The Companies Act 2016 which came into operation on 31 January 2017, requires all companies to prepare and audit their financial statements before lodging it with the Companies Commission of Malaysia (SSM). However, under section 267(2) of the Companies Act 2016, the Registrar of Companies can exempt selected categories of private companies from having to appoint an auditor and to impose the criteria and conditions accordingly.
To this end, on 4 August 2017, SSM issued the Practice Directive No. 3/2017, highlighting that dormant, zero-revenue and threshold-qualified private companies are eligible to elect for audit exemption.
A dormant company qualifies for audit exemption if it has been dormant from the time of its incorporation; or it is dormant throughout the current financial year and in the immediate preceding financial year.
A zero-revenue company is qualified for audit exemption if it does not have any revenue during the current financial year; it does not have any revenue in the immediate past two financial years; and its total assets in the current Statement of Financial Position (FS) does not exceed RM300,000 as well as in the FS of the immediate past two financial years.
A threshold-qualified company is qualified for an audit exemption if it fulfills the following criteria-
- It has revenue not exceeding RM100,000 during the current financial year and in the immediate past two (2) financial years;
- Its total assets in the current Statement of Financial Position does not exceed RM300,000 and in the immediate past two (2) financial years; and
- It has, at the end of its current financial year and in each of its immediate past two (2) financial years’ end, not more than five (5) employees.
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