

                     (a)  on a particular day (the start day), ASIC is:

                              (i)  informed of a conflict of interest situation in relation to the company under subsection 324CB(1A); or

                             (ii)  informed of particular circumstances in relation to the company under subsection 324CF(1A); and

                     (b)  ASIC has not been given a notice on behalf of the audit firm, before the notification day (see subsection (2D)), that that conflict of interest situation has, or those circumstances have, ceased to exist before the end of the period (the remedial period) of 21 days, or such longer period as ASIC approves in writing, from the start day.

          (2C)  An audit company ceases to be auditor of a company under this subsection if:

                     (a)  on a particular day (the start day), ASIC is:

                              (i)  informed of a conflict of interest situation in relation to the company under subsection 324CB(1A) or 324CC(1A); or

                             (ii)  informed of particular circumstances in relation to the company under subsection 324CF(1A) or 324CG(1A) or (5A); and

                     (b)  ASIC has not been given a notice on behalf of the audit company, before the notification day (see subsection (2D)), that that conflict of interest situation has, or those circumstances have, ceased to exist before the end of the period (the remedial period) of 21 days, or such longer period as ASIC approves in writing, from the start day.

          (2D)  The notification day is:

                     (a)  the last day of the remedial period; or

                     (b)  such later day as ASIC approves in writing (whether before or after the remedial period ends).

             (3)  A director of a company must take all reasonable steps to comply with, or to secure compliance with, subsection (1).

             (4)  If an audit firm ceases to be the auditor of a company under subsection (2) at a particular time, each member of the firm who:

                     (a)  is taken to have been appointed as an auditor of the company under subsection 324AB(1) or 324AC(4); and

                     (b)  is an auditor of the company immediately before that time;

ceases to be an auditor of the company at that time.

327C  Public company auditor (appointment to fill casual vacancy)

             (1)  If:

                     (a)  a vacancy occurs in the office of auditor of a public company; and

                     (b)  the vacancy is not caused by the removal of an auditor from office; and

                     (c)  there is no surviving or continuing auditor of the company;

the directors must, within 1 month after the vacancy occurs, appoint an auditor to fill the vacancy unless the company at a general meeting has appointed an auditor to fill the vacancy.

Note:          Certain public companies are not required to appoint an auditor: see subsections 327A(1A) and 327B(1A).

             (2)  An auditor appointed under subsection (1) holds office, subject to this Part, until the company’s next AGM.

             (3)  A director of a public company must take all reasonable steps to comply with, or to secure compliance with, subsection (1).

327D  Appointment to replace auditor removed from office

             (1)  This section deals with the situation in which an auditor of a company is removed from office at a general meeting in accordance with section 329.

             (2)  The company may at that general meeting (without adjournment), by special resolution immediately appoint an individual, firm or company as auditor of the company if a copy of the notice of nomination has been sent to the individual, firm or company under subsection 328B(3).

             (3)  If a special resolution under subsection (2):