ASIC announced yesterday an additional suite of temporary measures to assist entities with their financial reporting obligations and has amended its ‘no action’ position in respect of Annual General Meetings (AGM). The relief measures are two-fold:
- ASIC will extend the financial reporting deadlines for both listed and unlisted entities to lodge financial reports by one month for certain financial year ends up to and including 7 July 2020 given reporting processes are taking additional time due to current remote work arrangements, travel restrictions and other impacts of COVID-19.
- ASIC has extended its ‘no-action’ position in relation to AGMs so that public companies with financial year ends that fall between 31 December 2019 and 7 July 2020 will have up to seven months (rather than five months) after their respective financial year ends to hold their AGM.
We have summarised these new developments in further detail below.
ASIC extends financial reporting deadlines
ASIC will extend the deadline for both listed and unlisted entities to lodge financial reports under Chapters 2M and 7 of the Corporations Act by one month for certain financial year ends up to and including 7 July 2020. This builds on earlier relief ASIC announced for unlisted entities with financial year ends that fall between 31 December 2019 and 31 March 2020. The legislative instrument extending the financial reporting deadlines will be issued by the end of next week.
Entities can only take advantage of the extended deadlines where the normal reporting deadline has not already passed at the time the legislative instrument is registered. Where possible, entities should continue to lodge their financial reports within the normal statutory deadlines, considering the information needs of stakeholders and the entity’s borrowing covenants or other obligations.
Under ASIC’s additional relief measures:
- Unlisted entities will have an additional month to lodge financial reports for financial year ends from 31 December 2019 to 7 July 2020; and
- Listed entities will have an additional month to report for full year and half-year financial reports for financial year ends that fall in the period between 21 February 2020 and 7 July 2020. Listed entities will have to inform the market when they rely on the extended period for lodgement and ASIC has noted that it may also be desirable for them to explain the reasons for relying on the extended deadlines.
Despite these new measures, ASX listed entities will still need to lodge their Appendix 4E preliminary financial reports under ASX Listing Rules 4.3A and 4.3B by the due date (eg. 31 August 2020 for 30 June 2020 year ends). If the entity does not have audited accounts by that date, it will need to lodge unaudited accounts with its Appendix 4E.
ASIC has also flagged that certain consequential relief will be available (where applicable) for entities which take advantage of the extended deadlines. This includes (amongst other things) similar extended deadlines for sending reports to members.
ASIC extends its ‘No action’ position in relation to AGMs
ASIC adopted a ‘no-action’ position for entities with a financial year end of 31 December 2019 that are required to hold their AGM by 31 May 2020, as we previously discussed here. This meant that ASIC would not take action against such entities for failing to comply with their obligations under s 250N(2) of the Corporations Act provided the entity holds their AGM by 31 July 2020.
In light of the social distancing measures and travel restrictions that continue to remain in place, ASIC has extended its ‘no action’ position to apply to public companies with financial year ends that fall between 31 December 2019 and 7 July 2020. Accordingly, these public companies will have up to seven months (rather than five months) after their respective financial year ends to hold an AGM. For public companies with 1 June 2020 to 7 July 2020 financial year ends, this also means that ASIC will not take any legal action where holding their AGM in January or February 2021 results in a failure to comply with the requirement to hold an AGM in the 2020 calendar year. However, ASIC recommends that public companies that choose to delay their AGM should refrain from holding their AGMs in the peak holiday period in late December 2020 and early January 2021. It should also be emphasised that ASIC’s ‘no action’ stance does not preclude third parties from taking legal action.
For companies that have also relied on ASIC’s extension of time for the lodgement of financial reports, ASIC’s ‘no-action’ position will allow for additional time to distribute financial reports to members prior to the AGM.
Virtual Meeting Determination ends on 6 November 2020 unless extended
Entities which seek to rely on the amendment to ASIC’s ‘no action’ position and choose to hold their AGM after 6 November 2020 will not be able to rely on the virtual meeting changes introduced on 5 May 2020 (see our article here) unless those temporary changes are extended by the Treasurer. As ASIC’s ‘no-action’ position and guidance does not have legislative force, entities whose constitutions do not permit virtual AGMs may be exposed to third party legal action if they hold a virtual meeting after 6 November 2020.