Amendments to Companies Act 1993 reporting requirements effective form 31 May 2017
Amendments have been made to the Companies Act 1993 via the Regulatory Systems (Commercial Matters) Amendment Act 2017 so that “bottom tier” subsidiary companies within larger groups will no longer have to prepare financial statements, even if these companies are ‘large’ as defined.
These amendments apply:
- To accounting periods that began before, but end on or after, 31 May 2017;
- To accounting periods that begin on or after 31 May 2017.
As a reminder, preparation requirements for financial statements apply to:
- Every large company
- Every company that is a public entity
- Every large overseas company
- Every other company with 10 or more shareholders unless the company has opted out of compliance; and
- Every other company with fewer than 10 shareholders if the company has opted into compliance.
If a company falls into any of the above and it has subsidiaries, it must prepare group financial statements but can elect not to present separate parent financial statements.
The amendments relate to sections 200 and 202 of the Companies Act 1993 (that contain the preparation requirements for separate and group financial statements respectively) as follows:
- A new section 200(3) has been inserted which states that a scoped in company that is a subsidiary, but does not itself have subsidiaries, does not need to prepare separate financial statements, as long as it is reported as part of the group which prepares generally accepted accounting practice compliant financial statements.
- Existent section 202(2) has been deleted and replaced with a new section 202(2) which says that, a scoped-in company that is a subsidiary, and itself has subsidiaries, does not need to prepare group financial statements, as long as it is reported as part of the group which prepares generally accepted accounting practice compliant financial statements.
Please refer to the below diagram for a summary of the amendments:
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Company
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Reporting Requirements per Companies Act 1993
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A
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- Must prepare group financial statements – section 202(1)
- Does not have to prepare separate financial statements - section 200(2)
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B
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- Does not have to prepare separate financial statements – section 200(2)
- Does not have to prepare group financial statements, as long as – section 202(2):
(i) B is a subsidiary of A;
(ii) Generally accepted accounting practice compliant group financial statements in relation to a group comprising A, B, and all other subsidiaries of A are completed; and
(iii) B has not opted into compliance with section 202.
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C
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- Does not have to prepare separate financial statements, as long as - section 200(3):
(i) C is a subsidiary of A;
(ii) Generally accepted accounting practice compliant group financial statements in relation to a group comprising A, C, and all other subsidiaries of A are completed; and
(iii) C has not opted into compliance with section 201.
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D
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- Does not have to prepare separate financial statements, as long as - section 200(3):
(i) D is a subsidiary of A;
(ii) Generally accepted accounting practice compliant group financial statements in relation to a group comprising A, D, and all other subsidiaries of A are completed; and
(iii) D has not opted into compliance with section 201.
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E
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- Does not have to prepare separate financial statements, as long as - section 200(3):
(i) E is a subsidiary of A;
(ii) Generally accepted accounting practice compliant group financial statements in relation to a group comprising A, E, and all other subsidiaries of A are completed; and
(iii) E has not opted into compliance with section 201.
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It should be noted, however that if any these companies (B, C, D and/or E) are subject to reporting requirements under other legislation (i.e. in addition to the Companies Act 1993), these companies will still need to ensure they comply with any reporting requirements under that other legislation.
For more on the above, please contact your local BDO representative.