Guidance notes, board minutes and written notice for obtaining an audit exemption

A UK company that is a subsidiary of a UK parent company can qualify for exemption from audit under the subsidiary company exemption (sections 479A & 479C of the Companies Act 2006) if the parent company guarantees the subsidiary’s outstanding liabilities for a particular financial year if certain conditions are met. These conditions include the members of the subsidiary unanimously agreeing to the audit exemption and the parent providing a statement of guarantee for the subsidiary.

We have this month added new templates to enable this procedure, namely:

• template board minutes to be used by the subsidiary company to confirm that it will be seeking an exemption form audit of its individual accounts for a particular financial year under section 479A Companies Act 2006;
• a template written notice of consent/agreement by the members of the company in accordance with s.479A(2)(a) Companies Act 2006; and
• a link to Companies House form AA06. This is the form of guarantee given by a parent undertaking as required by s.479A(2)(b) Companies Act 2006 and in accordance with the parent undertaking declaration in section 479C of the Companies Act 2006.

The guidance note on accounts and audit has also been updated to provide a full narrative to this process, and particularly all the formalities required for obtaining the exemption. The guidance note has also been updated to set out the changes that will be taking place in due course to the accounts and audit process for private limited companies considering the Economic Crime and Corporate Transparency Act 2023.

Note that there is no limit on the size of the company for the purposes of this audit exemption. A subsidiary within a small group or a dormant company may also qualify for exemption from audit under other provisions without the need for a parent guarantee.

This will be a useful package for accountants, company secretaries or administrators needing to obtain an exemption from audit for subsidiary companies.