Dormant Company Audit Exemption

(Section 365 Companies Act 2014)

The Dormant company audit exemption is a new provision introduced in the Companies Act 2014. The Dormant Company Audit Exemption is NOT specific to company size. A company can qualify to claim audit exemption based on the fact that it is dormant. It is not available to public limited companies or public unlimited companies.

The directors of the company must

(i) be of the opinion that in respect of the financial year concerned, the company is dormant and will satisfy the conditions specified at (a) and (b) below, and

(ii) decide that the company should avail of the exemption in that year (and record that decision in the minutes of the meeting concerned):

(a) it has no significant accounting transaction (ie. a transaction that is required by s.281 and s.282 Companies Act 2014, to be entered in the company’s accounting records); and

(b) its assets and liabilities comprise only permitted assets and liabilities (ie. investments in shares of, and amounts due to or from, other group undertakings). 

In determining whether or when a company is dormant for the purposes of s.365, the following shall be disregarded:

(a) any transaction arising from the taking of shares in the company by a subscriber to the constitution as a result of an undertaking of his or her in connection with the formation of the company;

(b) any transaction consisting of the payment of—

(i) a fee to the Registrar on a change of the company’s name;

(ii) a fee to the Registrar on the re-registration of the company; or

(iii) a fee to the Registrar for the registration of an annual return (including any fee of an increased amount by virtue of regulations under section 889(6)).

The right of members to dissent to the audit exemption does not apply to a dormant company (s.334(5)CA2014).

Dormant company audit exemption - statements to be included on balance sheet (s.365):

Where the dormant company exemption is being availed of, the following statements must be included on the company’s balance sheet by the directors of the company:

I/We, as director(s) of (company name) state that:

(a) the company is availing itself of the audit exemption provided for by Chapter 16 of Part 6 of the Companies Act 2014;

(b) the company is availing itself of the exemption on the grounds that the conditions specified in s.365(2) are satisfied;

(c) we acknowledge the company’s obligations under Companies Act 2014, to keep adequate accounting records and to prepare Financial Statements which give a true and fair view of the assets, liabilities and financial position of the company at the end of its financial year and of its profit or loss for such a year and to otherwise comply with the provisions of Companies Act 2014 relating to Financial Statements so far as they are applicable to the company;

(d) we hereby certify that we have relied on the specific exemption contained in s.365 Companies Act 2014 on the grounds that the company is entitled to the benefits of that exemption as a dormant company.

On behalf of the board:

TYPED Name of Signatory:                     TYPED Name of Signatory:

Director                                                     Director

Date:                                                         Date: