UK subsidiary companies can claim exemption from the audit requirements of the UK Companies Act 2006. The procedure is available where the subsidiary has a parent undertaking in an EEA member state.
The exemption must be claimed for each individual financial year, and requires the following documents to be filed with Companies House:
- Unanimous consent in writing by the subsidiary’s members (shareholders)
- A “statement of guarantee” given by the subsidiary’s parent undertaking, on Form AA06. (The parent undertaking may be an indirect parent rather than the immediate parent)
- The parent undertaking’s consolidated accounts for the financial year in question, including a copy of the auditor’s report and the annual report on those accounts. Those accounts must contain prescribed information
- A certified English translation of the parent undertaking’s consolidated accounts, if they are not in English
These documents must be filed on or before the date on which the relevant subsidiary’s accounts are filed. The subsidiary’s accounts must contain certain information about the exemption from audit.
Some types of subsidiary are excluded, such as those which were quoted companies or banking companies at any time during the financial year in question.
The effect of the statement of guarantee is that the parent undertaking guarantees all outstanding liabilities to which the subsidiary company is subject at the end of the financial year to which the guarantee relates, until they are satisfied in full.
The guarantee cannot be revoked, and does not terminate if the subsidiary ceases to be a subsidiary of that parent undertaking.
The Institute of Chartered Accountants in England and Wales (ICAEW) has published a useful guidance note on the exemption. Click the following link to view the ICAEW guidance note.