Introduction

Citation, application and interpretation

1. —(1) These Regulations may be cited as the Companies Act 1985 (Audit Exemption) (Amendment) Regulations 2000 and come into force on the day after the day on which they are made.

(2) These Regulations apply to annual accounts and reports in respect of financial years ending two months or more after the date of coming into force of these Regulations.

(3) In these Regulations, references to sections (or Schedules) are to sections of (or Schedules to) the Companies Act 1985.

Audit Exemption

Modification of section 249A

2. —(1)Section 249A (exemptions from audit for certain categories of small company)( 2 ) is modified as follows.

(2) In subsections (3)(b) and (3A)(b), for “£350,000” substitute “£1 million”.

(3) In subsection (6A), for “section 250(1)”, substitute “section 249AA(1)”.

Insertion of new section 249AA

3. The following section shall be inserted after section 249A—

“ Dormant companies

249AA. —(1) Subject to section 249B(2) to (5), a company is exempt from the provisions of this Part relating to the audit of accounts in respect of a financial year if—

(a) it has been dormant since its formation, or

(b) it has been dormant since the end of the previous financial year and subsection (2) applies.

(2) This subsection applies if the company—

(a) is entitled in respect of its individual accounts for the financial year in question to prepare accounts in accordance with section 246, or would be so entitled but for the application of section 247A(1)(a)(i) or (b), and

(b) is not required to prepare group accounts for that year.

(3) Subsection (1) does not apply if at any time in the financial year in question the company was—

(a) a banking or insurance company, or

(b) an authorised person for the purposes of the Financial Services Act 1986.

(4) A company is “dormant” during any period in which it has no significant accounting transaction.

(5) “Significant accounting transaction” means a transaction which—

(a) is required by section 221 to be entered in the company’s accounting records; but

(b) is not a transaction to which subsection (6) or (7) applies.

(6) This subsection applies to a transaction arising from the taking of shares in the company by a subscriber to the memorandum as a result of an undertaking of his in the memorandum.

(7) This subsection applies to a transaction consisting of the payment of—

(a) a fee to the registrar on a change of name under section 28 (change of name),

(b) a fee to the registrar on the re-registration of a company under Part II (re-registration as a means of altering a company’s status),

(c) a penalty under section 242A (penalty for failure to deliver accounts), or

(d) a fee to the registrar for the registration of an annual return under Chapter III of Part XI. ”

Modification of section 249B

4. —(1)Section 249B (cases where exemption from audit not available)( 3 ) is modified as follows.

(2) In subsection (1A), for “section 250” substitute “section 249AA”.

(3) In subsection (1C)—

(a) in paragraph (a), after “section 249” insert “(or if all bodies corporate in such group were companies, would so qualify)”, and

(b) in paragraph (b)—

(i) after “section 249) is” insert “, where the company referred to in subsection (1B) is a charity,”, and

(ii) after “(or £420,000 gross)” insert “or, where the company so referred to is not a charity, not more than £1 million net (or £1.2 million gross)”.

(4) In subsection (3), after “section 249A” insert “or by subsection (1) of section 249AA”.

(5) In subsection (4)—

(a) after “subsection (1) or (2) of section 249A”, insert “or by subsection (1) of section 249AA”,

(b) in paragraph (a), omit “(as the case may be)”, and after “section 249A” insert “or subsection (1) of section 249AA”, and

(c) for paragraph (b) substitute—

“ (b) to the effect that members have not required the company to obtain an audit of its accounts for the year in question in accordance with subsection (2) of this section ” .

Disclosure where dormant company acting as agent

Additional disclosures in notes to accounts

5. —(1)Schedule 4 (form and content of company accounts)( 4 ) is amended as follows.

(2) After paragraph 58 insert—

“ Dormant companies acting as agents

58A. Where the directors of a company take advantage of the exemption conferred by section 249AA, and the company has during the financial year in question acted as an agent for any person, the fact that it has so acted must be stated. ”

6. —(1)Schedule 8 (form and content of accounts prepared by small companies)( 5 ) is amended as follows.

(2) After paragraph 51 insert—

“ Dormant companies acting as agents

51A. Where the directors of a company take advantage of the exemption conferred by section 249AA, and the company has during the financial year in question acted as an agent for any person, the fact that it has so acted must be stated. ”

7. —(1)Schedule 8A (form and content of abbreviated accounts of small companies delivered to registrar)( 6 ) is amended as follows.

(2) After paragraph 9 insert—

“ Dormant companies acting as agents

9A. Where the directors of a company take advantage of the exemption conferred by section 249AA, and the company has during the financial year in question acted as an agent for any person, the fact that it has so acted must be stated. ”

Minor and consequential amendments

Minor and consequential amendments

8. —(1) In subsection (9) of section 246 (special provisions for small companies)( 7 ), for the words from “the company” to the end, substitute “the directors of the company have taken advantage of the exemption from audit conferred by section 249AA (dormant companies)”.

(2) In subsection (1) of section 247B (special auditors' report)( 8 )—

(a) in paragraph (b), after “section 249A(1) or (2)” insert “or section 249AA”,

(b) omit “and” at the end of paragraph (b), and

(c) omit paragraph (c).

(3) In subsection (3) of section 249C (the report required for the purposes of section 249A(2))( 9 ), omit from “(or, where the company is a charity,” to “that section)”.

(4) In subsection (1) of section 249E (effect of audit exemptions)( 10 ), after “section 249A(1)” insert “or 249AA(1)”.

(5) After subsection (1) of section 249E insert—

“ (1A) Where the directors of a company have taken advantage of the exemption conferred by section 249AA, then for the purposes of that section the company shall be treated as a company entitled to prepare accounts in accordance with section 246 even though it is a member of an ineligible group. ”

(6)Section 250 (resolution not to appoint auditors)( 11 ) is hereby repealed.

(7) In subsection (4)(a) of section 289 (particulars of directors to be registered under section 288)( 12 ), for “section 250(3)” substitute “section 249AA(3)”.

(8) In subsection (2) of section 386 (election by private company to dispense with annual appointment of auditors)( 13 ), for paragraph (a) substitute—

“ (a) the directors of the company have taken advantage of the exemption conferred by section 249A or 249AA, or ” .

(9) In subsection (1) of section 388A (certain companies exempt from obligation to appoint auditors)( 14 ), for “section 250” substitute “section 249AA”.

(10) In paragraph 2(2)(a) of Schedule 1 (particulars of directors etc to be contained in statement under section 10)( 15 ), for “section 250(3)” substitute “section 249AA(3)”.