Changes In Annual Reporting Reduce Costs For Firms: Business Law Reform - Regulations And Commencement Orders

On 14 May 2007, the Governor-General made orders and regulations to give effect to the changes in the Companies Act 1993 and Financial Reporting Act 1993 contained in the Business Law Reform legislation enacted in late 2006. The main effects of these instruments are set out below.

We expect that some of these new provisions will decrease costs for many companies - significant savings should result from a reduction in costs associated with printing and sending hard copy annual reports to each shareholder.

Changes in annual reporting to shareholders

From 18 June 2007, the amendments to section 209 of the Companies Act 1993 will allow a company to send to its shareholders a notice containing information about the availability of its annual report rather than the annual report itself. From 18 June, shareholders who want an annual report will need to opt in to receive one - a reversal of the current position in which shareholders must opt out if they do not wish to receive an annual report. The board of a company will be able to send to each shareholder, instead of an annual report, a notice that:

The shareholder has a right to receive an annual report or (if the company has prepared one) a concise annual report on request, free of charge.

The shareholder may obtain a copy of the annual report online.

If applicable, the board has prepared a concise annual report. The requirements for a concise annual report are discussed below.

A shareholder must respond within 15 working days requesting a copy of the annual report (and/or concise annual report, if applicable) if they wish to receive a hard copy. The board is then obliged to send a copy of the relevant document as soon as practicable. If a shareholder doesn't reply it is assumed that they will, if they wish, access the annual report online.

Shareholders may not waive both the right to receive an annual report and the right to receive notice of the annual report.

Requirements for a concise annual report

The new Companies Act regulations set out for the first time the requirements for concise annual reports. A report must describe any changes in the nature of the business of the company or any of its subsidiaries, and any changes in the class of business in which the company has an interest, whether as a shareholder of another company or otherwise. It must also include for the relevant accounting period, either:

Financial statements (or, if applicable, group financial statements); or

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