Deeds of cross-guarantee

This information sheet (INFO 24) answers the most frequently asked questions and lists some of the common problems relating to deeds of cross-guarantee (deeds). Such deeds must be lodged with ASIC before a wholly-owned company will be eligible for relief under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.

The applicant is responsible for lodging the deed and supporting documentation before the end of the financial year in which they wish to first use the relief provided by the instrument. We do not approve the deed.

What must be lodged?

The applicant must lodge:

  • the deed (using wording from Pro forma 24 Deed of cross guarantee (PF24));
  • a certificate setting out prescribed statements about the deed, given by a certified practising lawyer.

The deed and certificate must be lodged before the end of the first financial year (first reliance year) in respect of which the company seeks to take advantage of relief under the instrument.

Is a Form 911 required?

A Form 911 Verification or certification of a document is not required. However, the deed and supporting documentation should be accompanied by ASIC Coversheet Form CF06 Deeds of cross guarantee and related documents - ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 or a covering letter.

What if the deed is to remain in a particular state or territory?

If, for stamp duty reasons, the applicant requires that the deed remain in a state or territory other than that in which the companies seeking relief have their registered offices, this should be clearly stated in the covering letter. A certified copy of the deed should also be submitted. This will be sent to ASIC’s Traralgon Office so that the public records can be updated.

Is an alternative trustee required?

An alternative trustee is only required if a group entity has been appointed as the trustee. In most cases, the alternative trustee will be another group entity. If the trustee is a company outside the group, an alternative trustee is not required.

What if the deed is executed under a power of attorney?

If the deed has been signed under a power of attorney, a certified copy of the instrument(s) appointing the attorney must be submitted.

Must all wholly-owned entities be included in the deed?

All entities within the closed group must be included in the deed. However, if a stand–alone wholly-owned company does not require relief, it need not be included. For example, in the diagram below, if company D seeks relief, companies A, B, C and E must be included in the deed. Company F need not be included in the deed if it does not need relief. If companies B, C and E need relief, only companies A, B, C and E need be party to the deed. 

Deeds Of Cross Guarantee

All the companies seeking relief must be included, along with any entity that holds shares, either directly or indirectly, in those entities seeking relief.

Wholly-owned entities not eligible for relief, nevertheless, may and often must be members of the closed group and parties to the deed. For instance, if company F in the diagram above was a small proprietary company, but anticipated becoming a large proprietary company, it might be convenient for it to be a party to the deed with companies A, B and C.

Common problems we have identified

Common problems with deeds that we have identified include:

Completion of Part 1 of the Schedule

Part 1 of the Schedule to the deed should be completed with the following information as at the date of execution of the deed:

  • only the name and ACN or ARBN for the holding entity of the closed group should be inserted under item (1) of Part 1
  • only the names and ACNs of those group companies (not including the holding entity) who are members of the closed group and that are eligible to obtain the benefit of the relief under the instrument should be inserted under item (2) of Part 1
  • all entities that are parties to the deed and that are not listed in either item (1) or (2) of Part 1 of the Schedule should be listed under item (3). Details of entities that are wholly-owned entities of the holding entity of the closed group but that are not party to the deed should not be inserted under this clause or any item in Part 1 of the Schedule.

Part 1 of the Schedule has no effect on the future eligibility for relief under the instrument of a company noted under item (3) of Part 1. For instance, a small proprietary company on the verge of being a large proprietary company that is a party to the deed and listed under item (3) of Part 1 may still claim relief if at a later date the small proprietary company does in fact become a large proprietary company.

The deed contains typographical errors or incorrect ACNs or ARBNs

Minor amendments to deeds (e.g. correcting minor typographical errors) will only be accepted if they are initialed by every signatory to the deed. If a more serious deficiency is detected (e.g. a member of the closed group has been omitted), the deed will not be accepted and a new deed (i.e. a fresh lodgement) will be required.

Deed incorrectly executed

A deed must be signed by two directors or at least one director and the company secretary of each entity named in the Schedule to the deed, including the trustee and, if applicable, the alternative trustee. 

Alternative trustee has not been appointed and is required to be

An alternative trustee must be appointed if a group entity has been appointed as the trustee. In most cases, the alternative trustee will be another group entity. If the trustee is a company outside the group, an alternative trustee is not required.

Companies under external administration

Companies that are under external administration and any entities owned by such companies are not eligible for relief.

Opt-in notice not lodged

A number of closed groups have mistakenly assumed that, after a deed has been successfully lodged with us, companies that are parties to the deed are automatically entitled to relief from lodging financial reports. However, each company that wishes to take advantage of relief under the instrument must also lodge an opt-in notice (Form 389 Opt–in/change of holding entity notice by wholly-owned company relieved from financial reporting obligations) with ASIC within four months after the end of the first financial year for which relief is required.

No extension of time is available to lodge Form 389 with ASIC. Failure to lodge this form within the required lodging period will mean the company has not met the conditions of ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 and should therefore prepare, have audited and lodge financial statements and reports for the relevant financial year.

Companies which fail to lodge a Form 389 on time for the first financial year in which they seek to rely on the relief, and therefore cannot rely on the relief, will have a continuing obligation to prepare and lodge a financial report for that financial year. Although ASIC may not take action to require such companies to lodge the outstanding financial report, we will be very unlikely to grant individual relief to remove the continuing obligation to lodge the report. We will also be unlikely to grant a formal no-action letter where the report has not been lodged.

The opt-in notice need only be lodged once and, assuming the conditions of the instrument continue to be met, the relief will continue until either an opt-out notice (Form 399 Opt–out notice by wholly-owned company relieved from financial reporting obligations) or financial reports are lodged with us: see section 7 of ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.

Change of holding entity

Where a company has previously taken advantage of the relief (i.e opted-in) and the company’s holding entity subsequently changes and the company wishes to continue to take advantage of the relief, the company must lodge a Form 389 Opt–in/change of holding entity notice by wholly-owned company relieved from financial reporting obligations. Please note that Form 389 does not change the holding entity. A new deed of cross guarantee must be entered into between the new holding entity and the company seeking to take advantage of the relief. An existing deed of cross guarantee cannot be varied to change the holding entity. This is because paragraph 6(1)(q) of ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 only allows certain types of variations.

Electronic lodgement of deeds and other documents

Permanent measures enabling companies to use technology to meet regulatory requirements under the Corporations Act about distributing meeting related materials and executing documents took effect from 23 February 2022 under the Corporations Act.

The permanent measures have been made to make the laws relating to the execution of company documents technology neutral and allow companies to execute company documents electronically. The permanent measures relating to the electronic execution of company documents are facilitative in nature. A company may continue to execute documents in the traditional manner by the person signing a physical form of the document by hand or by signing an electronic form of the document using electronic means. The permanent measures also permit a combination of different methods to be used to execute a company document. For example, a company may execute a document by one director signing a physical form of the document by hand, and another director signing an electronic form of the document by electronic means.

On 6 June 2022, ASIC approved an instrument, ASIC Corporations (Email Lodgement Service—ASIC Corporations (Wholly-owned Companies) Instrument 2016/785) Instrument 2022/444 to facilitate the electronic lodgement of documents for the purposes of relief under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.

Under this ASIC Corporations (Email Lodgement Service—ASIC Corporations (Wholly-owned Companies) Instrument 2016/785) Instrument 2022/444 deeds of cross guarantee, variation deeds, assumption deeds, revocation deeds, notices of disposal, certificates and opt-in and opt-out notices may be lodged by email. Documents being executed by a company itself must be executed in accordance with s127 of the Corporations Act and may be signed either:

  1. by signing a physical form of the document by hand;
  2. by signing an electronic form of the document using electronic means;

in accordance with s110A of the Corporations Act

Deeds in electronic form may be signed using electronic means including, for example, by using a cloud-based signature platform. Documents in electronic form other than deeds may also be signed by electronic means.

To take advantage of ASIC Corporations (Email Lodgement Service—ASIC Corporations (Wholly-owned Companies) Instrument 2016/785) Instrument 2022/444, lodging parties must comply with the terms of the ASIC Email Lodgement Service: User Agreement for ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 (ELS User Agreement) that was re-issued on 6 June 2022.

There is no need to relodge documents in electronic form, including deeds that have been signed in physical form by hand or in electronic form using electronic means and lodged under, or in substantial compliance with, any of the following instruments before 6 June 2022:

Lodging documents

To lodge your documents electronically, email them to: Corporations.Lodgements@asic.gov.au.

When you lodge a document electronically, you must also provide the following:

This is Information Sheet 24 (INFO 24), reissued in February 2010, February 2017, June 2020, March 2021, February 2022 and June 2022. Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.

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Last updated: 10/06/2022 04:16