(1) A company is entitled to small companies exemption in relation to the directors' report for a financial year if -
(a) it is entitled to prepare accounts for the year in accordance with the small companies regime, or
(b) it would be so entitled but for being or having been a member of an ineligible group.
(2) The exemption is relevant to section 416(3) (contents of report: statement of amount recommended by way of dividend).