What is a ‘large proprietary company’?
A policy objective adopted by lawmakers is to reduce the cost of doing business in Australia.
In Australia there are 2 main categories of companies – proprietary or private companies and public companies. Most small to medium-sized businesses choose to register as a proprietary company however, they are restricted to not more than 50 non-employee shareholders. A public company may be listed on the stock exchange.
Pursuant to the provisions of the Corporations Act 2001 (the Act) ‘proprietary companies’ are defined as either large or small depending on their consolidated revenue, asset value and number of employees.
Small proprietary companies are protected from the full raft of reporting obligations imposed on large proprietary companies and public companies including the lodgement of annual financial reports, a director’s report, the appointment of an auditor and lodgement of an auditor’s report.
Effective 1 July 2019 2019 the Corporations Amendment (Proprietary Company Thresholds) Regulations 2018 (the Regulations) modernise the thresholds by doubling them as follows:
- increasing the annual consolidated revenue threshold to $50 million or more;
- increasing the value of gross assets to $25 million or more; and
- increasing the maximum employee size to 100 employees or more.
The stated objective of the regulation is to ensure financial reporting obligations are targeted at economically significant companies, while reducing costs for smaller sized companies that would no longer be required to lodge audited financial reports with ASIC.
It is essential therefore that the change in the thresholds are considered by directors of proprietary companies before 1 July 2019, so consideration can be given as to whether they are likely to satisfy at least 2 of the threshold requirements and take steps to plan for accounting and reporting standards required by the Act.