The Law no. 155/2017 enforced important news for what concerns Audit requirements for Limited Liability Companies (S.R.L.), modifying the limits set by article 2477 of the Italian Civil Code.
Subsequently, the requirement contained in the Law has recently been enforced by the Code of Corporate Crisis and Insolvency, ruled by the Legislative Decree no. 14/2019, published on the Official Gazette on February 14th 2019.
Therefore the new rules become applicable starting March 14th 2019.
With the new regulation the limits set for the appointment of the Audit Body become lower, causing as an immediate effect – for S.R.L. involved – the obligation of modifying the Incorporation Deed and the Memorandum of Association (Statute) where needed, together with the appointment of a new Audit Body (Board of Auditors plus Accounting Auditors or Sole Auditor).
AUDIT BODY FOR Srl: NEW LIMITS ENFORCED IN 2019 (WITH REFERENCE TO YEARS 2017 AND 2018)
The new regulation on Audit Body in SRL has modified the article 2477 of the Civili Code, that now – in the part interested – states:
“The appointment of the Audit Body or the Sole Auditor is mandatory if the company:
is subject to the filing of consolidated annual accounts;
controls a company subject to audit;
exceeded for 2 consecutive years at least ONE of the following limits:
total assets of the Financial Statement: 2 million Euro;
revenues: 2 million Euro;
average number of employees in a year: 10 units.
The obligation to appoint the Audit Body or the Sole Auditor set by letter c) above, chases when, for three consecutive years, none of the limits have been surpassed”.
Thus is evident that limits are significantly lower than the ones set in the past, when the Audit Body was needed only if for two consecutive years two (an not only one as it is now) of the limits were surpassed: 4.4 millions Euro for Assets, 8.8 millions Euros for revenues and 50 units for average employees.
Obviously the reduction of these limits has produced as an immediate effect the widening of the SRLs involved with the new obligations for Audit requirements.
HOW AND WHEN TO COMPLY WITH THE NEW REGULATION
What your SRL has to do to comply with new Audit requirements and consequently appoint the Audit Body?
And by when it has to comply?
Answers to these questions can be found in Paragraph 3 of Article 379 of the Legislative Decree no. 14/2019:
“Limited Liability Companies already incorporated at the date of enforcement of this article, when requisites set by Paragraph 1 are met, have to appoint the Audit Body, if needed and update their Incorporation Deed and Memorandum of Association within nine months from said date.”
Up to the expiration of that deadline, the existing rules set by the Incorporation Deed and Memorandum of Association remain in force even if they don’t comply with the rules set by Paragraph 1.
For the first application of the rules set by article 2477 of the Civil Code, Paragraphs 2 and 3, as amended by the Paragraph 1, you have to consider the two years preceding the deadline set by the first period”.
The above mentioned rule has to be interpreted as follows:
SRLs already incorporated on March 14th 2019 will have 9 months to comply with the new Audit Regulation.
Therefore within December 14th 2019 those SRLs that in the years 2017 and 2018 exceeded even ONE of the 3 limits set by article 2477 of the Civil Code will have to:
ADEQUATE, WHERE NEEDED, THE INCORPORATION DEED AND THE MEMORANDUM OF ASSOCIATION (STATUTE)
APPOINT THE NEW AUDIT BODY (BOARD OF AUDITORS OR SOLE AUDITOR)
It has been clarified by Italian Authorities that, while the Board of Auditors can also process accountings audit if appointed, as well as the Sole Auditor can supervise the respect of the law and of the Statute, Audit Companies will not be allowed to perform the duties of the Board of Auditors or of the Sole Auditor; as a consequence if a SRL wants to appoint an Audit Company for accountings audit, has then to appoint also a Board of Auditors or a Sole Auditor to supervise the respect of the law and the Statute.
So your company will have to:
AMEND IF NEEDED the Incorporation Deed and the Memorandum of Association appointing a Public Notary for a extraordinary Shareholders’ meeting, and
if has surpassed for 2 consecutive years at least 1 of the 3 limits set by the new Law in 2017 and 2018 (revenues and average number of employees), YOUR COMPANY IS OBLIGED to appoint the Audit Body (Board of Auditors or Sole Auditor).
We’d like to highlight how, even if Italian Authorities have confirmed that the deadline to comply is set on December 14th 2019, the Auditors appointed near that deadline will have to audit the entire 2019 financial year within a very strict period of time, therefore it is recommendable to evaluate the appointment of the new Audit body with the Shareholders Meeting that will approve the Annual Financials for the year 2018, therefore within June 30th 2019.
Our firm will be more than happy to assist your company in complying with this new regulation, please contact us for further details.