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Financial reporting relief for wholly-owned entities under Class Order 98/1418

Relief under Class Order 98/1418
Changes to deeds of cross guarantee from 31 March 2008
Other changes to CO 98/1418 from 31 March 2008
Changes from 11 August 2009
Getting relief under CO 98/1418
Answers to your questions about lodging deeds
Download a copy of the class order, pro formas and checklists
How ASIC will check compliance

Go to... More financial reporting relief by topic

Relief under Class Order 98/1418

Under Class Order [CO 98/1418], certain wholly-owned subsidiaries may be relieved from the requirement to prepare and lodge audited financial statements under Chapter 2M of the Corporations Act 2001, where they enter into deeds of cross guarantee with their parent entity and meet certain other conditions.

Relief under this class order is based on similar relief available to corporate groups since the 1980s. The deed of cross guarantee makes the group of companies that are parties to that deed akin to a single legal entity in many respects. Creditors and potential creditors can then focus on the consolidated position for those entities rather than the individual financial statements of the wholly-owned subsidiaries that are parties to the deed.

Getting relief under CO 98/1418

Changes to deeds of cross guarantee from 31 March 2008

Changes to applying for this relief from 31 March 2008 will make it quicker for groups to access this relief.

You must still lodge deeds of cross guarantee with ASIC, as well as meet the following requirements.

From 31 March 2008 you must ensure that:
  1. the wording of all deeds exactly duplicates the ASIC pro formas (except for specific information such as company names and dates), and
  2. you lodge with the deed certification that the deed wording is exactly the same as that in the relevant ASIC proforma (Pro Forma 24 for deeds of cross guarantee or Pro Forma 27 for assumption deeds), and certain statements concerning the execution of the deed by the parties to it.

For deeds of cross guarantee lodged after 31 March 2008, you no longer need to provide any certification about the company's financial reporting compliance over the past three years or about the absence of audit qualifications.

Other changes to CO 98/1418 from 31 March 2008

Other changes to the requirements of the class order effective from 31 March 2008 include the removal of the following requirements:
  1. that the company has complied with certain financial reporting obligations under Chapter 2M of the Act;
  2. the need to prepare and lodge a statutory declaration providing evidence of your ability to obtain relief under the class order;
  3. the need to lodge the solvency statement by directors with ASIC. This statement must still be prepared and signed, however, it can now be signed by one director only instead of two.
  4. the need to annually lodge a Form 389. The class order now requires lodgement of opt-in and opt-out notices.
For further details you should refer to the editorial note attached to Class Order 98/1418.

Changes from 11 August 2009

ASIC has announced changes to form-lodging arrangements for companies wishing to take advantage of relief under Class Order [CO 98/98] Small proprietary companies which are controlled by a foreign company but which are not part of a large groupand Class Order [CO 98/1418].

The changes introduced by ASIC mean that companies relying on relief in [CO 98/98] will be able to lodge opt-in and opt-out forms at any time during a 19-month period commencing three months before the start of the relevant financial year and ending four months after the end of the financial year.

As the last date for lodging a Form 389 opt-in notice coincides with the deadline for lodging a financial report for the first year an entity intended to rely on [CO 98/1418] relief, there is no scope for a further extension to the period to lodge the notice. Accordingly, ASIC’s discretion to extend the period for lodging Form 389 has been removed from the class order.

Entities which fail to lodge a Form 389 on time, and therefore cannot rely on [CO 98/1418] relief, will have a continuing obligation to prepare and lodge a financial report for the first financial year they intended to rely on the relief. Although ASIC may not take action to require such companies to lodge the outstanding financial report, we will be very unlikely to grant individual relief to remove the continuing obligation to lodge the report. We will also be unlikely to grant a formal no-action letter where the report has not been lodged.

Where a company lodges a financial report after the due date, normal late lodgement fees will apply. However, late lodgement of the financial report will not prevent a company taking advantage of relief in [CO 98/1418] for the next financial year, provided the conditions of the class order are met.

Lodgement arrangements for opt-out notice Form 399 have not changed.

For detailed information about the form-lodging arrangements, please refer to paragraphs 36 to 38G of the Editorial Note to [CO 98/1418].

Getting relief under Class Order CO 98/1418

Before you apply for relief, you should carefully read Class Order [CO 98/1418], the editorial note to the class order, the relevant pro forma (and in the case of a deed of cross guarantee, the editorial note to that pro forma) to ensure you meet all of the eligibility requirements for relief.

We recommend you use our form CF06 and read the accompanying guide when lodging material under CO 98/1418. It is not essential to use this form, but it will help you make sure you meet all our requirements.

Mail the required material to:

The fee payable to ASIC on lodgement of a deed of cross guarantee or assumption deed is currently $38. There is no fee payable for lodgement of revocation deeds or notices of disposal.

Provided you have complied with all of the conditions of the class order, you will be eligible for the relief as soon as the material is lodged with ASIC.

Use our checklists

Use our checklists to help you ensure your wholly-owned subsidiary clients meet the certain relief requirements. Download a copy of our checklists for: Keep in mind that these checklists are not exhaustive and are not a substitute for the company and its directors ensuring that all requirements for relief are met.

Answers to your questions about lodging deeds

Read our information sheet on Deeds of Cross Guarantee for answers to frequently asked questions and some of the more common problems we see with deeds lodged with us. This information is also appended to Pro Forma 24 as an editorial note.

Download a copy of the class orders, pro formas and checklists

Class Order [CO 98/1418]
Pro Forma 24 Deeds of cross guarantee PDF and Word
Pro Forma 25 Notice of disposalPDF and Word
Pro Forma 26 Revocation deed PDF and Word
Pro Forma 27 Assumption deedsPDF and Word
Checklist: Deeds of cross guarantee and assumption deedsPDF
Checklist: Revocation deedsPDF
Checklist: Notices of disposalPDF

How ASIC will check compliance

ASIC will, from time to time, check compliance with certain requirements for relief through surveillance of a random selection of companies. These checks may not occur around the time deeds are lodged and companies and their directors should be aware the consequences of non-compliance can be serious.

Consequences of not complying
The consequences of non-compliance with these requirements can be serious. If your client fails to meet all the class order conditions, relief won’t be available. This means each affected wholly-owned subsidiary must comply with the normal financial reporting requirements of Chapter 2M of the Act for that financial year and perhaps one or more prior years.

ASIC does not have the power to relieve a company retrospectively of those breaches.

See also Information release 08/08: Changes to Class Order 98/1418 relief and new class order relief for disclosing entities

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