The Companies and Limited Liability Partnerships (Accounts and Audit Exemptions and Change of Accounting Framework) Regulations 2012

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend provisions in and under the Companies Act 2006, relating to exemption from audit, the requirements to prepare individual accounts and to deliver individual accounts to the registrar of companies and the applicable accounting framework for individual and group company accounts.

The Regulations come into force on 1st October 2012 and apply to financial years ending on or after that date. The Regulations give effect to optional derogations not previously applied in Council Directive 78/660/EEC on the annual accounts of certain types of companies (O.J. L222, 14.8.1978, p.11).

Regulation 4 widens the exemption from audit for small companies to provide that a company must only meet the general small company criteria for accounts and reports to qualify for the exemption. Regulation 5 widens in the same way the conditions for qualification for audit exemption of a small company which is in a small group.

Regulations 6 and 7 introduce an exemption from the audit of individual accounts for subsidiary companies whose parent undertaking is established under the law of an EEA state. Various conditions must be satisfied in order for the subsidiary company to qualify for the exemption, principally the parent undertaking must give a statutory guarantee of the debts and liabilities to which the subsidiary company is subject as at the last day of the financial year in which the subsidiary company is seeking an audit exemption. Various categories of company are excluded from the exemption including quoted companies, some financial services companies and trade unions and employers’ associations.

Regulations 8, 9, 10 and 11 introduce exemptions for dormant subsidiaries from the requirement to prepare individual accounts and to deliver individual accounts to the registrar. To qualify for the exemption the dormant subsidiary must have satisfied the same conditions which subsidiaries must satisfy to qualify for the audit exemption established by regulations 6 and 7. Companies excluded from the exemption include quoted companies, some financial services companies and trade unions and employers’ associations.

Regulations 12, 13 and 14 provide that company directors who prepare a company’s individual accounts in accordance with international accounting standards may switch to Companies Act accounts for a reason other than a relevant change of circumstances provided they have not switched to Companies Act accounts in the period of five years preceding the first day of the financial year in which they wish to implement the change of accounting framework. Regulations 15, 16 and 17 do the same in relation to a parent company’s group accounts provided the parent company’s accounts are not required by Article 4 of the IAS Regulation (EC) No 1606/2002 to be prepared in accordance with international accounting standards.

Regulation 18 amends the meaning of annual accounts so that any reference to annual accounts in Part 15 of the Companies Act 2006 only includes a reference to individual accounts where a company has prepared them.

Regulation 19 adds to the list of documents subject to Directive disclosure requirements, the documents which a subsidiary company must deliver to the registrar in order to qualify for the exemptions established by regulations 6 to 11. The Registrar must publish notice of having received those documents in the London Gazette.

Regulation 20 amends the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 to apply to limited liability partnerships the same exemptions from audit and requirements to prepare individual accounts and to deliver individual accounts to the registrar, and the same change in the provisions governing the applicable accounting framework for individual and group accounts, as those introduced by these Regulations in relation to companies.

Regulations 21 and 22 respectively amend the Registrar of Companies and Application for Striking Off Regulations 2009 and the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 to provide that copies of documents which must be filed with the registrar of companies in order for subsidiary companies and LLPs to take advantage of the exemptions from the audit, preparation and filing of individual accounts introduced by these Regulations can be drawn up and delivered to the registrar in Welsh or in a language other than English, accompanied by a certified translation into English.

Regulation 22 also amends the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 to require the Registrar to publish in the London Gazette, notice of having received the documents which a subsidiary LLP must file in order to qualify for the exemptions from audit, preparation or filing of individual accounts established by these Regulations. Regulation 23 amends the Unregistered Companies Regulations 2009 to require the Registrar to do the same with regard to unregistered companies.

A transposition note has been prepared as have impact assessments of the effect that these Regulations will have on the costs of business. The transposition note and the impact assessments are available from the Department for Business Innovation and Skills, Business Environment Directorate, 1 Victoria Street, London, SW1H 0ET. They are also available electronically at www.bis.gov.uk. Copies have also been placed in the libraries of both Houses of Parliament.