Many of Dania Accounting’s clients ask whether or not they actually need an auditor to audit their annual report. In most cases, the answer is no. We’ll briefly explain why by outlining the audit rules for sole proprietorships, limited liability companies, and holding companies.
No audit is necessary for sole proprietorships. And although limited liability companies had a legally required annual audit in the past, the law changed in 2006, allowing most companies to avoid the audit.
Limited liability company requirements
The rules are the same for both IVS and ApS companies. In order to avoid the audit, a limited liability company must meet two out of three of the below requirements:
1) You must have a balance sum of a maximum of 4 million DKK – that’s either the sum of your assets or the sum of your debts.
2) You must have maximum net sales of 8 million DKK per year, without VAT.
3) You must have an average employee staff of 12 full-time employees during the accounting year.
You must meet at least two out of these three requirements. If you don’t, you need an audit.
De-registering the audit when you start the company
When you start the business, you can de-register the audit to avoid it in your first accounting year by writing it into the founding document; this is the document establishing that you’ve incorporated the limited liability company.
Another thing to remember is that if you copy-and-paste your statute from online sources, the audit will be mentioned in the statute. In order to de-register the audit, you must ensure that the statute is cleaned of everything related to an auditor. The Danish word for an auditor is “revisor” and the act of de-registering the audit is called “at fravælge revisionspligt”.
De-registering the audit of an established company
If your limited liability company was established many years ago with annual audits, then you must de-register during your normal annual shareholder meeting. This is the time when you approve the annual report from the previous year.
Let’s say, for instance, you’re having the annual shareholder meeting in 2018 to approve the annual report for 2017; in this case, 2017 must be audited, because those were the established rules in 2017. However, during the shareholder meeting, you can agree that from the next year, 2018, you’ll de-register the audit.
The steps to do this:
1) Write it down in the protocol at the shareholder meeting.
2) Agree at that same shareholder meeting to change the statute, deleting everything that’s related to the audit.
3) When 2018 comes to a close and you’re completing the annual report, write in the declaration of the management section that the conditions for not being audited have been approved.
De-registering the audit for a holding company
Holding companies have a controlling amount of shares in other companies, a ‘controlling amount’ normally being defined as 20% ownership. If you have a holding company, the rules for avoiding the audit are initially the same as those that govern limited liability companies – a balance of 4 million DKK, sales of 8 million DKK, and 12 full-time employees. The difference is you must combine the values from all the companies you own shares in. Even if you own only 20%, you must add the total balance, sales, and employees from all companies, and you can quickly exceed these amounts. If you’re within the three requirements, you’re allowed to de-register the audit with the same rules as a limited liability company. If not, you need an audit.