The Commercial Code (art.42.1) states that any parent company of a group of companies shall be required to formulate their consolidated annual accounts and management report. In turn, (art.42.4) states that the company's general meeting, which is necessary to form the consolidated accounts, must designate an auditor to monitor said accounts and management report. Therefore, if the company is required to formulate consolidated yearly statements, they must be audited.

Notwithstanding the above, Article 43 of the Commercial Code provides exemptions for groups of companies having to formulate consolidated annual accounts, which meet any of the following requirements:

• When on the closing date of the financial year, the company obligated to consolidate does not, in its last annual accounts, exceed two of the limits set out in the Royal Legislative Decree 1/2010, July 2. This Decree approves the consolidated text of the Corporations Act, for the formulation of the abbreviated profit and loss accounts, except for any company of the group that is considered a public interest entity according to the definition as set out in Article 3.5 of Law 22/15 of July 20 (Auditing). These limits are:

  Parameters	AMOUNT
  Total assets	11.400.000 €
  Annual net turnover	22.800.000 €
  Average number of employed workers	250

• When the company required to consolidate, subject to Spanish law, is at the same time the dependent of another company governed by the legislation mentioned above, or by the legislation of another Member State of the European Union, whether the latter owns upwards of 50% of the shareholdings and, shareholders and partners that hold, at least, 10 per cent have not requested consolidated accounts six months before the end of the financial year. In any case, they must meet the following requirements:
  • That the company exempted from formalising the consolidation, together with all other companies that must be included, should be consolidated in the accounts of a larger group whose parent company is subject to the legislation of a Member State of the European Union.
  • That the company exempted from formalising the consolidation states in its accounts that it is exempt from the obligation to establish consolidated statements, the group to which it belongs, the company's name and the domicile of the parent company.
  • The consolidated accounts of the parent company and the management report and the auditor's report are filed in Companies House and translated into one of the region's official languages where the exempted company is domiciled.
  • That the company exempted from formalising the consolidation has not issued securities traded on regulated markets in any European Union Member State.
• When a company is required to consolidate participates exclusively with subsidiary companies that do not hold significant material interest individually or jointly, in order to present an accurate picture of the assets, financial position and profit or loss of the companies in the group.
• Subsidiary companies may be exempt from the obligation to consolidate for any of the following reasons:
  • On rare occasions, the consolidated financial statement's necessary information cannot be obtained for duly justified reasons.
  • The sole purpose of holding the stocks or shares of the company is for their subsequent transfer.
  • That severe and lasting restrictions hinder the exercise of control of the parent company over the subsidiary company.