Subsidiary companies—audit exemption


Published by a ÀÏ˾»úÎçÒ¹¸£Àû Corporate expert
Practice notes

Subsidiary companies—audit exemption


Published by a ÀÏ˾»úÎçÒ¹¸£Àû Corporate expert

Practice notes
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STOP PRESS: A significant restructuring of the UK listing regime came into effect on 29 July 2024 which included the removal of the premium and standard listing segments and the creation of a single listing category for equity shares in commercial companies. The commercial companies category is heavily disclosure-based and sits alongside other listing categories such as the shell companies, secondary listing and closed ended investment fund categories. A new UK Listing Rules sourcebook came into force to implement the changes and the previous Listing Rules sourcebook was revoked. For further information, see Practice Note: Reform of the UK listing regime—fundamentals. This Practice Note reflects the listing regime as it was prior to 29 July 2024.

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

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Jurisdiction(s):
United Kingdom
Key definition:
Subsidiary definition
What does Subsidiary mean?

There are two suggested definitions for the term 'subsidiary', as commonly used in agreements. CA 2006, s 1159 provides that a company is a holding company of another company (its subsidiary) if it satisfies one of three tests, two of which require it to be a member of the other company (as well as to possess certain rights, which go to its voting powers). Membership of a company is a question of fact and the court has found that if a company (company A) has transferred shares in another company (company B) to a lender in connection with the taking of security and the name of that lender or the lender’s nominee has been entered in the register of members, then company A is not a member of company B in respect of those shares: see Enviroco Ltd v Farstad Supply A/S.

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