Abridgement Exemption - Small Companies

Companies Act 2014, Section 352 and 353
That exemption is an exemption from the requirement in section 347 to annex to the company’s annual return the following documents:
(a) the statutory financial statements of the company;
(b) in the case of a small company, the directors’ report; and
(c) the statutory auditors’ report on those financial statements and that directors’ report.

Small Company Abridgment Exemption:
If a company that qualifies as a small company (See Section 280A CA 2014 as inserted by Companies (Accounting) Act 2017) avails itself of the exemption provided by section 352, it shall instead annex to its annual return a copy of each of the following documents:
(a) abridged financial statements prepared in accordance with section 353 and which have been approved and signed in accordance with section 355;
(b) a special statutory auditors’ report prepared in accordance with section 356.

Abridged financial statements for a small company:
Section 353 of the companies Act 2014 requires the abridged financial statements of a small company shall be extracted from the statutory financial statements of the company in the following manner:

Companies Act Financial Statements:
Where the statutory financial statements of the company are Companies Act financial statements, the abridged financial statements shall comprise—

  • (i) the balance sheet of the company,
  • (ii) those notes to the financial statements that provide the information required by sections 305 to 321 -  Small companies are exempted from the requirements of sections 314/317(part)/318/319/322/323 (1) (partial) 
  • (iii)  Profit and loss account items applicable to the company concerned and in particular the information required by paragraph 53 of Schedule 3A in the case of a small company.
  • (iv) The information required by paragraph 48 of Schedule 3A in the case of a small company, even where a company has elected to include it in the profit and loss account
  • (v) Any information provided in accordance with subsections 4, 5 and 6 of section 291 

Section 274(3) (references to balance sheet to include certain notes) does not apply to this section.

IFRS Financial Statements:
Where the statutory financial statements of the company are IFRS financial statements, the abridged financial statements shall comprise—
(a) the balance sheet of the company,
(b) those notes to the financial statements that provide the information required by sections 305 to 321, and
(c) Any other notes to the financial statements including the notes relating to income statement items applicable to the small company concerned and the statement of changes in equity of the company (IFRS returns)

Approval and signing of abridged financial statements
Where the directors of a company are satisfied that the requirements of section 353 have been complied with as regards the preparation of the abridged financial statements, those financial statements shall be approved by the board of directors and signed on their behalf by 2 directors, where there are 2 or more directors. If there is only one director by that director.

Abridgment Statement:
Where an abridgment exemption is being claimed the following statement shall be inserted on the balance sheet.
(a) they have relied on the specified exemption contained in section 352;
(b) they have done so on the ground that the company is entitled to the benefit of that exemption as a small company and
(c) the abridged financial statements have been properly prepared in accordance with section 353.

The signature(s) of the director(s) as the case may be, shall be inserted on the face of the abridged balance sheet immediately after the abridgment statement. Every copy of every abridged balance sheet which is approved by the board of directors or which is circulated, published or issued shall state the names of the person(s) who signed the balance sheet on behalf of the board of directors.

Summary of Requirements:
The following requirements apply to the documents annexed to the annual return under section 352(3) or delivered to the Registrar:

(a) the copy of the abridged financial statements required by section 352(3)(a) shall state the names of the directors who signed the abridged balance sheet on behalf of the board of directors;
(b) the copy of the special statutory auditors’ report required by section 352(3) (c), where audit exemption cannot be availed of, shall state the name of the statutory auditors who signed the report and, if different, the name of the statutory auditors who signed the report under section 391

Appendix 1- Special Auditors’ Report:
Where a small company cannot avail of audit exemption but still qualifies for the abridgment exemption it is required under the terms of section 352 (3)(c) a special statutory auditors’ report prepared in accordance with section 356.

“Section 356 - Special report of the statutory auditors on abridged financial statements
There shall accompany abridged financial statements annexed to the annual return and delivered to the Registrar a copy of a special report of the statutory auditors of the company to the directors containing—
(a) a statement of the statutory auditors with respect to the matters set out in subsection (2) on those abridged financial statements, and
(b) a copy of the statutory auditors’ report to the members under section 391 in the form required by section 336.

(2) Where—
(a) the directors of a company propose to annex to the annual return abridged financial statements for any financial year prepared pursuant to section 353, and
(b) the statutory auditors of the company are of opinion that the directors of the company are entitled, for that purpose, to rely on the exemption contained in section 352 and the abridged financial statements have been properly prepared pursuant to section 353, it shall be the duty of the statutory auditors of the company to state in the special report referred to in subsection (1) that, in the opinion of those auditors—
(i) the directors of the company are entitled to annex those abridged financial statements to the annual return, and
(ii) the abridged financial statements so annexed are properly so prepared.

(3) With respect to the statutory auditors’ special report referred to in subsection (1) (a) copy (as that expression is to be read in accordance with section 352(5)) of which is to be delivered to the Registrar), the original of that report shall be signed by the statutory auditors and bear the date of such signing; the requirements of section 337(2) with respect to the signing of the report there referred to shall also apply with respect to the signing of the special report.

(4) Every copy of the special report of the statutory auditors prepared in accordance with subsection (1) that is circulated, published or issued shall state the name of the statutory auditors providing the report and, if different, the names of the statutory auditors who provided the report under section 391.

(5) If a company fails to comply with subsection (1) or (4), the company and any officer of it who is in default shall be guilty of a category 2 offence.

(6) In subsection (5) “officer” includes any shadow director and de facto director.”

Appendix 2 - Offences:
If abridged financial statements are approved which have not been prepared in accordance with the requirements of section 353, every director of the company who is party to their approval, and who knows that they have not been so prepared or is reckless as to whether they have been so prepared, shall be guilty of a category 2 offence.

For that purpose, every director of the company at the time the abridged financial statements are approved shall be taken to be a party to their approval unless he or she shows that he or she took all reasonable steps to prevent their being approved.

If the requirements of section 352(6) as regards documents annexed to an annual return under section 352(3) are not complied with, the company concerned and any officer of it who is in default shall be guilty of a category 2 offence. An “officer” includes any shadow director and de facto director