Accurate and timely financial reporting is not only a best practice, but it is legally enforceable for certain types of Australian companies, who are required by law to lodge financial reports with the Australian Securities and Investments Commission (ASIC) within a specified period after the end of their financial year.
ASIC prosecuted ten companies between 1 January 2021 and 30 June 2021 for failing to comply with their obligations to lodge financial reports.
What types of companies are required to lodge financial reports with ASIC?
Chapter 2M of the Corporations Act 2001 outlines which entities need to lodge financial reports.
Generally, companies need to lodge financial reports when:
- There are large sums of money involved,
- The public has invested in the company, or
- The company exists for charitable purposes only and is not intended to make a profit.
In some cases, “small” companies don’t need to lodge.
Further information is provided by ASIC.
What are the legally enforceable time periods for lodgment of financial reports?
Several Sections of the Corporations Act set out the requirements for preparation and lodgment of financial reports.
Preparation of reports
- Section 292 of the Act requires all disclosing entities, public companies, large proprietary companies, and registered schemes to prepare financial reports each financial year.
- Section 302 of the Act requires disclosing entities to prepare financial reports each half-year.
Lodgment of reports
- Section 319 of the Act requires a disclosing entity and registered scheme to lodge the complete financial reports within three months after the end of the financial year. All other entities are required to lodge their financial reports within four months after the end of the financial year.
- Section 320 of the Corporations Act requires a disclosing entity to prepare or obtain a report for a half-year and lodge the report with ASIC within 75 days after the end of the half-year.
Recent prosecutions
Failing to comply with obligations to lodge financial reports is a white collar crime enforceable by ASIC.
ASIC took action against the following companies between 1 January 2021 and 30 June 2021 for failing to comply with their reporting obligations:
| Company | Enforcement action |
| Bargo Collieries Pty Ltd | Convicted and fined $7,000 for failing to lodge annual financial reports between 2015 and 2019 |
| Envisager Securities Ltd | Found guilty and placed on a bond and required to be of good behaviour for failing to lodge annual financial reports for 2018 and 2019 |
| Gasfields Ltd | Convicted and fined $3,000 for failing to lodge their annual financial report for 2019 and half-year report ending 31 December 2019 |
| Hail Creek Coal Pty Ltd | Found guilty without conviction and placed on a bond and required to be of good behaviour for lodging their annual financial report for 2017 late |
| Harsco Metals Australia Holding Investment Co. | Found guilty without conviction and placed on a bond and required to be of good behaviour for failing to lodge annual financial reports for 2015 and 2016 |
| Konica Minolta Business Solutions Australia | Found guilty without conviction and placed on a bond and required to be of good behaviour for failing to lodge annual financial reports between 2017 and 2019 |
| Oceania Resources Pty Ltd | Convicted and fined $7,000 for failing to lodge annual financial reports between 2015 and 2019 |
| Redbank Energy Ltd | Convicted fined $9,000 for failing to lodge annual financial reports for 2018 and 2019 and the half yearly report for the half-year ended 31 December 2019 |
| Vocational Education, Training and Employment Australia Ltd | Convicted and fined $13,500 for failing to lodge annual financial reports between 2016 and 2018 |
| Wolf Petroleum Ltd | Convicted and fined $12,000 for failing to lodge annual financial reports for 2018 and 2019 and failing to hold an annual general meeting or report to its members for that same period. |
Conclusion
Accurate and timely financial reporting is not only important to allow shareholders, creditors and the public to make informed decisions about companies. Depending on the type of organisation, lodgment of financial reports to ASIC may also be a legal requirement. ASIC will prosecute companies that fail to comply with their financial reporting obligations.
