The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, has introduced the Corporations Amendment (Corporate Reporting Reform) Bill 2010 into Parliament to reduce red-tape on business and improve Australia’s corporate reporting framework.

The key measures include:

• reducing the regulatory burden on companies limited by guarantee, which typically have a not-for-profit purpose, by introducing a three-tiered differential reporting framework. Small companies limited by guarantee will be exempt from reporting and auditing requirements and other companies limited by guarantee will have streamlined assurance requirements and simplified disclosures in the directors’ report. In addition, the process for companies to distribute the annual report to their members will be streamlined;
• streamlining parent-entity reporting;
• providing greater flexibility for companies to pay dividends, by replacing the profits test with a solvency-type test; and
• allowing companies to more easily change their year-end date to minimise the burden on companies and their auditors during peak reporting periods.

Other reforms include:

• improving disclosure of non-financial information in the directors’ report;
• refining the statement of compliance with International Financial Reporting Standards contained in the directors’ declaration; and
• clarifying the circumstances in which a company can cancel its share capital.

A proposal contained in the draft Bill, protecting solicitors’ representation letters from disclosure to enable auditors to properly verify a company’s contingent liabilities, was removed from the final version of the Bill prior to its introduction.

The Government will consult further on the proposal and include reforms in a later Bill once appropriate wording has been settled.