Wealthy private companies may be forced to reveal financial results

The Rudd Government has quietly backed a recommendation from the Australian Securities and Investment Commission that could force some of Australia’s wealthiest and secretive companies to reveal their financial results.

But no timetable has been given for the change, which has been opposed in the past by the Myer Family, Lindsay Fox’s transport company Linfox and Len Buckeridge’s building materials company BCG.

Under changes introduced by the Howard Government in 2007, the threshold for private companies who have to report their financial results was increased by 150% to include companies with more than $25 million in revenue, $12.5 million in assets and more than 50 staff.

But a number of Australia’s biggest private companies remain exempt from these rules due to “grandfathering” provisions introduced by the Keating Government in 1995. These well-established companies are allowed to operate under old regulations that pre-dated Keating’s 1995 changes.

But last year the Rudd Government said it would support a recommendation made by ASIC way back in 2001 that the grandfathering clause by scrapped.

“The relief granted to grandfathered exempt proprietary companies creates an inconsistent regulatory framework for proprietary companies that potentially gives grandfathered exempt proprietary companies an unfair competitive advantage,” the Government said in its formal response.

“Providing relief to these companies also conflicts with the policy of successive Governments that proprietary companies with economically significant operations should be required to lodge financial reports.”

But the Government has not moved to enshrine the recommendations in legislation quite yet.

“The Government proposes that the consequences of either removing the grandfathering provisions or making them subject to a sunsetting requirement should be re-examined in conjunction with any future proposals to amend the financial reporting requirements of the Corporations Act,” it’s response said.

When this “re-examination” will proceed is not clear. A spokesperson for Financial Services Minister Chris Bowen was unable to comment prior to publication.

Around 5,000 large private companies are subject to the ASIC financial reporting regime, although the exact number of firms exempted under the grandfathering provisions is unknown.

But the lifting of the grandfathering provisions is likely to have some of Australia’s richest entrepreneurs up in arms, if their responses to a 2007 inquiry are anything to go by.

Back then, Perth-based building materials company BCG, which is owned by billionaire Len Buckeridge, said lifting the rules would have “little benefit to the wider community”.

“The changes will cause proprietary companies to have to unnecessarily release commercially sensitive information to parties who are no economically dependent on that information, but may be in a position to take commercial advantage of it.”