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A Private Limited Company (“Company”) can avail of either of two exemptions from having its financial statements audited pursuant to The Companies Act 2014 (“the Act”).

1. The first exemption is known as “the standard exemption” and can be obtained if the Company satisfies certain conditions in respect of the current financial year and the preceding financial year.  In order to qualify for the standard exemption a Company must satisfy two out of three of the following conditions: -

  • That the turnover of the Company did not exceed €8.8 million.
  • That the Company’s balance sheet total did not exceed €4.4 million.
  • That the Company’s average number of employees was not greater than 50.

 2. The second exemption is known as “the dormant company audit exemption”.  In order for a Company to satisfy the conditions of this audit exemption the Company must qualify as a dormant company which is a Company:-

  • That has no significant accounting transactions during the financial year in question; and
  • The assets and liabilities of which comprise only intragroup assets and liabilities.

It is worthy to note that if a Company is availing of the dormant company audit exemption in respect of a particular financial year there is no obligation that the company should have met the conditions in respect of the preceding financial year as there is with the standard audit exemption.

A Company may not avail of the audit exemption unless its annual return has been filed on time.  If the annual return has not been filed on time then a Company will automatically lose its entitlement to claim an audit exemption for the following two years.

However, there is an appeal procedure available which allows a Company to make an application to the District Court for additional time to allow a Company to file its annual return.

Any application needs to be on notice to the Registrar of Companies pursuant to Section 343(5) of the Act.  The application is for an order extending the time in which a Company’s annual return, in relation to a particular period, may be delivered to the Registrar of Companies.

A Company may make an application to the District Court where is of the opinion that it will miss its filing deadline or where it has already missed its deadline in respect of one or more annual returns.

It is very important to note that it is not possible to apply for an extension in respect of an annual return which has already been filed late but an application can cover a number of annual returns, provided that none of them has already been filed.  If the court order is granted it extends the period in which the annual return may be made but the Company’s annual return date is not altered.

Therefore, if a Company is late filing its annual return it would be best served to apply to the District Court for an extension of time to file the annual return rather than making a late filing of its annual return.

Making a late filing of a Company’s annual return will attract a penalty fee, in addition to the standard filing fee.  If a Company has made a late filing of its annual return then it cannot make the application to the District Court. The knock-on effect of this is that the consequences of late filing will apply to the Company.

The most relevant consequence of late filing of an annual return is that the Company would lose the ability to avail of an audit exemption for the following 2 years.  This is particularly relevant for small to medium sized companies who wish to avoid the additional costs of appointing an auditor to audit its financial statements.

Accordingly, it is important to note the options available prior to making a late filing of a Company’s annual return.

Breda Sheahan is an Associate at FitzGerald Legal & Advisory, 6 Lapps Quay, Cork

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