Companies Act update - Small companies are getting bigger

In a welcome move, measures are being introduced to help reduce the administrative and regulatory obligations, together with the associated costs of compliance for smaller enterprises. The Minister for Enterprise, Trade and Employment signed into legislation new provisions to increase the size criteria for qualifying as a micro company and small company under the Companies Act 2014 (the ‘Companies Act’).

European Union (Adjustments of Size Criteria for Certain Companies and Groups) Regulations Act 2024 ^[1] was signed into law on 19 June 2024 and takes effect from 01 July 2024.

The financial threshold criteria for qualifying as a micro company, a small company and a small group have all been increased by a minimum of 25%, meaning more companies may be able to avail of an audit exemption.

From 01 July 2024, the new criteria will automatically apply to all financial periods beginning on or after 01 January 2024.

The regulations also provide that companies with financial periods commencing on or after 01 January 2023 can elect to apply the new size criteria by passing an appropriate resolution (Article 2⁽¹⁾ of the Commission Delegated Directive (EU) 2023/2775 of 17 October 2023).

A comparison of the old and new size criteria under the Companies Act are shown in the table below:

It’s worth noting there are no changes to the employee element of the size criteria. The only changes relate to the financial thresholds relating to turnover and balance sheet total. The criteria relating to the average number of employees remains unchanged at 10 for a micro company and 50 for a small company or small group.

The regulations also increase the thresholds for qualifying as a medium company or medium group. These also come into force on 01 July 2024 and will automatically apply to all financial periods beginning on or after 01 January 2024.

In addition to the above changes to the size criteria, the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Bill 2024⁽²⁾, which was published on 15 March 2024, proposes an amendment to the existing legislation to help protect audit exemptions, once claimed. Currently a company will lose its audit exemption if it is late in filing its annual return. It is proposed to amend the legislation to allow companies to file their annual return late once every 5 years with no loss of audit exemption. This has not yet been enacted; however, it will be a further welcome move for small companies.

Whereas there are no immediate actions to take, it is worth reviewing the size of your company (or group of companies) to determine if you qualify for an audit exemption resulting from the changes in the size criteria.

However, it should be noted that audit exemptions are not solely based on size criteria and may be impacted by your companies’ registration office filing history, requests from shareholders that an audit be undertaken or the type of company you have (e.g. public vs private).

At Evelyn Partners we work with our clients to ensure that all Companies Act obligations are adhered to, that all filing deadlines are met and that you are kept informed of developments that might affect your business. We also analyse and help identify if there are processes or governance tweaks that can support directors’ obligations.

If you would like further information on the above or on how we can help with your compliance requirements, please contact our Company Secretarial Lead at richard.casey@swgroup.com

[1] - S.I. No. 301/2024 - European Union (Adjustments of Size Criteria for Certain Companies and Groups) Regulations 2024 (irishstatutebook.ie)

[2] General Scheme of the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Bill 2024 - DETE (enterprise.gov.ie)