Group Companies and the Companies Act 2014

Under the new Companies Act, a holding company is obliged to file its own Financial Statements and consolidated Group Financial Statements unless they are exempt from doing so.

Exemption from consolidation: size of group (s.297, CA 2014)
A holding company can be exempt from filing consolidated group Financial Statements if it meets 2 of the following conditions.

  • The balance sheet total of holding company and subsidiaries taken as a whole does not exceed €10m.
  • The amount of turnover of the holding company and subsidiaries taken as a whole does not exceed €20m.
  • The average number of persons employed by the holding company and its subsidiaries does not exceed 250 (average as defined in s.317 CA 2014)

This exemption does not apply where:

  • the company has elected to prepare IFRS Group Financial Statements
  • the shares, debentures and other debt securities of a subsidiary undertaking have been admitted to trading on a regulated market in an EEA State, and 
  • any of the subsidiary undertakings is a credit institution.

Exemption from consolidation: holding company that is a subsidiary undertaking of undertaking registered in EEA (s.299, CA 2014)
A lower holding company that is a subsidiary can be exempt from the requirement to prepare Group Financial Statements conditions if:

  • the lower holding company is a wholly owned subsidiary of the EEA holding undertaking, or
  • the EEA holding undertaking holds more than 50% of the shares held in the lower holding company and a notice requesting preparation of group Financial Statements has not been served on the lower holding Company no later than 6 months after the end of the financial year by shareholders holding in aggregate:
    (i) more than half of the remaining shares in the lower holding company;
    (ii) 5 percent or more of the total shares in the lower holding company (s.299(2)(b), CA2014, should be consulted).
  • The lower holding company must be included in the consolidated Financial Statements for the larger Group drawn up to the same date or to an earlier date in the same financial year, by a holding undertaking established under the laws of an EEA state, 
  • The Financial Statements must be drawn up in accordance with the Seventh Directive as modified by Council Directives 86/635/EEC and 91/647/EEC respectively or are prepared in accordance with International Financial Reporting Standards (IFRS).
  • The lower holding company discloses in its entity Financial Statements that it is exempt from the obligation to prepare and deliver Group Financial Statements and it states the name of the higher holding undertaking, the country in which it is incorporated and that if the holding undertaking is unincorporated, its principal place of business; 
  • The lower holding company delivers on time to the Registrar of Companies copies of the higher holding undertaking’s consolidated accounts, annual report and auditors’ report.

(See s.300, CA 2014, regarding exemption from consolidation: holding company that is a subsidiary undertaking of undertaking registered outside EEA). 

Exemption of a Subsidiary from annexing its own Financial Statements to its annual return (s.357, CA 2014) (old Section 17 exemption):
A company that is a subsidiary undertaking of a holding undertaking that is established under the laws of an EEA state, shall, as respects any particular financial year stand exempted from the requirement to annex its own Financial Statements to its annual return and may annex instead Group Financial Statements provided the following conditions are satisfied:

  • Every person who is a shareholder of the company at the next AGM after the end of the financial year shall declare his or her consent to the exemption.
  • There is a written notification to every shareholder. 
  • There is an irrevocable guarantee by the holding undertaking of all the liabilities for the financial year 
  • The statutory Financial Statements for the financial year are consolidated into the consolidated Financial Statements prepared by the EEA based holding company. 
  • The exemption of the subsidiary company is disclosed in a note to the consolidated Financial Statements. 
  • A notice stating that the company is availing itself of the exemption in s.357 CA 2014, a copy of the guarantee, the shareholder notification, and a declaration that the shareholders have agreed to the guarantee is included with the annual return. 
  • A copy of the consolidated Financial Statements of the holding company with auditor’s report (the consolidated Financial Statements are drawn up in accordance with the Seventh Directive as modified 86/635/EEC and audited in accordance with Article 37 of the Seventh Council Directive.

Small Group Company Audit Exemption (s359, CA 2014)
Audit Exemption applies to any group company if the group as a whole qualifies as a Small Group.  The entire group and all its subsidiary undertakings must, taken as a whole, satisfy two of the following 3 conditions in order to claim a Group Company Audit Exemption:

  • The balance sheet total, in relation to the holding company and the other members of the group taken as a whole does not exceed €4.4 million.
  • The amount of turnover of the holding company and the other members of the Group taken as whole does not exceed €8.8 million. 
  • The average numbers of persons employed by the holding company and the other members of the group taken as a whole does not exceed 50.

The above conditions must be met in the year (the conditions must also be met in the preceding year unless it is the holding company’s first financial year.) (s359 (5) CA2014). The company’s annual return, to which Financial Statements are attached, must be filed correctly and on time for the year in question and the previous year (s.364 CA2014). Audit exemption not available where a holding company or subsidiary undertaking falls within a certain category (s.362 CA 2014)

A holding company and the other members of a Group are NOT entitled to the Small Group audit exemption if the company is a company falling within any provision of Schedule 5 (s.362(2) CA 2014).

Most companies in paragraphs 5 and 16 of Schedule 5 will be Designated Activity Companies (DACs) and since s.994 CA 2014 dis-applies Part 6 CA 2014, to all DACs that are credit institutions or insurance undertakings, they are not entitled to claim audit exemption under Part 6.

What is a securitisation company?
A securitisation company is a company that qualifies as such within the meaning of s.110, Taxes Consolidation Act 1997, or as a Financial Vehicle Corporation (FVC). If pre-1 January 2005, see Article 1 (1) Reg(EC) no. 24/2009 of ECB. If after 1 January 2005: see Article 1(1) Reg(EU) no. 1075/2013 of ECB. 

Where notice is served under section 334 for Small Group

  • If one or more of the company’s shareholders representing not less than 10% of the voting rights (one member for a guarantee company (CLG)) request that the company not avail itself of the exemption and serve notice in writing to this effect on the company in the financial year immediately preceding the financial year concerned or during the financial year concerned but not later than one month before the end of that year, the company must have an audit. (S334 CA 2014)
  • If the notice is served on the Holding Company, the Group can not avail of audit exemption. 
  • If the notice is served on a subsidiary, the subsidiary can not avail of audit exemption.