Dormant companies

250 Resolution not to appoint auditors.

1

A company may by special resolution make itself exempt from the provisions of this Part relating to the audit of accounts in the following cases—

a

if the company has been dormant from the time of its formation, by a special resolution passed before the first general meeting of the company at which annual accounts are laid;

b

if the company has been dormant since the end of the previous financial year and—

i

is entitled in respect of its individual accounts for that year to the exemptions conferred by section 246 on a small company, or would be so entitled but for being a member of an ineligible group, and

ii

is not required to prepare group accounts for that year,

by a special resolution passed at a general meeting of the company at which the annual accounts for that year are laid.

2

A company may not pass such a resolution if it is—

a

a public company,

b

a banking or insurance company, or

c

an authorised person under the Financial Services Act 1986.

3

A company is “dormant” during a period in which no significant accounting transaction occurs, that is, no transaction which is required by section 221 to be entered in the company’s accounting records; and a company ceases to be dormant on the occurrence of such a transaction.

For this purpose there shall be disregarded any transaction arising from the taking of shares in the company by a subscriber to the memorandum in pursuance of an undertaking of his in the memorandum.

4

Where a company is, at the end of a financial year, exempt by virtue of this section from the provisions of this Part relating to the audit of accounts—

a

sections 238 and 239 (right to receive or demand copies of accounts and reports) have effect with the omission of references to the auditors’ report;

b

no copies of an auditors’ report need be laid before the company in general meeting;

c

no copy of an auditors’ report need be delivered to the registrar, and if none is delivered, the copy of the balance sheet so delivered shall contain a statement by the directors, in a position immediately above the signature required by section 233(4), that the company was dormant throughout the financial year; and

d

the company shall be treated as entitled in respect of its individual accounts for that year to the exemptions conferred by section 246 on a small company notwithstanding that it is a member of an ineligible group.

5

Where a company which is exempt by virtue of this section from the provisions of this Part relating to the audit of accounts—

a

ceases to be dormant, or

b

would no longer qualify (for any other reason) to make itself exempt by passing a resolution under this section,

it shall thereupon cease to be so exempt.