Subsidiary companies—audit exemption
Subsidiary companies—audit exemption

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Subsidiary companies—audit exemption
  • Qualifying subsidiary exemption from the requirement to audit accounts
  • Excluded companies
  • Parent undertaking guarantee
  • Parent undertaking guarantee as a class 1 transaction

If a company prepares annual accounts for a financial year, they must be audited, unless the company is exempt from audit.

Qualifying subsidiary exemption from the requirement to audit accounts

If a subsidiary company satisfies certain conditions, it may benefit from an exemption from the requirement to audit individual accounts for a financial year.

The relevant conditions are that:

  1. it is a subsidiary undertaking

  2. its parent undertaking is established under the law of any part of the UK

  3. all its members agree to the exemption in respect of the financial year in question

  4. its parent undertaking gives a guarantee in respect of that financial year under CA 2006, s 479C (ie, a statement guaranteeing all of the subsidiary company's outstanding liabilities at the end of the financial year, until they are satisfied in full, which is enforceable against the parent undertaking by any person to whom the subsidiary company is liable in respect of those liabilities)

  5. it must be included in the consolidated accounts drawn up by the parent undertaking for that financial year or to an earlier date in that year in accordance with:

    1. if the undertaking is established in any part of the UK and is a company, the requirements of CA 2006, Pt 15; or, if the undertaking is not a company, the legal requirements which apply to the drawing up of consolidated

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