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ACCA Applied Skills · Corporate and Business Law (Global) · Other company officers

Orion Ltd is a private company that qualifies for audit exemption. Members holding 12% of the voting shares give notice requiring the company to have its accounts audited, and the notice is given within the period allowed by the relevant law (assume a threshold of 10%). What is the effect?

The company must obtain an audit for that year. Members holding at least the minimum percentage of shares can require one even where the company qualifies for exemption, and 12% exceeds the assumed 10% threshold. Small turnover does not override the members' right.

  1. AThe notice is ineffective because only a majority of members can require an audit
  2. BThe company must obtain an audit for that financial year despite qualifying for exemptionCorrect
  3. CThe directors may ignore the notice if the company's turnover is below the exemption limit

Explanation

Under typical rules, members holding a stated minimum proportion of shares can require an audit even though the company qualifies for exemption. Here 12% exceeds the assumed 10% threshold and notice was timely, so the audit is required. Turnover below the limit does not override that right.

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