ASIC RG 174 — ASIC Regulatory Guide – RG 174 Relief for externally administered companies and registered schemes being wound up

Page 1 REGULATORY GUIDE 174 Relief for externally administered companies and registered schemes being wound up October 2021 About this guide This guide is for registered liquidators and other persons who are externally administering the affairs of companies and winding up registered managed investment schemes (registered schemes). It explains when we will grant relief relating to:  the financial reporting obligations of the Corporations Act;  the Australian financial services (AFS) licensee financial reporting obligations (for companies and responsible entities that are or have been AFS licensees);  the compliance plan audit obligations (for registered schemes); and  the requirement to hold an annual general meeting (for public companies). Page 2 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 2 About ASIC regulatory documents In administering legislation ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by:  explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)  explaining how ASIC interprets the law  describing the principles underlying ASIC’s approach  giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief activity or the results of a research project. Document history This guide was issued in October 2021 and is based on legislation and regulations as at the date of issue. Previous versions:  Superseded Regulatory Guide 174, issued May 2015, reissued December 2018  Superseded Policy Statement 174, issued June 2003, rebadged as a regulatory guide 5 July 2007 Disclaimer This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act and other applicable laws apply to you, as it is your responsibility to determine your obligations. Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or obligations. Page 3 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 3 Contents A Overview ........................................................................................... 4 Purpose of this guide ......................................................................... 4 The financial reporting obligations ..................................................... 5 Our approach to relief ........................................................................ 9 B Financial reporting relief for externally administered companies ..................................................................................... 16 Exemption relief for companies in liquidation .................................. 16 Deferral relief for externally administered companies not in liquidation 18 Individual deferral relief for externally administered companies ...... 25 What happens when a deferral comes to an end? .......................... 32 Individual exemption from previously deferred financial reporting obligations ........................................................................................ 34 Individual relief from specific obligations ......................................... 35 C Financial reporting relief for registered schemes ...................... 36 When is a registered scheme ‘insolvent’? ....................................... 36 Winding-up a registered scheme ..................................................... 37 Exemption relief for ‘insolvent’ registered schemes being wound up 37 Individual deferral relief for registered schemes being wound up ... 41 Relief relating to compliance plan audit obligations ........................ 46 D AGM relief for public companies ................................................. 48 Exemption from AGM obligation for companies in liquidation ......... 48 AGM deferral relief for externally administered public companies .. 49 Individual extensions of time to hold an AGM ................................. 51 Individual exemptions from the AGM obligation .............................. 53 E Applying for relief .......................................................................... 54 General considerations when applying for relief ............................. 54 Who may apply for relief .................................................................. 56 How to apply for relief ...................................................................... 61 Key terms ............................................................................................... 62 Related information ............................................................................... 67 Page 4 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 4 A Overview Key points Companies and registered managed investment schemes (registered schemes) have financial reporting obligations, and public companies must hold annual general meetings (AGMs). Companies that are Australian financial services (AFS) licensees, including responsible entities of registered schemes, also have AFS licensee financial reporting obligations. Responsible entities of registered schemes must also have their scheme compliance plans audited. These obligations apply even if a company (including a responsible entity) is under external administration or a registered scheme is being wound up. ASIC provides relief from the financial reporting and AGM obligations under ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251, in certain circumstances. We may also grant individual relief from the financial reporting, AGM and compliance plan audit obligations in other circumstances. This relief does not extend to the obligation to keep financial records. Purpose of this guide RG 174.1 This guide will help externally administered companies and external administrators understand when we will grant relief from the financial reporting obligations in Pt 2M.3 of the Corporations Act 2001 (Corporations Act) and, for externally administered public companies, when we will grant relief from the AGM obligations. Note 1: In this guide, references to chapters (Chs), parts (Pts), or sections (s) are to the Corporations Act, unless otherwise specified. Note 2: In this guide, ‘external administrator’ means, for a company, a voluntary administrator, deed administrator, controller, provisional liquidator or liquidator, and, for a disclosing entity that is not a company or a scheme, the person taking responsibility for ensuring that the disclosing entity is wound up in accordance with its constitution, rules and applicable laws. RG 174.2 This guide will also help responsible entities or other persons who have responsibility for winding up a registered scheme understand when we will grant relief from the financial reporting and compliance plan audit obligations. It will also help externally administered companies (including responsible entities) that are or have been AFS licensees to understand when we will grant relief from any of the AFS licensee financial reporting obligations. Page 5 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 5 RG 174.3 This guide does not deal with or affect: (a) the administration of a compromise or arrangement under Pt 5.1 (arrangements and reconstructions); (b) the reporting obligations of external administrators and the obligation to convene certain meetings depending on the type of external administration (e.g. meetings of creditors, contributories or committees of inspection); (c) insolvent natural persons, partnerships, trusts (other than registered schemes) or bodies that are not companies, registered schemes or disclosing entities; and (d) companies that enter into a restructuring process under Pt 5.3B (restructuring of a company). The financial reporting obligations RG 174.4 Part 2M.3 of the Corporations Act imposes on companies, registered schemes and disclosing entities requirements about annual financial reporting, half-yearly reporting, auditing and disclosure. RG 174.5 These requirements are directed at maintaining investor confidence, enhancing market efficiency and ensuring the accountability of management through the provision of timely and reliable financial information. Auditing provides users with an independent opinion on whether the entity’s financial report complies with accounting standards and gives a true and fair view of the entity’s financial position and performance. Public financial reporting makes information available to a wide range of users to help them make economic decisions. Users include: (a) present and prospective shareholders or members; (b) present and prospective creditors; and (c) customers, employees, governments and the public. Note: See Australian Accounting Standard AASB 101 Presentation of financial statements, and Regulatory Guide 43 Financial reports and audit relief (RG 43). RG 174.6 The types of users and their need for financial reports may vary depending on: (a) whether the entity is solvent or insolvent; (b) whether the entity is under a form of external administration or, in the case of a registered scheme, being wound up; (c) the likelihood of members having any ongoing economic interest in the entity during and after the external administration or winding-up; and (d) whether there is any other economic information about the entity. Page 6 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 6 RG 174.7 Table 1 summarises the annual financial reporting obligations of companies, registered schemes and disclosing entities. Table 1: Summary of annual financial reporting obligations Obligation Comments Type of entity Prepare the financial report: see s292 The financial report includes:  the financial statements;  disclosures and notes; and  the directors’ declaration. Applies to:  disclosing entities;  public companies (not including small companies limited by guarantee unless these are directed to do so);  large proprietary companies;  registered schemes;  small proprietary companies that are directed to do so;  small foreign-controlled proprietary companies; and  small proprietary companies that have one or more CSF shareholders at any time during the financial year. Prepare the directors’ report: see s298 Unless the report relates to a company limited by guarantee, it has a general component (see s299 for unlisted entities and s299A for listed entities) and a specific component (see s300 for unlisted entities and s300A for listed entities). See s285A for an overview of the obligations of companies limited by guarantee. Applies to:  disclosing entities;  public companies (not including small companies limited by guarantee unless these are directed to do so);  large proprietary companies;  registered schemes;  small proprietary companies that are directed to do so;  small foreign-controlled proprietary companies; and  small proprietary companies that have one or more CSF shareholders at any time during the financial year. Page 7 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 7 Obligation Comments Type of entity Have the financial report audited and obtain the auditor’s report: see s301, 307 and 308 A small proprietary company preparing a financial report in response to a shareholder direction under s293 is not required to have it audited if the direction did not request it. There are similar rules for companies limited by guarantee. A small proprietary company preparing a financial report because it had one or more CSF shareholders during the financial year is not required to have it audited if, at the end of the financial year, the company has raised less than the CSF audit threshold from all the CSF offers it has ever made. Under s312, officers must assist the auditor in the conduct of the audit. Applies to:  disclosing entities;  public companies (not including small companies limited by guarantee unless these are directed to do so);  large proprietary companies;  registered schemes;  small proprietary companies that are directed to do so;  small foreign-controlled proprietary companies; and  small proprietary companies that have one or more CSF shareholders at any time during the financial year. Provide the financial report, directors’ report and auditor’s report to members: see s314 and 316 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: see s314(1) and (2). For the deadlines, see s315(1)–(4) and 316(2). A small proprietary company preparing a financial report because it had one or more CSF shareholders during the financial year may provide the financial report or a concise financial report, by making a copy of the financial report or concise financial report readily accessible on a website: see s314(1AF). Applies to:  disclosing entities;  public companies (not including small companies limited by guarantee unless these are directed to do so);  large proprietary companies;  registered schemes;  small proprietary companies that are directed to do so;  small foreign-controlled proprietary companies; and  small proprietary companies that have one or more CSF shareholders at any time during the financial year. Page 8 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 8 Obligation Comments Type of entity Lodge the financial report, directors’ report and auditor’s report with ASIC: see s319 The deadlines will depend on the type of company: see s319(3). Companies that have the benefit of the grandfathering in the relevant Pt 10.1 transitional provisions do not have to lodge a report. Applies to:  disclosing entities;  public companies;  large proprietary companies;  registered schemes;  small foreign-controlled proprietary companies; and  small proprietary companies that have one or more CSF shareholders at any time during the financial year. Lay before the AGM the financial report, directors’ report and auditor’s report: see s317 For the AGM deadlines, see s250N. Applies to public companies. Note 1: See s285 for an overview of the obligations in Ch 2M, and s285A for an overview of the obligations of companies limited by guarantee. Note 2: A ‘CSF shareholder’ of a proprietary company means an entity that holds one or more securities of the company, having been issued with the securities through a CSF offer by the company under the crowd-sourced funding rules in Pt 6D.3A: see s9. Note 3: The CSF audit threshold means $3 million or any amount prescribed by the regulations: see s9. RG 174.8 Some companies and registered schemes are disclosing entities. Disclosing entities must prepare and lodge a half-year financial report and directors’ report: see s302. They must also obtain and lodge an auditor’s report of the half-year financial report: see s309. RG 174.9 AFS licensees must prepare and lodge a true and fair profit and loss statement and balance sheet for each financial year: see s989B. They must also lodge an auditor’s report containing certain information. How the obligations apply to externally administered companies and registered schemes being wound up RG 174.10 There are a number of types of external administration that each affect companies in different ways. The types of external administration are: (a) court winding-up; (b) voluntary winding-up; (c) provisional liquidation; (d) controllership; (e) administration (referred to in this guide as ‘voluntary administration’); (f) deed of company arrangement (DOCA); and (g) court-approved scheme of arrangement. Page 9 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 9 RG 174.11 A company does not cease to have the status of a company on the appointment of an external administrator. Accordingly, unless ASIC relief applies, obligations that are imposed on a company—such as the financial reporting and AGM obligations—continue to apply while the company is under external administration. RG 174.12 While a company is under external administration, the powers of the directors may be suspended or restricted depending on the type of external administration: see s198G. The external administrator, on the other hand, may have control of the company’s business, property and affairs—and may, in some cases, perform any function and exercise any power that the company or any of its officers could perform or exercise if the company were not under external administration: see, for example, s437A, 477 and 506. An external administrator is obliged to use their powers to cause the company to comply with its legal obligations, including the financial reporting and AGM obligations. RG 174.13 In addition to the preparation of financial reports, external administrators of companies must prepare and lodge with ASIC a range of other documents. These include notices of appointment, notices relating to meetings of creditors, returns in relation to the external administration of the company, and notices and other information required by order or direction of a court: see Regulatory Guide 16 External administrators: Reporting and lodging (RG 16) for a list of these reporting requirements and to find out which of these reports are publicly accessible. RG 174.14 Registered schemes that are being wound up must also continue to comply with their financial reporting and compliance plan audit obligations (see s601HG), and prepare final audited accounts in accordance with the scheme constitution before finalising the winding-up and deregistration. Note: Under the Corporations Act, a registered scheme’s responsible entity is responsible for the performance of the scheme’s financial reporting obligations, and the directors and officers of the responsible entity are taken to be the directors and officers of the scheme. Our approach to relief RG 174.15 We generally grant relief from the financial reporting obligations for externally administered companies and registered schemes that are being wound up if we are satisfied that the benefit of the report is outweighed by the burden of preparing the report. We take into account the impact of those benefits and burdens on members, creditors and external administrators. RG 174.16 We recognise that the information needs of users of a company or registered scheme’s financial information need to be balanced with the costs associated with preparing annual or half-year financial reports, particularly in the Page 10 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 10 context of companies or registered schemes whose continued operation is in doubt because of financial strain. RG 174.17 As described in Sections B and C of this guide, ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251 grants: (a) exemption from Pt 2M.3 to companies in liquidation and insolvent registered schemes that are being wound up; and (b) deferral of any financial reporting obligations under Pt 2M.3 to companies under external administration (not in liquidation) that: (i) are outstanding at the time of the appointment of a relevant external administrator; and (ii) arise during the period of deferral after a relevant external administrator is appointed (deferral relief). RG 174.18 The deferral relief is granted for a minimum period of six months and up to a maximum period of 24 months from the date of appointment of the relevant external administrator, subject to early cessation events applying after the initial six-month period. RG 174.19 We may also grant individual relief to defer the time for compliance with some or all of the financial reporting obligations for externally administered companies (that are not in liquidation) and certain registered schemes being wound up (individual deferral relief): see RG 174.24–RG 174.25. RG 174.20 Most disclosing entities are either companies or registered schemes. However, we consider that the policy settings in this guide also apply to a request for financial reporting relief made by a disclosing entity that is not a company or a registered scheme. RG 174.21 Before granting deferral relief or individual deferral relief, we must be satisfied that complying with the financial reporting obligation by the statutory deadline will impose unreasonable burdens: see s342(1). RG 174.22 Section B of this guide describes the circumstances in which we may be satisfied that this test will be met for externally administered companies. Section C describes our relief for registered schemes being wound up. Our approach differs between the two because the Corporations Act does not include a framework for external administration in the case of registered schemes, as it does for companies. Page 11 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 11 Financial reporting relief under ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251 RG 174.23 Table 2 summarises the financial reporting relief available under ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251. Table 2: Exemption and deferral of financial reporting obligations under ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251 Type of external administration Type of relief Conditions of relief Reference Applies to companies in liquidation, including companies concurrently in liquidation and controllership, but excluding companies:  under voluntary administration;  under a DOCA; and  that are AFS licensees. Exemption from Pt 2M.3 and any continuing obligations under Pt 2M.3. Exemption from AFS licensee financial reporting obligations under Subdiv C of Div 6 of Pt 7.8 when a company ceases to hold an AFS licence before the due date for reporting. Companies must have adequate arrangements in place to answer any reasonable questions asked by a member about the liquidation. RG 174.32– RG 174.39 Applies to registered schemes that are being wound up if:  ASIC has been formally notified of the commencement of the winding-up of the scheme; and  the scheme was insolvent for at least 12 months and a scheme insolvency resolution has been lodged with ASIC. Exemption from Pt 2M.3 and any continuing obligations under Pt 2M.3. Exemption from compliance plan audit obligation. The responsible entity or person appointed by the court to wind up the scheme must:  have adequate arrangements in place to answer any reasonable questions asked by a member about the winding-up; and  make certain information on the winding-up available to members. Note: See s601NFA, as notionally inserted by ASIC Corporations (Externally- Administered Bodies) Instrument 2015/251. RG 174.119– RG 174.132 Applies to certain companies:  under voluntary administration;  under a DOCA;  when a managing controller has been appointed to the whole or substantially the whole of the company’s property; or  in provisional liquidation. Deferral of: • financial reporting obligations under Pt 2M.3 and any continuing obligations under Pt 2M.3 for a minimum period of six months and up to a maximum period of 24 months from the date of the appointment of the relevant external administrator; and • if the company is an AFS licensee—AFS licensee financial reporting obligations under Subdiv C of Div 6 of Pt 7.8 for a period of six months. During the deferral period, companies must:  if listed, give notice to the relevant market operator(s);  give notice on a website maintained by the company and a website maintained by the external administrator; and  have adequate arrangements in place to answer any reasonable questions asked by a member about the external administration. RG 174.40– RG 174.70 Page 12 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 12 Type of external administration Type of relief Conditions of relief Reference If the company ceases to be under external administration before the end of the initial six- month period—the deferral period commences on the day of the first relevant external administrator’s appointment and ends on the day that is six months after the appointment of the relevant external administrator. If the company continues to be under external administration after the initial six-month period—the deferral period commences on the day of the relevant external administrator’s appointment and ends on the earlier of the following:  24 months after the day of the relevant external administrator’s appointment;  if a deed administrator is appointed following the appointment of the relevant external administrator, the day on which a director of the company has the right to, or is able to, perform or exercise all or most of the management powers or functions of a director of the company under the DOCA or with the consent of the deed administrator; or  the day on which the company exits external administration. Relief to use alternative methods to distribute an annual report to members before the end of the deferral period. By the end of the deferral period, companies must:  report to members;  send reports to members on request; and  lodge reports with ASIC. If alternative distribution methods are used for annual reports, notice must be given on the company’s and the external administrator’s website that the annual report has been lodged and is available free of charge. Individual deferral relief RG 174.24 We may grant individual deferral relief from some or all of the financial reporting obligations if an application for relief is made. Whether we grant individual deferral relief and the conditions that we impose will depend on the circumstances of the externally administered company (not in liquidation) or registered scheme being wound up. Note: Individual deferral relief is unlikely to be relevant to companies that have a liquidator appointed because those companies are exempt under ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251. Page 13 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 13 RG 174.25 Table 3 summarises the individual deferral relief that may be available. Table 3: Individual deferral relief that may be available Type of external administration Details of relief Conditions of relief Reference Applies to companies:  under voluntary administration;  under a DOCA;  when a managing controller has been appointed to the whole or substantially the whole of the company’s property; or  in provisional liquidation. Deferral of:  some or all financial reporting obligations under Pt 2M.3 for a period of up to 24 months; and  if the company is an AFS licensee—AFS licensee financial reporting obligations under Subdiv C of Div 6 of Pt 7.8 for a period of up to 24 months. Depends on the company’s circumstances. Usual conditions require:  if listed, notice to be given to the relevant market operator(s);  notification on a website maintained by the company and a website maintained by the external administrator; and  adequate arrangements in place to answer any reasonable questions asked by a member about the external administration. Additional conditions may be imposed. RG 174.71– RG 174.88, RG 174.89– RG 174.91 and RG 174.107 Applies to registered schemes if:  ASIC has been formally notified of the commencement of the winding-up of the scheme; and  in the reasonable opinion of the responsible entity or person appointed by the court, the scheme is likely to be insolvent. Deferral of:  some or all financial reporting obligations for a period of up to 24 months; and  the compliance plan audit obligation for a period of up to 24 months. Depends on the registered scheme’s circumstances. Usual conditions require:  if listed, notice to be given to the relevant market operator(s);  notification on a website maintained by the responsible entity or person appointed by the court responsible for winding up the scheme;  adequate arrangements in place to answer any reasonable questions asked by a member about the winding-up; and  making certain information about the winding-up available to members. RG 174.133– RG 174.141 and RG 174.148– RG 174.162 Page 14 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 14 Type of external administration Details of relief Conditions of relief Reference Applies to registered schemes when the responsible entity is under external administration and where the appointment of the external administrator has significantly disrupted the management and financial routine of the registered scheme and created practical difficulties for the scheme to comply with the financial reporting obligations. Deferral of:  some or all financial reporting obligations for a period of up to 24 months; and  the compliance plan audit obligation for a period of up to 24 months. Depends on the registered scheme’s circumstances. Usual conditions require:  notice to be given to the market operator(s);  notification on a website maintained by the responsible entity and a website maintained by the external administrator;  adequate arrangements in place to answer any reasonable questions asked by a member about the external administration; and  making certain information about the winding-up available to members. RG 174.142– RG 174.147 Note: See RG 174.85 for details of our individual deferral relief if a controller who is not a managing controller is appointed to particular property of a company. AGM relief for public companies AGM exemption relief RG 174.26 ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251 exempts companies in liquidation from holding an AGM. Liquidation generally signals the end of the life of a company through the orderly winding-up of its business, realisation of its assets and the distribution of proceeds to members and creditors—making the convening of an AGM an unnecessary expense. Note: A liquidator must lodge with ASIC minutes of all meetings of members and creditors, committee of inspection meetings, and a return in relation to the external administration of the company that includes detailed lists of receipts and payments: see s70-5 of Sch 2 to the Corporations Act and Form 5602 Annual administration return. A copy of these can be obtained online at ASIC Connect, on payment of the relevant fee. AGM deferral relief RG 174.27 ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251 also conditionally defers the time by which a public company in external administration (not in liquidation) must hold an AGM until two months after the deferral relief ends. Individual AGM relief RG 174.28 We may also consider individual relief on a case-by-case basis to exempt a public company from the obligation to hold an AGM if an external Page 15 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 15 administrator is appointed, or extend the period in which the externally administered public company must hold an AGM. Whether we will grant individual relief will depend on the individual circumstances of the public company under external administration (not in liquidation). RG 174.29 We will generally provide individual AGM relief to align with our deferral relief or individual deferral relief. If we have provided deferral relief, or individual deferral relief from all financial reporting obligations and AGM deferral relief is not otherwise available, we will generally provide an extension of time in which to convene the AGM under s250P where possible. This is because the consideration of financial reports is one of the primary functions of the AGM. RG 174.30 Section D describes the relief available under ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251 and the individual relief we provide in relation to AGMs. Obligation to keep financial records RG 174.31 We do not give relief from the obligation for companies, registered schemes, disclosing entities and AFS licensees to keep financial records. An externally administered company or the responsible entity of a registered scheme being wound up must still keep written financial records that: (a) correctly record and explain the company or registered scheme’s transactions, financial position and performance; and (b) would enable the preparation and audit of true and fair financial statements, if required (see s286). Note 1: Similar obligations apply to AFS licensees: see s988A. Note 2: References in this guide to financial reporting obligations do not include the record-keeping obligations of companies and AFS licensees, or AFS licensee financial reporting obligations. Page 16 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 16 B Financial reporting relief for externally administered companies Key points ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251 exempts companies in liquidation from Pt 2M.3, provided that those companies are not AFS licensees. It also grants a deferral of financial reporting obligations falling due within 24 months from the appointment of a relevant external administrator, and any continuing financial reporting obligations outstanding before the appointment of the relevant external administrator. The relief extends the due date for the obligation by a minimum period of six months and up to a maximum period of 24 months, with early cessation events applying after the initial six-month period. This relief also applies to AFS licensee financial reporting obligations, but for a period of six months (licensee deferral relief). We may also grant individual deferral relief to externally administered companies in other situations. Exemption relief for companies in liquidation RG 174.32 ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251 provides an exemption from Pt 2M.3 to companies in liquidation, provided that those companies are not AFS licensees. Our relief is based on the view that complying with Pt 2M.3 in circumstances of liquidation would make the financial reports misleading, would be inappropriate in the circumstances and would impose an unreasonable burden: see s342(1). RG 174.33 Creditors and members have access to information that must be prepared and lodged with ASIC by the liquidator under Ch 5 and Sch 2 to the Corporations Act. This information is useful to creditors and members because it helps them to evaluate and make decisions about the allocation of their resources while the company is being wound up by the liquidator, including: (a) whether the company’s debts will be paid in full, in part, or not at all; and (b) whether there will be any surplus funds available for distribution to members on completion of the winding-up. AFS licensees RG 174.34 AFS licensees in liquidation may only rely on our exemption relief if they have cancelled and do not hold an AFS licence as at the date that they would Page 17 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 17 otherwise be required to lodge the relevant report with ASIC. Externally administered companies that hold an AFS licence are excluded from our relief because AFS licensees are subject to minimum financial requirements at all times. RG 174.35 The obligations for an AFS licensee to have available adequate financial resources to provide the financial services covered by the AFS licence and to carry out supervisory arrangements (see s912A(1)(d)) continue to apply so long as the AFS licence is held by the licensee. For this reason, we consider it would be inconsistent to grant an exemption from Pt 2M.3 and the AFS licence reporting obligations while the body corporate holds an AFS licence. Note: For more information on the financial requirements that apply to AFS licensees, see Regulatory Guide 166 Licensing: Financial requirements (RG 166). RG 174.36 When there are no prospects for a company in liquidation that is an AFS licensee to continue carrying on business, the company should apply for the cancellation of its AFS licence under s915B. Note: ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251 will not apply if the company’s AFS licence has been cancelled but the company is subject to a specification under s915H that requires ongoing compliance with the AFS licensee financial reporting obligations. If the company’s AFS licence has been cancelled and it is not subject to a specification under s915H that requires ongoing compliance with the AFS licensee financial reporting obligations, the company may rely on our exemption relief. Outstanding financial reporting obligations before liquidation RG 174.37 Our exemption relief for companies that have a liquidator appointed also applies to any outstanding financial reporting obligations from previous years. If the company was also an AFS licensee whose licence has been cancelled, then our exemption relief will also apply to any outstanding AFS licensee financial reporting obligations. Note: A company that must do an act under Pt 2M.3, within a particular period or before a particular time, continues to be subject to an obligation to do the act even after the period has ended or that time has passed: see s1314. Concurrent external administrations RG 174.38 When a liquidator and controller are appointed to a company concurrently, the exemption will still be available because the appointment of a controller will not interfere with the winding-up process in the same way as the appointment of a voluntary administrator or deed administrator. RG 174.39 The exemption is not available if a voluntary administrator has also been appointed, or if the company is subject to a DOCA. This is because the winding-up is suspended if a voluntary administrator is appointed by the liquidator, or while a company is subject to a DOCA: see Mercy & Sons Pty Ltd v Wanari Pty Ltd (2000) 35 ACSR 70 and Re Nardell Coal Corporation Page 18 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 18 Pty Ltd [2004] NSWSC 281. The appointment of a controller to the property of the company does not suspend a winding-up. Deferral relief for externally administered companies not in liquidation RG 174.40 ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251 conditionally defers any financial reporting obligations under Pt 2M.3 for companies under external administration (not in liquidation) that: (a) are outstanding at the time of the appointment of a relevant external administrator; and (b) arise during the period of deferral after a relevant external administrator is appointed. RG 174.41 The deferral relief is granted for a minimum period of six months and up to a maximum period of 24 months from the date of appointment of the relevant external administrator. The relief extends the due date for the obligations for a minimum period of six months to allow the relevant external administrator time to attend to the most urgent post-appointment matters and become familiar with the affairs of the company. RG 174.42 After the initial six-month deferral period, the early cessation events will apply to bring about an early end to the deferral relief when: (a) the company is no longer under external administration; or (b) the deed administrator is no longer exercising all or most of the management powers and functions of the company under a DOCA. RG 174.43 We consider a deferral period of up to 24 months, with a minimum six- month deferral period, provides a balance between the interests of users of the financial reports and the burden imposed by compliance with the reporting obligations. RG 174.44 Compliance with the financial reporting obligations during the deferral period will generally impose unreasonable burdens. The burdens arise from a combination of time, financial and human resource constraints imposed on the company and the relevant external administrator in these forms of external administration: (a) Time constraints: Under the Corporations Act, an external administrator must complete a number of tasks within a short timeframe. For example, a voluntary administrator must convene and hold two creditors’ meetings and investigate the company’s business, property, affairs and financial circumstances: see s436E, 438A and 439A. It may be difficult for a voluntary administrator to complete these tasks, and prepare or obtain the financial and other reports required under Pt 2M.3. Page 19 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 19 (b) Financial constraints: Compliance with the financial reporting obligations may deplete the already limited financial resources of a company under external administration. (c) Human resource constraints: In light of the company’s time and financial constraints, the external administrator may have limited human resources available despite the external administrator’s reasonable efforts. RG 174.45 We consider the burdens to be disproportionate to the value that the company’s financial report (and other reports) may have for relevant users during this period. A deferral of the financial reporting obligations for these companies reduces the severity of the burdens during this period, and preserves the company’s limited assets for the benefit of all parties while its prospects are being determined. RG 174.46 We consider 24 months to be a reasonable period of time for an external administration (not in liquidation) to progress. A deferral period of up to 24 months gives the relevant external administrator time to: (a) investigate the affairs of the company and report back to creditors; (b) progress the administration of the company; and (c) cause the Pt 2M.3 reports to be prepared, audited, lodged and (for annual reports) distributed—or apply for individual deferral relief depending on the company’s circumstances—before the end of the deferral period. Early cessation events RG 174.47 Under our deferral relief, early cessation events will only apply after the minimum six-month deferral period. Our deferral relief will expire after the initial six-month deferral period either: (a) at the end of 24 months from the date of the appointment of the relevant external administrator; or (b) earlier than 24 months if either of the following early cessation events occur: (i) the external administration comes to an end; or (ii) the company is subject to a DOCA and the directors exercise all or most of the management powers and functions of the company under the DOCA or with the consent of the deed administrator. RG 174.48 When an early cessation event occurs, the deferral period under our relief expires and any outstanding or deferred financial reports must be lodged on or before this time. Page 20 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 20 Example 1 A public company (not a disclosing entity) with a balance date of 30 June (of each year) must lodge its annual report by 31 October (of each year): see s319. If a voluntary administrator is appointed to the company on 1 October 2021, our deferral relief would apply in relation to the 30 June 2021 and 30 June 2022 annual reports because the obligation to lodge these annual reports would otherwise fall due during the deferral period. Our deferral relief would not apply to the 30 June 2023 annual report because the due date for lodging that annual report is 31 October 2023, which is outside the 24-month period. If the company exits voluntary administration on 25 October 2022, then it will trigger an early cessation event and our deferral relief will end. This means our deferral relief would apply to the company’s annual report for 30 June 2021, but not the annual report for 30 June 2022. Consequently, the company will need to lodge its annual report for 30 June 2021 on or before 25 October 2022. Example 2 A large proprietary company with a balance date of 31 December (of each year) must lodge its annual report by 30 April (of each year): see s319. If a voluntary administrator is appointed to the company on 1 October 2021 and the company continues to be under external administration on 1 October 2023, the due date for lodgement and reporting of all outstanding and deferred financial reports to members will be deferred to 24 months after the appointment of the voluntary administrator (i.e. 1 October 2023). The company may apply for individual deferral relief, which must be granted before the end of the 24-month deferral period—otherwise, the company will be in breach of its financial reporting obligations. Example 3 A listed public company (disclosing entity) with a half-year balance date of 31 December (of each year) must lodge its half-year report by 16 March (of each year): see s320. If a voluntary administrator is appointed to the company on 1 January 2022, the due date for lodging any outstanding or deferred half-year report will be deferred until the earlier of 1 January 2024 or the day an early cessation event occurs (i.e. the company exits external administration or the company is subject to a DOCA and the directors exercise all or most of the powers and functions of management of the company under the DOCA, or with the consent of the deed administrator, before 1 January 2024). If an early cessation event occurs within six months of the appointment of the voluntary administrator, the company will still have six months from the date of appointment of the voluntary administrator to lodge any outstanding or deferred half-year report (i.e. until 1 July 2022). Page 21 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 21 Example 4 A listed public company (disclosing entity) with a balance date of 30 June (of each year) must lodge its annual report by 30 September (of each year): see s319. If a voluntary administrator is appointed to the company on 30 September 2021, the due date for lodging the annual report and reporting to members will be deferred until 30 September 2023, or earlier if an early cessation event occurs on or after 1 April 2022. In addition, the date for lodging the 31 December 2021 half-year report will be deferred to 30 September 2023, or earlier if an early cessation event occurs on or after 1 April 2022. AFS licensees RG 174.49 We also provide licensee deferral relief for AFS licensee financial reporting obligations, but for a period of up to six months. Financial statements lodged in compliance with these obligations are not public documents. We consider the burden imposed by this requirement is likely to be disproportionate to the value the reports may have for ASIC during the relevant period. A deferral of the AFS licensee financial reporting obligations may reduce the severity of the burden during this period, and preserve the company’s limited assets for the benefit of all parties while its prospects are being determined. Note: If a specification given under s915H to an AFS licensee whose licence has been cancelled or suspended is inconsistent with the relief given by ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251, the specification will prevail and the relief will, to the extent of the inconsistency, not apply—for example, if the AFS licensee is subject to a specification under s915H requiring ongoing compliance with the AFS licensee financial reporting obligations, or if we have extended the time for lodgement under s989D(3). In addition, we can seek out information using our powers if we need specific information on the financial position of the AFS licensee. Outstanding financial reporting obligations before appointment of relevant external administrator RG 174.50 Our deferral relief also applies to an annual or half-year report that should have been lodged by the company before the relevant external administrator was appointed (i.e. any continuing obligations in respect of outstanding financial reporting obligations under Pt 2M.3). If the company was also an AFS licensee, then our licensee deferral relief will also apply to any outstanding AFS licensee financial reporting obligations under Subdiv C of Div 6 of Pt 7.8. Concurrent external administrations RG 174.51 If a company that is relying on our deferral relief and/or licensee deferral relief becomes subject to a second (either concurrent or immediately consecutive) external administration (that is not a winding-up), the period of deferral is determined by the date of the appointment of the first relevant external Page 22 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 22 administrator. While we acknowledge that each new external administration may create its own burdens, on balance, we consider that a subsequent appointment does not, in itself, warrant a longer deferral period under the legislative instrument. RG 174.52 If a voluntary administrator is appointed under s436B by a liquidator, the company may technically be under voluntary administration and in (suspended) liquidation concurrently, if the liquidation has not been formally terminated. For the purposes of ASIC Corporations (Externally- Administered Bodies) Instrument 2015/251, the company is taken to be solely under voluntary administration and can therefore rely on our deferral relief or licensee deferral relief from the date of appointment of the voluntary administrator by the liquidator. RG 174.53 The appointment of a voluntary administrator by a liquidator will not affect any previously exempt financial reporting obligations. However, the company will no longer be able to rely on our exemption relief for companies in liquidation in relation to any subsequent financial reporting obligations (i.e. after the appointment of the voluntary administrator). Example 5 A listed public company (disclosing entity) with a balance date of 30 June (of each year) must lodge its annual report by 30 September (of each year): see s319. If a liquidator is appointed on 1 August 2022 and the liquidator appoints a voluntary administrator to the company on 30 September 2022 and the company then enters into a DOCA on 1 November 2022, the due date for lodging the annual report, reporting to members under s315 and for lodging the half-year report will still be deferred until 30 September 2024. Deeds of company arrangement RG 174.54 Entering into a DOCA will not trigger our deferral relief or licensee deferral relief a second time. DOCAs are not an initial form of external administration and the deed administrator is usually the same person as the preceding voluntary administrator: see s444A(2). The initial burden created by time constraints, and financial and human resource constraints, is therefore less severe. RG 174.55 However, a company subject to a DOCA may still rely on our deferral relief and/or licensee deferral relief that applied from the date of appointment of the relevant external administrator until the end of the deferral period. A company may then apply for individual deferral relief if it considers that compliance with the financial reporting obligations would impose unreasonable burdens in its particular circumstances: see RG 174.82–RG 174.84. Page 23 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 23 Example 6 A listed public company (disclosing entity) with a balance date of 30 June (of each year) must lodge its annual report by 30 September (of each year). If a voluntary administrator is appointed to the company on 30 September 2021, the due date for lodging the annual report and reporting to members under s315, and for lodging the half-year report, will be deferred until 30 September 2023 under ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251. The company enters into a DOCA on 1 February 2022. Under the DOCA, the deed administrator exercises all of the management powers and functions of the company and directors. The deed administrator has until 30 September 2023 to apply for and obtain further individual deferral relief or lodge the annual report. The fact that the company has entered into a DOCA does not extend the 24-month deferral period. Direction to prepare a financial report RG 174.56 Our deferral relief for companies applies to public companies, large companies limited by guarantee, large proprietary companies, foreign- controlled proprietary companies that must prepare financial reports and small proprietary companies with one or more CSF shareholders at any time during the financial year. It does not apply if ASIC has given the company a direction to lodge a financial report: see s321. It also does not apply to small proprietary companies or small companies limited by guarantee that have been directed by its members or ASIC to prepare a financial report. Alternative distribution methods for annual reports RG 174.57 Our deferral relief allows a company to use alternative methods of distributing a deferred annual report to members, instead of sending it to them. The company, whether it is listed or unlisted, must arrange for a notice to be published in: (a) a prominent place on the company’s website; and (b) a place that is readily accessible on a website maintained by the external administrator. RG 174.58 The notice must contain statements to the following effect: (a) the reports for the relevant financial year of the company have been lodged with ASIC; (b) the company will send copies of the reports to a member of the company free of charge if the member asks for the reports in writing; and (c) the reports are available for download on the relevant website together with a hyperlink to the reports. Page 24 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 24 RG 174.59 The costs involved in physically sending information to members imposes a burden on the company, and the greater the number of members, the greater the burden may be. When a company is externally administered, the cost of sending the annual report may be borne by the creditors, even if that information is not being sent to the creditors. RG 174.60 We have taken the view that, in the case of externally administered companies covered by ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251, the burden imposed by a requirement to send the deferred annual report to each member is unreasonable, and that relief from the distribution requirements prescribed by s314(1) is therefore appropriate. In addition, we think that many members are now accustomed to companies making their annual report available on a website or providing the option to receive electronic copies: see s314(1AA). RG 174.61 Our relief in relation to alternative distribution methods allows annual reports to be provided free of charge on request, and to be made available for download from a website. Conditions of deferral relief RG 174.62 The deferral relief under ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251 is subject to a number of conditions. Notifying the market operator RG 174.63 A listed company relying on our deferral relief will need to notify the relevant market operator. Failure to notify the relevant market operator at the start of the deferral period, before the company is obliged to comply with its financial reporting obligations under Pt 2M.3, will result in the company losing the benefit of our deferral relief. Website notifications RG 174.64 A company, whether it is listed or unlisted, must: (a) give prominent notice of its reliance on ASIC Corporations (Externally- Administered Bodies) Instrument 2015/251 on a website maintained by the company (if any); and (b) arrange for notice of the deferral on a website maintained by the external administrator (if any) in a way that is readily accessible. RG 174.65 These notifications are a condition of relief, and failure to do so at the start of the deferral period, before the company would otherwise be obliged to comply with its financial reporting obligations under Pt 2M.3, will result in the company losing the benefit of our deferral relief. Page 25 REGULATORY GUIDE 174: Relief for externally administered companies and registered schemes being wound up © Australian Securities and Investments Commission October 2021 Page 25 Information for members RG 174.66 Our deferral relief is only available if, during the period of the deferral, the company has adequate arrangements in place to answer, within a reasonable period of time and without charge, any reasonable questions asked by a member of the company about the external administration. Failure to comply with this condition will mean that the relief will not be available and will cease to operate on and from the time the condition has not been complied with. RG 174.67 Notice of the appointment of a relevant external administrator must be lodged with ASIC. Members and creditors can find out who to contact for information about the company using these notices. Exclusion power RG 174.68 To ensure that our deferral relief does not give rise to unintended consequences, ASIC has the power under ASIC Corporations (Externally- Administered Bodies) Instrument 2015/251 to exclude an externally administered company from relying on our deferral rel