Adjustments To Size Criteria For Companies/Groups Take Effect

The European Union (Adjustments of Size Criteria for Certain Companies and Groups) Regulations 2024 (the Regulations) came into operation on 1 July 2024. The Regulations give effect to a recent EU delegated directive which amended the Accounting Directive to adjust the size criteria for certain undertakings/groups by 25% to account for inflation.

The Regulations amend certain provisions of Part 6 of the Companies Act 2014 (the Act) to increase the qualifying criteria in terms of turnover and balance sheet total for micro companies, small companies and groups and medium companies and groups (and, as a result, large companies, in that a large company is one that does not fall within any of the other categories). No change has been made to the criteria in relation to the average number of employees.

The thresholds are set out below; it should be noted that only the figures will change and all the other provisions in determining whether a company falls within a particular category continue to apply.

Companies can elect to first apply the new thresholds either to financial years beginning on or after 1 January 2024 or to financial years beginning on or after 1 January 2023.

The amendments will increase the number of companies and groups that:

• are entitled to avail of the exemption from audit under Chapter 15 of Part 6 of the Act (which largely depends on meeting the criteria for a small company or small group);
• are exempted as small or micro companies from making certain disclosures in their financial statements (e.g. a small company need not include certain information in its directors' report, and a micro company is exempt from preparing such a report); or
• are permitted as small or micro companies to file abridged financial statements with their annual return.

The above amendments will not affect other thresholds, for example those criteria whereby certain companies are required to prepare a directors' compliance statement under section 225 of the Act, or those criteria whereby certain companies are required to establish an audit committee under section 167 of the Act, or explain why they have not done so. However, the amendments will generally have a positive impact in reducing the obligations on, and increasing the exemptions available to, companies affected by the changes.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.