As many companies are required to lodge annual financial statements this month, we hope this note serves as a timely reminder to ensure that your company is meeting its ongoing obligations under any deed of cross guarantee.
Corporate groups often assume that lodging a deed of cross guarantee (Deed) and an annual consolidated set of financial statements is sufficient to obtain financial reporting relief for each reporting entity in the group.
In reality, there are a number of ongoing obligations that must be complied with in order to maintain eligibility for financial reporting relief. These obligations are set out in ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 (the Instrument) for financial years ending on or after 1 January 2017.
The Instrument repealed the previous ASIC Class Order [CO 98/1418] (the Class Order) for financial years between 1998 and 2016.
Importantly, all of the obligations in the Instrument must be complied with in order to be eligible for financial reporting relief.
The effect of non-compliance is that companies will not be able to rely upon a Deed, and must file their own financial statements.
There are a number of ongoing obligations under the Instrument that must be addressed, including:
The full list of criteria is set out in the Instrument.
The Good News
Fortunately, extensions of time and/or relief from civil liability is available in certain circumstances to companies and their directors and officers who have inadvertently failed to comply with the ongoing obligations under the Instrument, pursuant to section 1322 of the Corporations Act 2001 (Cth).
The NSW Supreme Court discussed the relevant factors that Courts will consider when determining whether to grant an extension of time, or relief from civil liability, in In the matter of Flight Centre Technology Pty Ltd  NSWSC 367. Factors include whether:
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