We are in the middle of the silly season for filing – company tax returns, personal tax returns and Accounts filing. In the middle of all that is something called the Annual Return or Form B1 for companies. The Annual Return records standing data on a company such as registered address, shareholders, share transfers and directors.
This Return for Companies is something that tends to bring more stress on Agents and Advisers than on Company Directors! Dealing with the Companies Registration Office on missed dates is not a nice place to be as they tend to have a stock answer……..LATE.
Poor you I hear you say! What all agents are trying to do is keep their Director clients compliant. The consequences for a company Director in failing to file an Annual Return for their company by the due date can be costly! How I hear you say?……read on!
All companies – active or dormant – are required to file an Annual Return (Form B1) with the Companies Registration Office each year. All companies have a unique Annual Return Date (or ARD). This date can be a maximum of 9 months after the company year end. As most year ends tend to be 31 December, a large volume of companies have an ARD of 30 September. What adds to the confusion is that this date is not set as being 9 months after the year end. It initially depends on the date the company was incorporated.
This ARD is like a starting date and commences a sequence of events that brings great excitement, joy, stress and relief to us all in the industry over a period of 56 days! 28 days after the ARD the annual return must be filed online with the CRO. This produces a signature page which needs to be printed and signed by a Director and Secretary. This is where it all gets confusing. The signature page needs to be physically signed and delivered to the CRO no later than 28 days after the date it was filed online. In addition, the company accounts need to be uploaded to the Companies Registration Office within the same 28 day period.
Consequences for being late
Loss of Audit Exemption
One of the great improvements made for SME companies over the last few years has been the extension of the Audit exemption. This basically means that the majority of SME companies in Ireland do not need to have an External Audit. We are talking about companies with turnover of up to €8.8m (now increasing to €12m) so not insignificant in size. Yes, they can still get their Accountant involved to prepare year end accounts but the focus of this can be on helping and assisting the business owner as opposed to a completely independent external process. When a company misses its Annual Return Date it will more than likely lose this exemption for two years. That brings with it significant additional cost as well as causing potential issues with bankers and suppliers as the company accounts are late. In addition, as there was never a plan to have an External Audit, the audit process itself can be quite difficult and not something that Auditors particularly want to get involved in.
In comparison to the loss of Audit Exemption the impact of the late filing fees is not that onerous. The fees start at €100 and increase by €3 per day to a maximum of €1,200.
Failing to file an Annual Return can be grounds for the CRO to commence involuntary strike off procedures against a company. The company will get a reminder letter but this process is going to start happening much quicker.
The consequences of strike off are very serious for a company that is still trading:
- The assets of the company become the property of the State on dissolution of the company;
- Following strike-off of a company, it ceases to exist as a legal entity;
- The protection of limited liability is lost with effect from that date, and if the business formerly carried on through the company is continued, the owners are trading in their personal capacity;
- Banks should be unwilling to lend money to an entity which has, effectively, ceased to exist;
- There can also be unpleasant consequences for directors of such companies in that a disqualification order may be made against them by the High Court on the application of the Director of Corporate Enforcement.
An added confusion for this year is that all Annual Returns have to be filed electronically. Previously there was the option to file a paper return.
In order to ensure you avoid any pitfalls ask yourself the following questions:
Am I director of any company? This might seem obvious but often the companies that get caught out here are less obvious ones such as old dormant companies or voluntary organisations. Everybody assumes somebody else is looking after it!
Is somebody from the organisation tasked with ensuring the Annual Return is filed on time. Ask the question. Better to be a pain now than everyone having to figure out how to pay for and find an Auditor.
If I don’t have online access to file this return is there an adviser I can talk to?
As ever, feel free to contact one of the team if you would like to discuss further!