Large proprietary companies redefined

Australian proprietary companies are classified into ‘large’ or ‘small’ depending on the size of their revenue, assets and employees.  The Corporations Amendment (Proprietary Company Thresholds) Regulations 2019 (Cth), which came into force on 1 July 2019, doubles the classification thresholds resulting in a third of currently ‘large’ proprietary companies becoming ‘small’ in the next financial year commencing 1 July 2019.[1]  The new thresholds are as follows:

CriteriaPreviouslyFrom 1 July 2019
Consolidated revenue for financial year of the company and entities it controls$25 million or more$50 million or more
The value of the consolidated gross assets at the end of the financial year and the entities it controls$12.5 million or more$25 million or more
The number of employees the company and the entities it controls have50 or more100 or more

A proprietary company is ‘large’ if it satisfies at least two of the three requirements at the end of its financial year.

The increased thresholds only apply to financial years beginning on or after 1 July 2019.

The implications: when it pays to be small

The Corporations Act generally imposes less onerous obligations on small proprietary companies, notably in relation to financial reporting and whistleblowing protections.

Financial reporting

A ‘large’ proprietary company is required to lodge an audited annual financial report with ASIC which includes a director’s report.  ‘Small’ proprietary companies are generally exempt from these requirements but are still required to keep sufficient financial records.  The Federal Government estimates that the new regime will save small and medium enterprises $81.3 million in compliance costs annually.

Whistleblower policy

The classification changes may also relieve a number of companies from whistleblowing obligations under the Corporations Act, as amended by the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Cth).  More specifically, from 1 July 2019, the amended Corporations Act requires public companies and ‘large’ proprietary companies to have a compliant whistleblower policy which contains certain prescribed information, including:

  • the protections available to whistleblowers,
  • to whom disclosures can be made,
  • how the company will support and protect whistleblowers, and people named by them,
  • how the company will investigate disclosures,
  • how the policy will be made available to officers and employees of the company.

[1] Explanatory statement to the Corporations Amendment (Proprietary Company Thresholds) Regulations 2019, issued by authority of the Treasurer.

Alfonso Grillo