—(1) A company shall be exempt from audit requirements if —
it has been dormant from the time of its formation; or
it has been dormant since the end of the previous financial year.
(2) A company is dormant during a period in which no accounting transaction occurs; and the company ceases to be dormant on the occurrence of such a transaction.
(3) For the purpose of subsection (2), there shall be disregarded transactions of a company arising from any of the following:
the taking of shares in the company by a subscriber to the memorandum in pursuance of an undertaking of his in the memorandum;
the appointment of a secretary of the company under section 171;
the appointment of an auditor under section 205;
the maintenance of a registered office under sections 142, 143 and 144;
the keeping of registers and books under sections 88, 131, 173, 189 and 191;
the payment of any fee specified in the Second Schedule or an amount of any fine or default penalty paid to the Registrar under section 409(4);
such other matter as may be prescribed.
(4) Where a company is, at the end of a financial year, exempt from audit requirements under subsection (1) —
the copies of the profit and loss accounts and balance-sheet, or consolidated accounts and balance-sheet of the company to be sent under section 203 need not be audited;
section 203 has effect with the omission of any reference to the auditor’s report or a copy of the report;
copies of an auditor’s report need not be laid before the company in a general meeting; and
the annual return of the company to be lodged with the Registrar shall be accompanied by a statement by the directors —
that the company is a company referred to in subsection (1)(a) or (b) as at the end of the financial year;
that no notice has been received under subsection (6) in relation to that financial year; and
as to whether the accounting and other records required by this Act to be kept by the company have been kept in accordance with section 199.
(5) Where a company which is exempt from audit requirements under subsection (1) ceases to be dormant, it shall thereupon cease to be so exempt; but it shall remain so exempt in relation to accounts for the financial year in which it was dormant throughout.
(6) Any member or members holding not less than 5% of the total number of issued shares of the company (excluding treasury shares) or any class of those shares (excluding treasury shares), or not less than 5% of the total number of members of the company (excluding the company itself if it is registered as a member) may, by notice in writing to the company during a financial year but not later than one month before the end of that year, require the company to obtain an audit of its accounts for that year.
(7) Where a notice is given under subsection (6), the company is not entitled to the exemption under subsection (1) in respect of the financial year to which the notice relates.
(8) In this section, “accounting transaction” means a transaction the accounting or other record of which is required to be kept under section 199(1).
[UK, 1985, ss. 249B, 250]