Important Changes for small companies limited by guarantee under the Corporations Act

On 19 March 2015, the Corporations Legislation Amendment (Deregulatory and Other Measures) Act 2014 (Act) became law. As a result of the changes implemented by the Act small companies limited by guarantee and most other companies limited by guarantee with annual revenue of less than $1 million are no longer required to maintain the appointment of an auditor.Exemption from auditor appointment requirement for small and certain other companies limited by guaranteeSection 327A(1) of the Corporations Act previously required a public company to appoint an auditor within one month of its incorporation. This requirement extends to companies limited by guarantee, despite section 292(3) of the Corporations Act exempting small companies limited by guarantee from the requirement to prepare an annual financial report and section 301(3) of the Corporations Act allowing most companies limited by guarantee with annual revenue of less than $1 million (whether on an individual or consolidated basis) to review, rather than audit, their annual financial statements.In recognition that the requirement to appoint an auditor is superfluous for many companies limited by guarantee, section 327A has now been amended to exempt companies limited by guarantee from the requirement to appoint an auditor where the company is a small company limited by guarantee or where the directors reasonably believe that the company will fall within the scope of section 301(3) and, accordingly, the company will no longer be required to have its annual financial statements audited.