Audit in case of capital loss
Smaller companies which are not subject to ordinary audits and do not employ more than 10 employees in full-time positions on average over the business year can forego the limited audit (opting-out). This option was created by legislators with the introduction of the currently applicable auditing law from 1 January 2008.
However, with the corporate law revision, which came into force on 1 January 2023, the legislator has introduced a new audit requirement in the event of a capital loss. If the last annual financial statements of a company show a loss of capital and the company does not have a statutory auditor (e.g. in the case of an opting-out), these must be subjected to a limited statutory examination by an licensed auditor before they are approved by the General Meeting (Art. 725a para. 2 CO). The board of directors appoints the licensed auditor and in this case the limited statutory examination is carried out on a contractual basis and not as a governing body. The limited statutory examination has to be performed until any capital losses have been cleared.
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Good to know
Subordination agreements covering the amount capital loss do not eliminate a capital loss in accordance with Art. 725a para. 1 CO. Accordingly, there is no exemption from the audit obligation. The audit obligation no longer applies only if the board of directors have submitted an application for a moratorium (Art. 725a para. 3 CO).
Contractual audits in case of capital losses are considered to be particularly risky from an auditor's perspective. Before mandate acceptance, the terms of the engagement must be critically assessed.
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