Exemption from audit under sections 479A-479C of the Companies Act 2006 (the Act) has been in effect since October 2012, only a trading subsidiary whose parent company is established under UK law is eligible for this exemption.

In order to satisfy the conditions required for obtaining the exemption a number of documents need to be completed, signed and filed at Companies House.

For the subsidiary to be exempt, the conditions set out in s479A must be met:

• the parent undertaking is established under the law of any part of the United Kingdom;
• all of the members of the company agree to the exemption;
• the parent undertaking gives a guarantee under section 479C;
• the company is included in the relevant consolidated accounts in accordance with the specified applicable accounting standards;
• the parent undertaking discloses in the notes to the consolidated accounts that the company is exempt from the requirements of the Act; and
• the directors of the company deliver to the registrar on or before the date that they file the accounts for that year the documents set out in the Act.

All of the members of the company agree to the exemption

Firstly, all members of the subsidiary company must agree to the exemption by signing a members agreement which is filed at Companies House.

There is no prescribed form for the written notice of agreement by the members of the company, but the company will need evidence that consent was obtained. Companies House guidance states that the notice of agreement by members must show the subsidiary company’s name and registered number in a prominent place.

Members include:

• holders of ordinary shares (including the immediate parent company which need not be the undertaking that is providing the guarantee);
• holders of preference shares or non-voting shares;
• holders of any shares that are presented as liabilities for financial reporting purposes (the Act being concerned with the legal status of the shares and of their holders as members).

The parent undertaking gives a guarantee under section 479C

Secondly, the parent company must give a statutory guarantee of the subsidiary's outstanding liabilities. The parent company gives this guarantee by completing a form AA06 which is filed at Companies House for the subsidiary, no contract is required between the parent company giving the guarantee and the parties who benefit from the guarantee. It is worth noting that once an AA06 is filed it cannot be removed or revoked and will remain in force until all the liabilities of the subsidiary companies are settled in full. This means that once the form is filed, the parent company is permanently on the hook for the subsidiary’s liabilities. Directors of parent companies must check that they have power to provide the guarantee.

The subsidiary company is included in the relevant consolidated accounts

Thirdly, the subsidiary company must be included in the consolidated accounts drawn up by the parent company and the parent company must disclose that the subsidiary company is exempt by virtue of s.479A.

This Notice of Agreement to Exemption from Audit under Section 479A Companies Act 2006 is fully comprehensive and compliant with the requirements of Section 479A of the Companies Act 2006 and Companies House, it is in Microsoft Word format, written in plain English, easy to use and edit.