By Andrew Lambe. 18th February 2015
The new Companies Act 2014 will make significant changes to certain companies who under current legislation do not qualify for the audit exemption. We understand these new rules will apply to financial years commencing on or after the 1st June 2015, although this will be confirmed at time of the commencement order.
Under the new legislation, Companies Limited by Guarantee will for the first time, be able to avail of audit exemption. Registered Charities will still be required to have an audit though.Section 343 of the new Act sets out the conditions for availing of the exemption. Previously, the exemption did not apply where a company was a parent or a subsidiary company and these companies will now be able to claim the exemption if they meet other criteria. Companies will only have to meet 2 of the 3 size criteria to qualify as a “small company” for the purposes of claiming an audit exemption. Currently small companies have to satisfy all 3 conditions.
It is important to note that should an annual return be filed late, current rules remain in force in that the company cannot avail of audit exemption for a period of two years. This has been extended to include the first annual return so if the company files the first annual return late it cannot avail of audit exemption for the first financial year. However Section 343 introduces a new provision whereby a company can apply to their local District Court for an order extending the time for filing the annual return of the company. Only one order can be made in respect of a particular financial period. Where the order is filed on time and the company subsequently files the annual return within the extra time specified by the District Court, the documents will be deemed by the CRO to have been received on time. As a result, the consequences of late filing late filing penalties and/or loss of audit exemption will not apply to that particular annual return. The CRO will no longer entertain applications to waive late filing fees after the 1st June 2015.
Under the Bill, the audit exemption will be extended to parent and subsidiary companies and this is contained in subsection 294-295 of the act. It sets out an exemption from preparing group financial statements if the group’s size is below certain thresholds (increased from those currently in force). Dormant companies will be able to avail of audit exemption once their annual returns are filed on time.
An another important part of the legislation to be aware of is section 330 which provides that members holding 10% of the voting rights in a company may require that it not avail of the audit exemption. The next section (331) requires that a statement be included in the balance sheet where the audit exemption is availed of.
Also there will now be a mechanism introduced for companies to voluntarily correct incorrect financial statements where they have been submitted to the CRO. Companies will be able to rectify incorrectly filed accounts by submitting Form B1X along with the corrections.
Listed below are the Company types can avail of audit exemption:
Checklist for availing of Audit Exemption:
• Is your company listed above?
• Has the appointment of the auditor been terminated?
• Has the auditor served the notice on the company? (21 days)
• Is the notice filed in the CRO?
• Has the statement been included on the balance sheet?
• Are you required to have an audit by other means? Bank Funding, Enterprise Ireland etc?
• Are you under the 2 out of 3 conditions for current year for a single company?
• Are you under the 2 out of 3 conditions for current and proceedings financial year for a group?
• Have you filed this year’s and last year’s annual return on time?
• If this is your first financial year, have you filed your first annual return on time?
• Have the directors chosen to avail of audit exemption and recorded this decision on the minutes?
For more information on the new Companies Act 2014, please do not hesitate to contact us at Company Bureau. Alternatively, you can sign up to our newsletter which features updates on the new act each month. See our homepage – www.companyformations.ie for more details.