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On 16 July 2025, an important legislative change was introduced in respect of the loss of audit exemption for small and micro companies in Ireland that are not part of a group. The changes were introduced by Section 22 of the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Act 2024.
Overview of the change
Previously, a single late annual return automatically resulted in companies incurring late filing penalties and the loss of audit exemption for the two following financial years. The requirement to have financial statements subject to audit can create an unnecessary financial and administrative burden on small and micro companies. In certain circumstances, a company could submit an application to the District Court for an extension to the annual return filing date and avoid paying late filing fees.
Under the new rules, small and micro companies will only lose their audit exemption if they fail to file their annual return on time for a second time in a five-year period. The first instance of a late filing will only trigger the standard late filing penalties, but not the added loss of entitlement to audit exemption. The updated regime reflects a more practical and lenient approach to compliance enforcement, encouraging timely filing while ensuring that small companies are not unfairly penalised for an isolated late annual return filing.
It's important to note that the new audit exemption provisions do not extend to small or micro groups. Therefore, if a company within a small or micro group structure files a late annual return, it will continue to be the case that all companies within the group will lose their audit exemption for the following two financial years. The entire group will be required to prepare audited financial statements unless further steps are taken.
Clarifications from Companies Registration Office notice
The Companies Registration Office (“CRO”) issued the following clarification regarding the change to the audit exemption regime:
“Late annual returns filed up to midnight on 15 July 2025 will require an audit for the following two annual returns.
Effective from midnight on 15 July 2025, audited financial statements are required if a compliance filed late twice in the last 5 years.
The 5-year reference period is effectively starting from midnight on 15 July 2025 for companies who are not currently filing audited accounts due to loss of audit exemption for late filing of annual returns preceding the enactment.”
Insight
This amendment to the Companies Act 2014 marks a welcome development, offering meaningful relief to small and micro companies that, despite prioritising their filing obligations, occasionally struggle to comply with the filing requirements of the company.
However, company officers of all companies must ensure they understand the obligations of their role and the filing requirements of the company, particularly small group companies where one instance of a missed annual return filing will continue to result in an audit requirement for all Irish registered group companies.
Need help understanding your company's status?
If you're unsure how these changes impact your company and its entitlement to audit exemption you can get in touch with us to discuss further.
