For companies registered in the Abu Dhabi Global Market (ADGM), annual accounts are a key part of ongoing compliance. But one question often comes up as the filing deadline approaches:
Does an ADGM company always need audited financial statements to file its annual accounts?
Not necessarily.
The requirement depends on factors such as the company’s size, activities, entity type and whether it qualifies for an applicable audit exemption. However, certain entities remain subject to audit requirements even if they would otherwise qualify for an exemption. Understanding the distinction is important before preparing the annual filing.
Annual accounts filing and audited accounts are not the same
Generally, ADGM companies and Limited Liability Partnerships (LLPs) are required to file annual accounts with the ADGM Registration Authority (RA). The type of accounts required depends on the entity’s size, activities and applicable regulatory requirements.
For companies that do not qualify for an exemption, the filing will generally include:
- Audited annual accounts;
- An auditor’s report;
- A director’s report; and
- A board resolution approving the accounts.
Where an audit is required, the financial statements must be audited by an ADGM Recognised Auditor.
However, ADGM provides an audit exemption for certain companies that qualify under its small companies regime.
When can an ADGM company file unaudited accounts?
A company or LLP that qualifies as a small entity may be able to file simplified accounts instead of audited financial statements.
Under the current ADGM requirements, a company generally falls within the small-company regime where its turnover does not exceed USD 13.5 million and it has no more than 35 employees. Eligible small companies can file an unaudited balance sheet rather than full audited annual accounts filing.
There are, however, important exclusions.
Public interest entities and firms providing financial services are not eligible to use the simplified small-company filing regime.
The Companies Regulations also provide specific rules concerning companies that are part of a group, as well as circumstances in which members can require an audit. Therefore, simply falling below the turnover and employee thresholds should not be treated as an automatic audit exemption in every case.
What does the simplified filing involve?
Where a company qualifies for the small-company regime and uses the audit exemption, it may file an unaudited balance sheet.
The balance sheet must include the required statement confirming that the company is relying on the applicable small-company provisions. It must also be signed on behalf of the board by a director, with the director’s name stated on the balance sheet.
The exemption therefore does not remove the company’s responsibility to maintain proper accounting records or prepare compliant annual accounts.
Annual accounts filing: What about ADGM SPVs and holding companies?
An ADGM SPV or holding company may have limited transactions or relatively low operating activity, but this does not automatically mean that audited accounts are unnecessary.
The entity should first be assessed against the relevant ADGM requirements, including its size, activities, group structure and any applicable exemptions.
There is also a separate consideration where the entity is seeking to qualify as a Qualifying Free Zone Person (QFZP) for UAE Corporate Tax purposes.
ADGM has specifically issued guidance on accounts and audit requirements for ADGM QFZPs. The Corporate Tax rules can require a QFZP to maintain audited financial statements in order to meet the conditions for the 0% Corporate Tax treatment on qualifying income.
This creates an important distinction:
An audit exemption available under ADGM company law does not necessarily mean that audited financial statements are unnecessary for every other regulatory or tax purpose.
The company therefore needs to consider both its ADGM filing obligations and its UAE Corporate Tax position.
When are ADGM annual accounts due?
For most private companies and LLPs, subsequent annual accounts filing generally need to be filed within nine months of the Accounting Reference Date (ARD).
For example, where the ARD is 31 December, the filing deadline would generally be 30 September of the following year. Public companies generally have a six-month filing period.
ADGM has also introduced additional information requirements within the annual accounts filing process. These include information relating to the financial period, type of accounts filed, audit information where applicable, key financial and staffing data, and the currency of the accounts.
What should an ADGM entity check before annual accounts filing?
Before proceeding with the annual accounts filing, an entity should consider:
1. Entity type: Is it a private company, LLP, CSP, SPV or another type of ADGM entity?
2. Size: Does it meet the current thresholds for the small-company regime?
3. Activities: Does it conduct financial services or another activity that affects its eligibility for an exemption?
4. Group structure: Is the company part of a group, and do the group-level rules affect the exemption?
5. Tax position: Is the company a QFZP or seeking to benefit from the 0% Corporate Tax rate on qualifying income?
6. Filing deadline: What is the entity’s Accounting Reference Date and the corresponding filing deadline?
7. Audit status: If an audit is required, is the auditor appropriately recognised in ADGM?
Taking these questions together helps determine whether the entity should prepare audited annual accounts or can use an applicable simplified filing route.
How MS Can Help?
MS supports businesses with their ongoing ADGM compliance requirements, including annual accounts and related corporate obligations. Our team can help assess the applicable filing and audit requirements based on the entity’s structure and activities, coordinate with relevant professionals where required, and support the timely preparation and submission of annual accounts.
