What are Annual Returns and does my company need to file them?

By Sinead Floody, 13th September 2016

Every Irish Limited company is required to file an Annual Return with the CRO on a yearly basis regardless as to whether the company has traded or is dormant. Annual Returns must be filed with the CRO no later than 28 days after the Annual Return Date (ARD).

The first ARD falls on the 6-month anniversary of the incorporation date. The purpose of this return is to simply upload a snapshot of the company’s statutory information to the public record. Financial Statements are not required for filing with the first Annual Return. If this Annual Return is missed or is late, the CRO will impose penalty fees of €100 on the company, which accumulate by €3 daily.

The next ARD will be 12 months from the first ARD or 18 months from the date of incorporation, and every 12 months thereafter. Subsequent Annual Returns require a set of Financial Statements showing the activities of the company for the financial period/year; whether trading or dormant. The company must furnish the CRO with their Financial Statements within 28 days of the ARD. If this Annual Return is missed or is late, the company will lose its audit exemption which is a costly affliction on the company and the CRO will impose penalty fees of €100 on the company, which accumulate by €3 daily.

Financial Statements must be prepared in accordance with the audit exemption of the company and the requirements laid out by the Companies Act 2014 and generally accepted accounting principles. The first financial period can be no longer than 18 months in length and cannot pre-date the ARD by 9 months.

If required, it is possible to extend the ARD of a company by up to 6 months from the ARD, but no more than 9 months from the financial year end date. This can only be done once in a 5-year period so this decision must not be taken lightly. It is also possible to change the ARD by filing the annual return early once an annual return is filed once in each calendar year.

 What is an Audit?

An audit is an independent examination of the Financial Statements of a business. The role of the auditor is to ensure that the company has compiled its accounts in accordance with company law and with generally accepted accounting principles. The auditor signs off on the Financial Statements once they are satisfied with same.

The purpose of audit exemption is to ensure a burden is not placed on small businesses where the cost of an audit may outweigh the benefits deriving from an audit. All companies except Public Limited Companies (PLCs) and Public Unlimited Companies (PUCs) can avail of audit exemption.

Non-filing of Annual Returns

If a company fails to fulfil its legal obligation in filing its Annual Returns on time, the company will lose its audit exemption for the year in question and for the following year.

If a company has a legitimate reason as to why their Annual Return was not filed (for ARDs after June 2015), the company can apply to the District Court under Section 343 of the Companies Act 2014 to request that the court waive the penalty fees and re-instate the lost audit exemption.

If a company does not attempt to get the company back into good standing by filing a return in a certain period of time, the company may be involuntarily struck-off the register by the CRO and dissolved. In this case, any company assets will vest in the State and the directors are at risk of prosecution by the Office of the Director of Corporate Enforcement.

If a company is struck-off and dissolved, a company restoration can take place within the first 12 months of the strike-off date.

Avoiding Penalties

Ways to avoid incurring penalty fees and loss of audit exemption include:

  1. Being aware of your company’s ARD
  2. Ensuring that your company’s financial statements are prepared well in advance of the ARD
  3. Seeking assistance from a company secretarial firm such as Company Bureau so the annual return is taken care of electronically and reminders are sent to the company

For more information on Annual Returns or company audits, please do not hesitate to contact us on +353 (0)1 646 1625 or email our Company Secretarial department at cosec@companybureau.ie.