Disputes about financial reporting by small proprietary companies

It explains:

• who needs to lodge financial reports
• what you may do as a shareholder if you wish a small proprietary company to prepare and circulate financial reports
• ASIC’s position when an allegation is made that a small proprietary company has breached its financial reporting obligations.

Who needs to lodge financial reports

Broadly, there are five categories of entity that the law says must prepare and lodge annual financial reports and directors’ reports with ASIC. These include all public companies, all large proprietary companies, and some foreign-controlled small proprietary companies.

However, the law does not require domestic small proprietary companies to:

• prepare financial reports and circulate them to members at a specified time, or
• lodge annual financial reports and directors’ reports with ASIC.

It is not common for small proprietary companies to prepare and circulate reports to members. However, if members wish to receive this information they can make a direction to the company to provide it.

Directing a small proprietary company to prepare and circulate financial reports

Members of a small proprietary company with at least 5% of the votes can direct the company to prepare and circulate financial reports to all shareholders. The request may specify that the financial report is to be audited.

We recommend you seek legal advice to ensure that any direction you make to a small proprietary company complies with the Corporations Act 2001.

If a company does not comply with a direction to prepare and circulate financial reports

If you have provided a written direction to the small proprietary company to prepare and circulate financial reports to shareholders, but it has failed to do one or both, you may apply to a court for an order that the company comply with the written direction.

You should seek legal advice to find out the process for making an application to a court for an order.

If you are unsure of how to seek legal advice, contact the Law Society in your state or territory.

ASIC and disputes about financial reporting for small proprietary companies

ASIC provides information and uses a wide range of compliance programs to help companies understand and meet their financial reporting requirements.

We do not generally intervene in disputes about the preparation and circulation of financial reports by small proprietary companies, or the content of such reports. This is because these matters relate to the private legal rights of individuals and do not affect the broader public.

Where can I get more information?

• Information Sheet 31 Lodgement of financial reports (INFO 31)
• Information Sheet 24 Deeds of cross guarantee (INFO 24)
• Information Sheet 163 Financial reporting compliance by administrators of insolvent public companies (INFO 163)
• See our website for information about ASIC’s role and the laws we administer.

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.