I have a holding company which is regulated and authorised by the central bank. This company owns 100% of the shares of another company (i.e. a subsidiary company) which is not regulated (i.e. it is a standard trading company). The two companies individually and when taken together do not exceed the small group thresholds (i.e. meets two of the three: Turnover>=12 million; Total assets >=6 million; and number of employees <=50). Can the subsidiary company claim audit exemption?
No this subsidiary company cannot claim audit exemption as its parent (i.e. the company authorised and regulated by the central bank) is an ineligible entity (as a company that is authorised by the central bank is a company included in Schedule 5 of Companies Act 2014) and therefore it together with the other group companies cannot be considered a small group. Section 280B(2) and 280B(5) of Companies Act 2014 refers. Section 359 of Companies Act 2014 is the section dealing with audit exemption for group companies, Section 359(2) of CA 2014 makes it clear that only group’s that qualify as a small group as defined in Section 280B CA 2014 can avail of audit exemption.
Therefore in this case as Section 280B excludes the group from qualifying as a small group, Section 359 of CA 2014 does not apply and therefore the subsidiary entity here must prepare audited financial statements.
In addition the parent company must prepare audited financial statements. As the parent company is disqualified from being a small holding company under Section 280B of CA 2014 then it must prepare consolidated financial statements as its statutory financial statements.