What are My Company Record Keeping Requirements?

Operating any commercial enterprise involves keeping books and records. Running a company is no exception. Accurate financial records are a must for all companies. In addition to their commercial utility, companies in Australia are also legally required to maintain written financial records. This article explains your company record keeping requirements and which records you need to keep.

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Company Record Keeping Requirements

The Corporations Act 2001 (Cth) (the Act) obliges all companies to maintain written financial records that accurately record and explain its transactions, financial position and performance. These records must permit the preparation and audit of true and fair financial statements.

The Act considers correct record keeping such a fundamental task that it lists it as one of the key responsibilities of directors and company secretaries. The Australian Securities and Investment Commission (ASIC) views breaches of this obligation extremely seriously.

What Do We Mean by Financial Records?

The Act’s definition of financial records includes, among other things:

• documents of prime entry;
• receipts, invoices, orders for the payment of money, bills of exchange, promissory notes, vouchers and cheques; and
• working papers or other documents necessary to explain how financial statements were drawn up and any adjustments required in that process.

While electronic records are acceptable, you must be able to convert all electronic financial records into hard copies within a reasonable time. The responsibility for this rests with your company, even if a third party (such as your accountant) keeps your financial records on their computer system.

From a legal perspective, the point of recordkeeping is to ensure that a person can correctly gauge a company’s financial position from the books. Accurate and up-to-date records ensure corporate transparency and accountability.

What Other Records Must I Keep?

While it may not be the most exciting part of running a business, maintaining proper records is a legal obligation and a valuable resource for your business. You should keep the following kinds of records and company books.

Tax & Financial

Keeping track of your company’s financial transactions is essential as it will ensure compliance with tax laws and facilitate the preparation of tax returns. Some essential financial records include:

• general ledger;
• general journal;
• register of assets;
• invoices and statements received and paid;
• creditors ledger;
• financial statements, like profit and loss accounts, balance sheets, depreciation schedules and taxation returns (for income tax, group tax, fringe benefits tax, business activity statements and all supporting documents);
• bank account statements, bank reconciliations and bank loan documents;
• cash records, including the cash receipts journal, bank deposit books, cash payments journal, cheque butts and petty cash books;
• records for sales and debtors, including the sales journal, debtors ledger, list of debtors, invoices issued, statements issued and delivery dockets;
• records for work in progress, including job/customer files, stock listings, creditors records; and
• unpaid invoices, including correspondence, annual returns and forms for ASIC and records for wages and superannuation. 

Corporate

For companies, it is essential to maintain corporate records, including:

• governance documents, such as the constitution and any shareholders’ agreement;
• registers (where relevant) for members, options, debenture holders, prescribed interests, charges and unclaimed property;
• minutes of directors’ meetings;
• minutes of members’ meetings;
• deeds for trust, debentures, contracts, agreements (for example, lease agreements); and
• any intercompany transactions, including guarantees.

Employment

If your company has employees, you need to keep certain records related to their employment. These records typically include:

• employee personal information, such as their name, address, tax file number, and employment eligibility verification (e.g. residential status);
• employment contracts, including copies of signed employment agreements or offer letters;
• payroll records, such as documentation of wages, taxes withheld, and benefits provided; and
• performance evaluations, records of employee performance assessments and feedback.

Licences

Depending on your industry and location, you may need to obtain licences, permits, policies or registers to operate your business legally. It is important to keep these documents readily accessible and maintain records of their issuance and renewal.

General Records

The Personal Property Securities Register does not require companies to keep a register of all charges from 20 January 2012. However, companies must still maintain a record of charges held before that date.   

Further, while the Act does not require small proprietary companies to keep financial statements (for example, profit and loss accounts) unless ASIC or shareholders specifically request it, they are nonetheless a valuable commercial tool. Therefore, your company should seriously consider preparing such statements even though it is not legally necessary.

Key Takeaways

Record keeping is a crucial aspect of running a successful business. By maintaining accurate and organised records, you not only fulfil your legal obligations but also gain valuable insights into your company’s financial health and performance. While it may seem daunting, breaking down the requirements into manageable categories, such as financial, tax, employee, business licences, permits, and corporate records, can help you stay on track. 

For more information, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page. 

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