In response to stakeholder feedback, ASIC has adopted a no-action position on the financial reporting obligations of special purpose financing subsidiaries or other wholly-owned subsidiaries that issue debentures to sophisticated or professional investors, and their guarantors, that may have been relying on relief under ASIC Corporations (Wholly-Owned Companies) Instrument 2016/785 (ASIC Instrument 2016/785).
Under ASIC Instrument 2016/785, certain wholly-owned companies may be relieved from financial reporting obligations under Chapter 2M of the Corporations Act 2001, where they enter into a deed of cross guarantee with their holding entity and meet certain other conditions. Wholly-owned companies that are 'borrowers in relation to debentures', or 'a guarantor of such a borrower', are excluded from relief under ASIC Instrument 2016/785.
ASIC has been made aware that some corporate groups with special purpose financing subsidiaries or other wholly-owned subsidiaries that issue debentures to sophisticated or professional investors for the purpose of providing finance to other companies in the group may have been of the view that the exclusions do not apply to their special purpose financing vehicle or any of its guarantors.
The no-action position means that we will not take enforcement action against special purpose financing subsidiaries or other wholly-owned subsidiaries that issue debentures to sophisticated or professional investors, or their guarantors, for not preparing and lodging annual reports where, apart from the exclusions mentioned above, they otherwise comply with the requirements of ASIC Instrument 2016/785.
The no action position applies for financial years ending on or after 28 September 2016 (when ASIC Instrument 2016/785 was issued). The no-action position does not apply where there was or is a requirement under the Corporations Act for a trust deed and trustee in relation to the offer of the debentures.
ASIC adopted the no-action position in response to technical and policy considerations raised by stakeholders. The no-action position will remain in place until 1 October 2026 or earlier if we decide to remake the relief after consulting with industry.
Background
Currently, wholly-owned companies that are 'borrowers in relation to debentures' and their guarantors are excluded from financial reporting relief under ASIC Instrument 2016/785 - see subparagraphs 6(1)(b)(ii) and (iii).
In our Corporate Finance Update - Issue 14 in September 2023, we reminded entities that borrowers in relation to debentures and their guarantors are excluded from financial reporting relief under ASIC Instrument 2016/785. We advised then that ASIC did not intend to provide a formal or informal no-action position or other relief in response to this issue. However, we decided to adopt a no-action position in relation to this issue following further consideration and feedback from stakeholders.
Any affected companies may wish to consider seeking their own legal advice on other potential remedies, such as relief from the court under section 1322 of the Corporations Act. We do not express any views in relation to any potential application to the court for relief under section 1322 at this time. ASIC does not have power to grant retrospective financial reporting relief.
Status of ASIC's 'no-action' positions
ASIC's general policy on 'no-action' positions and their status is set out in Regulatory Guide 108 No-action letters. In particular, it should be noted:
- a no-action letter is an expression of regulatory intention about how to exercise ASIC's powers. The purpose of a no-action letter is to provide an indication as to the future regulatory action that we might take. Entities do not need to apply to ASIC to avail themselves of this no-action position.
- an ASIC no-action letter does not necessarily preclude third parties (including the Office of Director of Public Prosecutions) from taking legal action in relation to the same conduct or conduct of that kind. Nor does it prevent a court from holding that particular conduct infringes the relevant legislation. ASIC does not represent that the conduct covered by the no-action letter will not be held to contravene the relevant legislation. Nor does ASIC undertake to intervene in an action brought by third parties in respect of such conduct.
ASIC is Australia's corporate, markets and financial services regulator.
