In addition to preparing their own accounts, parent undertakings are required to prepare consolidated group accounts and to lay them before the AGM at the same time as their own annual accounts.
The requirement to prepare group accounts is contained at Reg 5 of the European Communities (Group Account) Regulations (S.I. 201 of 1992) ("the GAR"), and states that: "At the end of its financial year a parent undertaking shall prepare group accounts in accordance with these Regulations and such accounts shall be laid before the annual general meeting at the same time as the undertaking's annual account are so laid."
Exemption from requirement to prepare group accounts
An exemption from this requirement is contained at Reg 7 of the GAR, which states that: "Subject to paragraphs (2) to (8), Reg 5 shall not apply to a parent undertaking that is a private company in any financial year if, at the balance sheet date of the parent undertaking in that financial year and in the financial year of that undertaking immediately preceding that year, the parent undertaking and all of its subsidiary undertakings together, on the basis of their annual accounts satisfy two of the following three conditions:
(a) the balance sheet total of the parent undertaking and its subsidiary undertakings together do not exceed €7,618,428
(b) the amount of the turnover of the parent undertaking and its subsidiary undertakings together does not exceed €15,236,857 and
(c) the average number of persons employed by the parent undertaking and its subsidiary undertakings together does not exceed 250
Sub paragraphs (2) to (8) further qualify the requirements in (a), (b) and (c).
Therefore where a parent company is a private company, it and its subsidiary companies must meet certain requirements in order for the parent to avail of the exemption from the requirement to prepare group accounts. However a plc cannot avail of the Reg 7 exemption, as it is expressed to apply only to parent undertakings that are private companies.
There is a further exemption at Reg 8(1) of the GAR, being an exemption from the requirement to prepare group accounts for a parent undertaking which is a fully or 90 per cent owned subsidiary undertaking of an EC undertaking. There are a number of qualifying conditions set out at Reg 8(3). This exemption is not limited to private companies so a plc which meets the Reg 8(3) conditions may avail of it, but Reg 8(4) provides that the Reg 8(1) exemption "shall not apply to a parent undertaking any of whose shares, debentures or other debt securities have been admitted to official listing on a stock exchange established in a Member State". So a listed plc cannot avail of the Reg 8(1) exemption.
Regulation 9(1) contains another exemption from Reg 5. This may be availed of by a parent undertaking ("the exempted parent") which is itself a subsidiary undertaking of another undertaking established under the law of a Member State whose shareholders or members holding an aggregate of 10 per cent or more in nominal value of the total share capital of the exempted parent undertaking have, at least 6 months before the end of the financial year of that undertaking, requested the preparation of group accounts in accordance with Reg 5. This Reg 9(1) exemption applies only if the conditions set out in Reg 8(3) are met and again has no application to a parent undertaking any of whose shares, debentures or other debt securities have been admitted to official listing on a stock exchange established in a Member State.
Filing requirement pursuant to GAR
Reg 39 of the GAR sets out the filing requirement in relation to group accounts. It requires a certified copy of group accounts drawn up by the parent undertaking in accordance with the GAR to be annexed to the annual return of the parent undertaking.
So unless a parent undertaking is entitled to avail of the exemptions under Reg 7, 8 or 9 of the GAR, it is obliged by Reg 39 to annex the group accounts to its annual return when filing same in CRO.
Specifically in relation to plcs which are parent undertakings, they cannot avail of the Reg 7 exemption as that is limited to private companies, and so the issue is whether the plc comes within Reg 8 or 9 and can avail of either of those exemptions. Otherwise, group accounts must be prepared by the plc parent undertaking and then submittted to CRO with its annual return. A listed plc, for instance, is not entitled to avail of any of the three exemptions, and so must always prepare and file the group accounts with its annual return.
A private company that is a subsidiary of another undertaking which is established in another EU Member State is exempted from the requirement to annex accounts and reports to the annual return which is imposed by section 7 of the 1986 Act if certain conditions are fulfilled.
(Section 17 Companies (Amendment) Act 1986 as substituted by Regulation 45 of the European Communities (Companies: Group Accounts) Regulations 1992.)
In this case, the following documents must be filed with the subsidiary company's annual return, pursuant to section 17(1)(d) of the 1986 Act:
- Notice stating that the company has availed of the exemption under section 17 (section 17(1)(d)).
- A copy of an irrevocable guarantee by the parent undertaking of the liabilities of the subsidiary company's annual return, pursuant to section 17(1)(b) of the 1986 Act.
- Notification by the company to the shareholders of the guarantee pursuant to section 17(1)(b).
- A declaration by the subsidiary that all the shareholders have declared their consent to the exemption, this declaration to be signed by the secretary or a director (section 17(1)(a) requires the consent of all the shareholders.
- Consolidated accounts of the parent undertaking (the exemption of the subsidiary should be disclosed in a note to the Accounts) drawn up in accordance with the requirements of the European Communities (Companies: Group Accounts) Regulations 1992 and duly audited must be attached to the subsidiary undertakings annual return (section 17(1)(f)).
Example of the text of guarantee which is acceptable:
By this guarantee, X Limited of (registered office, etc.) as the parent undertaking of Y Limited and for the purposes of the exemptions referred to in section 17(1) of the Companies (Amendment) Act 1986, as amended, and not otherwise, hereby irrevocably guarantees in respect of the whole of the financial year of Y Limited ending on the ** day of *** 20**, all of the liabilities of Y Limited referred to in section 5(c)(ii) of said Act; provided that this guarantee shall not extend to any liability or commitment of Y Limited which shall not have arisen otherwise than in respect of that financial year or which shall not constitute a liability or loss within the meaning of section 5(c)(ii) aforesaid.
Filing a batch of annual returns with the same set of consolidated accounts
It is now possible to file only one set of consolidated group accounts when a number of annual returns for companies, which are parent or subsidiary undertakings of the same group, are being filed together.
To avail of this option, a Form B1U must be completed and filed along with the annual returns and the set of accounts. The B1U is essentially a cover sheet which lists the annual returns in the batch and incorporates the guarantee documents. It is not a statutory form and therefore there is no fee.
Form B1U is designed to facilitate the filing of one copy of consolidated group accounts delivered in accordance with section 17 Companies (Amendment) Act 1986, as amended. It may be completed and submitted only when an annual return in respect of a member of a group has been lodged with that of another member of the group to which consolidated accounts have been attached. All of the annual returns in the batch must be made up to the same date. Even if the ARD's of the companies are not the same, it is possible to avail of this option by making all the returns up to the same date and ticking the "Keep ARD" box as appropriate. The B1U must be signed by a Director or Secretary who is common to all of the companies in the batch.
Form B1U is not a substitution to the requirements under section 17 that a list of subsidiary undertakings be submitted.
The fact that the relevant consolidated accounts have previously been filed is not sufficient. A set of consolidated accounts must be filed with each batch of annual returns.
The B1U has been designed to incorporate the four documents at 1 to 4 above which are required to be filed along with the annual return.
Numbers 1 and 4 are incorporated in the text of the form and numbers 2 and 3 must be copied into the form by the presenter. When using the B1U, it is not necessary to include copies of these documents with each annual return. However, these documents should still be prepared and held by the presenter.
Link to Forms Page B1U.
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