Richard Bruton (Dublin North Central, Fine Gael)
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Question 198: To ask the Minister for Enterprise, Trade and Innovation if he will indicate the circumstances in which bodies can be exempt from the requirement of an audit and his views on whether the necessity of having an audit is an unnecessary expense for some small businesses or organisations which are solely organised for social purposes; and if he will make a statement on the matter. [2959/11]

Billy Kelleher (Cork North Central, Fianna Fail)
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In general every company should appoint an auditor and have its annual accounts audited. However, certain private limited companies, which satisfy certain conditions, can be exempted from these requirements. To avail of the exemption, the directors of the company must form the opinion that in respect of both the financial year in question and the immediately preceding financial year, the company satisfies the following conditions:-

(i) the company is a company to which the Companies (Amendment) Act

1986 applies,

(ii) the amount of the turnover of the company does not exceed €7.3 million,

(iii) the balance sheet total of the company does not exceed €3.65 million,

(iv) the average number of persons employed by the company does not

exceed 50,

(v) the company is not a parent undertaking or a subsidiary undertaking, and

(vi) the company is not a licensed bank, an insurance undertaking or a

financial services company of the kind referred to in the Second Schedule

of the 1999 (No. 2) Act. A company is not entitled to the exemption in a

financial year unless the company is up-to-date in the filing of its annual

returns with the Companies Registration Office.

Companies organised for social purposes i.e. non-profit organisations, such as charities, residential management companies, sports clubs, trade associations and community or special interest groups are generally incorporated as companies limited by guarantee.

In 2009, the Company Law Review Group (CLRG) considered the case for extending the audit exemption to companies limited by guarantee. As outlined in its 2009 Annual Report the Group recommended that:

(i) Subject to consultation with the Minister for Community, Rural and Gaeltacht Affairs and the Charities Regulator the audit exemption regime contained in Part III of the 1999 (No. 2) Act should be extended to such class or classes of companies limited by guarantee which are charitable organisations (within the meaning of the Charities Act 2009) so as to bring them into alignment with charitable organisation that are not companies, provided that 10% of the members with voting rights should be able to require an audit.

(ii) The audit exemption regime be extended to all companies limited by guarantee which are not charitable organisations, subject to a veto right, (i.e. that any one member who has the right to vote at general meetings of the company may veto the proposal to avail of the exemption), and further subject to the requirement that audit exemption in respect of the following year, shall be an item on the agenda of the annual general meeting.

Subject to Government approval the recommendations of the CLRG in this matter will be taken into account in the Companies Consolidation and Reform Bill currently being drafted in the Office of the Parliamentary Council.