Seán Sherlock (Cork East, Labour) | Oireachtas source

This is a significant amendment and arises as a consequence of the CLRG's recommendation in 2013 that company law be amended to allow companies that meet two of the three criteria relating to balance sheet total turnover and number of employees, to qualify for audit exemption. The intention here is to use the available provisions in EU law to help small companies.

The Bill, as it stands, incorporates section 32(3)(a)(ii) and section 32(3)(a)(iii) of the Companies (Amendment) (No. 2) Act 1999. It provides that a private company limited by shares that meets three specified criteria may be exempted from the general rule that the annual accounts of a company must be audited. The three criteria and their current thresholds are: the annual turnover does not exceed €8.8 million; the balance sheet does not exceed €4.4 million; and the average number of employees does not exceed 50. The current thresholds were set in August 2012 and are given effect in two statutory instruments: the European Union (Accounts) Regulations 2012, SI No. 304 of 2012; and the Companies (Amendment) No. 2 Act 1999 (Section 32) Order 2012, SI No. 308 of 2012. This legislation transposes into Irish law elements of the fourth Council directive on the annual accounts of certain types of companies, which provides that member states may exempt companies from the obligation to conduct an annual audit where they meet at least two of the three criteria. When introducing this provision into Irish law in 1999, the Oireachtas chose to require companies to meet all three. The Bill, as initiated, carried forward the existing legislative provisions on audit exemption and now proposes to extend the scope of the exemption. In this regard, the Bill also provides for the application of the exemption for the first time to companies limited by guarantee. It provides that a company may be either a parent or subsidiary applying the three criteria to the group as a whole and not to individual companies within the group. This also proposes the application of the audit exemption to a dormant company.