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Companies (Audit, Investigations and Community Enterprise) Bill [HL]


Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 1 — Auditors

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(a)   

persons who are qualified to audit accounts under the law of a

specified country or territory outside the United Kingdom;

(b)   

persons who hold a specified professional qualification in

accountancy obtained in a specified country or territory outside

the United Kingdom.

5

(1A)   

Approval of a qualification under subsection (1)(b) may be expressed

to be subject to any specified requirement or requirements being

satisfied.

(2)   

A qualification must not be approved under subsection (1) unless the

Secretary of State is satisfied that the qualification, taken with any

10

requirement or requirements to be specified under subsection (1A),

affords an assurance of professional competence equivalent to that

afforded by a recognised professional qualification.”

(3)   

For subsection (6) substitute—

“(6)   

The Secretary of State may if he thinks fit, having regard to the

15

considerations mentioned in subsections (2) and (3)—

(a)   

withdraw his approval of an overseas qualification in relation to

persons becoming qualified as mentioned in subsection (1)(a),

or obtaining such a qualification as is mentioned in subsection

(1)(b), after such date as he may specify; or

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(b)   

vary or revoke a requirement mentioned in subsection (1A)

from such date as he may specify.”

Services provided by auditors

7       

Disclosure of services provided by auditors and related remuneration

(1)   

For section 390B of the Companies Act 1985 (c. 6) substitute—

25

“390B  Disclosure of services provided by auditors or associates and related

remuneration

(1)   

The Secretary of State may make provision by regulations for securing

the disclosure of—

(a)   

the nature of any services provided for a company by the

30

company’s auditors (whether in their capacity as such or

otherwise) or by their associates;

(b)   

the amount of any remuneration received or receivable by a

company’s auditors, or their associates, in respect of any

services within paragraph (a).

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(2)   

The regulations may provide—

(a)   

for disclosure of the nature of any services provided to be made

by reference to any class or description of services specified in

the regulations (or any combination of services, however

described);

40

(b)   

for the disclosure of amounts of remuneration received or

receivable in respect of services of any class or description

specified in the regulations (or any combination of services,

however described);

 

 

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 1 — Auditors

9

 

(c)   

for the disclosure of separate amounts so received or receivable

by the company’s auditors or any of their associates, or of

aggregate amounts so received or receivable by all or any of

those persons.

(3)   

The regulations may—

5

(a)   

provide that “remuneration” includes sums paid in respect of

expenses;

(b)   

apply to benefits in kind as well as to payments of money, and

require the disclosure of the nature of any such benefits and

their estimated money value;

10

(c)   

apply to services provided for associates of a company as well

as to those provided for a company;

(d)   

define “associate” in relation to an auditor and a company

respectively.

(4)   

The regulations may provide that any disclosure required by the

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regulations is to be made—

(a)   

in a note to the company’s annual accounts (in the case of its

individual accounts) or in such manner as is specified in the

regulations (in the case of group accounts),

(b)   

in the directors’ report required by section 234, or

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(c)   

in the auditors’ report under section 235.

(5)   

If the regulations provide that any such disclosure is to be made as

mentioned in subsection (4)(a) or (b), the regulations may—

(a)   

require the auditors to supply the directors of the company with

any information necessary to enable the disclosure to be made;

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(b)   

provide for any provision within subsection (6) to apply in

relation to a failure to make the disclosure as it applies in

relation to a failure to comply with a requirement of this Act or

(as the case may be) a provision of Part 7.

(6)   

The provisions are—

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(a)   

sections 233(5) and 234(5); and

(b)   

any provision of sections 245 to 245C.

(7)   

The regulations may make different provision for different cases.

(8)   

Nothing in subsections (2) to (7) affects the generality of subsection (1).

(9)   

Regulations under this section shall be made by statutory instrument

35

which shall be subject to annulment in pursuance of a resolution of

either House of Parliament.”

(2)   

In section 390A of the Companies Act 1985 (c. 6) (remuneration of auditors)—

(a)   

subsection (3) (auditors’ remuneration to be disclosed in note to

accounts) accordingly ceases to have effect, and

40

(b)   

in subsection (5) (application to benefits in kind), for the words from

“payments in cash” onwards substitute “payments of money.”

(3)   

In paragraph 1(1) of Schedule 4A to that Act (form and contents of group

accounts), omit “section 390A(3) (amount of auditors’ remuneration) and”.

 

 

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports

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Chapter 2

Accounts and reports

Auditing of accounts

8       

Auditors’ rights to information

For section 389A of the Companies Act 1985 (c. 6) substitute—

5

“389A  Rights to information

(1)   

An auditor of a company—

(a)   

has a right of access at all times to the company’s books,

accounts and vouchers (in whatever form they are held), and

(b)   

may require any of the persons mentioned in subsection (2) to

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provide him with such information or explanations as he thinks

necessary for the performance of his duties as auditor.

(2)   

Those persons are—

(a)   

any officer or employee of the company;

(b)   

any person holding or accountable for any of the company’s

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books, accounts or vouchers;

(c)   

any subsidiary undertaking of the company which is a body

corporate incorporated in Great Britain;

(d)   

any officer, employee or auditor of any such subsidiary

undertaking or any person holding or accountable for any

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books, accounts or vouchers of any such subsidiary

undertaking;

(e)   

any person who fell within any of paragraphs (a) to (d) at a time

to which the information or explanations required by the

auditor relates or relate.

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(3)   

Where a parent company has a subsidiary undertaking which is not a

body corporate incorporated in Great Britain, the auditor of the parent

company may require it to obtain from any of the persons mentioned

in subsection (4) such information or explanations as he may

reasonably require for the purposes of his duties as auditor.

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(4)   

Those persons are—

(a)   

the undertaking;

(b)   

any officer, employee or auditor of the undertaking;

(c)   

any person holding or accountable for any of the undertaking’s

books, accounts or vouchers;

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(d)   

any person who fell within paragraph (b) or (c) at a time to

which the information or explanations relates or relate.

(5)   

If so required, the parent company must take all such steps as are

reasonably open to it to obtain the information or explanations from the

person within subsection (4) from whom the auditor has required the

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company to obtain the information or explanations.

(6)   

A statement made by a person in response to a requirement under

subsection (1)(b) or (3) may not be used in evidence against him in any

 

 

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports

11

 

criminal proceedings except proceedings for an offence under section

389B.

(7)   

Nothing in this section or section 389B compels any person to disclose

information in respect of which in an action in the High Court a claim

to legal professional privilege, or in an action in the Court of Session a

5

claim to confidentiality of communications, could be maintained.

389B  Offences relating to the provision of information to auditors

(1)   

If a person knowingly or recklessly makes to an auditor of a company

a statement (oral or written) that—

(a)   

conveys or purports to convey any information or explanations

10

which the auditor requires, or is entitled to require, under

section 389A(1)(b), and

(b)   

is misleading, false or deceptive in a material particular,

   

the person is guilty of an offence and liable to imprisonment or a fine,

or both.

15

(2)   

A person who fails to comply with a requirement under section

389A(1)(b) without delay is guilty of an offence and is liable to a fine.

(3)   

However, it is a defence for a person charged with an offence under

subsection (2) to prove that it was not reasonably practicable for him to

provide the required information or explanations.

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(4)   

If a company fails to comply with section 389A(5), the company and

every officer of it who is in default is guilty of an offence and liable to a

fine.

(5)   

Nothing in this section affects any right of an auditor to apply for an

injunction to enforce any of his rights under section 389A.”

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9       

Statement in directors’ report as to disclosure of information to auditors

(1)   

Part 7 of the Companies Act 1985 (c. 6) (accounts and audit) is amended as

follows.

(2)   

In section 234 (duty to prepare directors’ report), after subsection (2) insert—

“(2A)   

If section 234ZA applies to the report, it shall contain the statement

30

required by subsection (2) of that section.”

(3)   

After section 234 insert—

“234ZA  

Statement as to disclosure of information to auditors

(1)   

This section applies to a directors’ report unless the directors have

taken advantage of the exemption conferred by section 249A(1) or

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249AA(1).

(2)   

The report must contain a statement to the effect that, in the case of each

of the persons who are directors at the time when the report is

approved under section 234A, the following applies—

(a)   

so far as the director is aware, there is no relevant audit

40

information of which the company’s auditors are unaware, and

(b)   

he has taken all the steps that he ought to have taken as a

director in order to make himself aware of any relevant audit

 

 

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports

12

 

information and to establish that the company’s auditors are

aware of that information.

(3)   

In subsection (2) “relevant audit information” means information

needed by the company’s auditors in connection with preparing their

report.

5

(4)   

For the purposes of subsection (2) a director has taken all the steps that

he ought to have taken as a director in order to do the things mentioned

in paragraph (b) of that subsection if he has—

(a)   

made such enquiries of his fellow directors and of the

company’s auditors for that purpose, and

10

(b)   

taken such other steps (if any) for that purpose,

   

as were required by his duty as a director of the company to exercise

due care, skill and diligence.

(5)   

In determining for the purposes of subsection (2) the extent of that duty

in the case of a particular director, the following considerations (in

15

particular) are relevant—

(a)   

the knowledge, skill and experience that may reasonably be

expected of a person carrying out the same functions as are

carried out by the director in relation to the company, and

(b)   

(so far as they exceed what may reasonably be so expected) the

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knowledge, skill and experience that the director in fact has.

(6)   

Where a directors’ report containing the statement required by

subsection (2) is approved under section 234A but the statement is

false, every director of the company who—

(a)   

knew that the statement was false, or was reckless as to whether

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it was false, and

(b)   

failed to take reasonable steps to prevent the report from being

approved,

   

is guilty of an offence and liable to imprisonment or a fine, or both.”

Defective accounts

30

10      

Persons authorised to apply to court in connection with defective accounts

(1)   

Section 245C of the Companies Act 1985 (c. 6) (other persons authorised to

apply to court) is amended as follows.

(2)   

After subsection (1) insert—

“(1A)   

But where the order giving authorisation (see subsection (4)) is to

35

contain any requirements or other provisions specified under

subsection (4A), the Secretary of State may not authorise a person

unless, in addition, it appears to him that the person would, if

authorised, exercise his functions as an authorised person in

accordance with any such requirements or provisions.”

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(3)   

After subsection (4) insert—

“(4A)   

An order under subsection (4) may contain such requirements or other

provisions relating to the exercise of functions by the authorised person

as appear to the Secretary of State to be appropriate.

 

 

Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports

13

 

(4B)   

If the authorised person is an unincorporated association, any relevant

proceedings may be brought by or against that association in the name

of any body corporate whose constitution provides for the

establishment of the association.

   

For this purpose “relevant proceedings” means proceedings brought

5

in, or in connection with, the exercise of any function by the association

as an authorised person.”

11      

Disclosure of tax information by Inland Revenue to facilitate application for

declaration that accounts are defective

(1)   

After section 245C of the Companies Act 1985 (c. 6) insert—

10

“245D  Disclosure of information held by Inland Revenue to persons

authorised to apply to court

(1)   

Information which is held by or on behalf of the Commissioners of

Inland Revenue may be disclosed to a person who is authorised under

section 245C of this Act, or under Article 253C of the Companies

15

(Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), if the

disclosure—

(a)   

is made for a permitted purpose, and

(b)   

is made by the Commissioners or is authorised by them.

(2)   

Such information—

20

(a)   

may be so disclosed despite any other restriction on the

disclosure of information whether imposed by any statutory

provision or otherwise, but

(b)   

in the case of personal data (within the meaning of the Data

Protection Act 1998), may not be disclosed in contravention of

25

that Act.

(3)   

For the purposes of subsection (1), a disclosure is made for a permitted

purpose if it is made for the purpose of facilitating—

(a)   

the taking of steps by the authorised person to discover whether

there are grounds for an application to the court under section

30

245B of this Act or Article 253B of the Companies (Northern

Ireland) Order 1986; or

(b)   

a determination by the authorised person as to whether or not

to make such an application.

(4)   

The power of the Commissioners to authorise a disclosure under

35

subsection (1)(b) may be delegated (either generally or for a specified

purpose) to an officer of the Board of Inland Revenue.

245E  Restrictions on use and further disclosure of information disclosed

under section 245D

(1)   

Information that is disclosed to an authorised person under section

40

245D may not be used except in or in connection with—

(a)   

taking steps to discover whether there are grounds for an

application to the court as mentioned in section 245D(3)(a);

(b)   

determining whether or not to make such an application; or

(c)   

proceedings on any such application.

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Companies (Audit, Investigations and Community Enterprise) Bill [HL]
Part 1 — Auditors, accounts, directors’ liabilities and investigations
Chapter 2 — Accounts and reports

14

 

(2)   

Information that is disclosed to an authorised person under section

245D may not be further disclosed except—

(a)   

to the person to whom the information relates; or

(b)   

in or in connection with proceedings on any such application to

the court.

5

(3)   

A person who contravenes subsection (1) or (2) is guilty of an offence

and liable to imprisonment or a fine, or both.

(4)   

It is a defence for a person charged with an offence under subsection (3)

to prove—

(a)   

that he did not know, and had no reason to suspect, that the

10

information had been disclosed under section 245D; or

(b)   

that he took all reasonable steps and exercised all due diligence

to avoid the commission of the offence.

(5)   

Sections 732 (restriction on prosecutions), 733(2) and (3) (liability of

individuals for corporate default) and 734 (criminal proceedings

15

against unincorporated bodies) apply to offences under this section.”

(2)   

After Article 253C of the Companies (Northern Ireland) Order 1986 (S.I. 1986/

1032 (N.I. 6)) insert—

“253D  Disclosure of information held by Inland Revenue to persons

authorised to apply to court

20

(1)   

Information which is held by or on behalf of the Commissioners of

Inland Revenue may be disclosed to a person who is authorised under

Article 253C, or under section 245C of the Companies Act 1985, if the

disclosure—

(a)   

is made for a permitted purpose, and

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(b)   

is made by the Commissioners or is authorised by them.

(2)   

Such information—

(a)   

may be so disclosed despite any other restriction on the

disclosure of information whether imposed by any statutory

provision or otherwise, but

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(b)   

in the case of personal data (within the meaning of the Data

Protection Act 1998), may not be disclosed in contravention of

that Act.

(3)   

For the purposes of paragraph (1), a disclosure is made for a permitted

purpose if it is made for the purpose of facilitating—

35

(a)   

the taking of steps by the authorised person to discover whether

there are grounds for an application to the court under Article

253B or section 245B of the Companies Act 1985; or

(b)   

a determination by the authorised person as to whether or not

to make such an application.

40

(4)   

The power of the Commissioners to authorise a disclosure under

paragraph (1)(b) may be delegated (either generally or for a specified

purpose) to an officer of the Board of Inland Revenue.

 

 

 
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