Amendment Paper as at
Tuesday 19th October 2004
CONSIDERATION OF BILL
COMPANIES (AUDIT, INVESTIGATIONS AND ENTERPRISE) BILL
NEW CLAUSES
Amendment of Companies Act 1985: limit on auditor's liability (No. 1)
Mr Andrew Mitchell
Mr Peter Atkinson
Mrs Gillian Shephard
Mr Ian Taylor
NC1
To move the following Clause:—
'(1) Section 310 of the Companies Act 1985 (c 6) (provisions exempting officers and auditors from liability) is amended as follows.
(2) In subsection (2) delete "subsection" and insert "subsections".
(3) After subsection (3) insert—
"(4) A company may, in pursuance of such a provision, enter a contract with any such auditor to limit any liability which by virtue of any rule of law would otherwise attach to him in respect of any such negligence, default or breach of duty to an amount equal to the proportion of the total loss or damage suffered which is directly attributable to the negligence, default or breach of duty of the auditor having regard to the contribution to the loss or damage of any other person provided such contract is approved by members in general meeting".'.
Amendment of Companies Act 1985: limit on auditor's liability (No. 2)
Mr Andrew Mitchell
Mr Peter Atkinson
Mrs Gillian Shephard
Mr Ian Taylor
NC2
To move the following Clause:—
'(1) Section 310 of the Companies Act 1985 (c 6) (provisions exempting officers and auditors from liability) is amended as follows.
(2) In subsection (2) delete "subsection" and insert "subsections".
(3) After subsection (3) insert—
"(4) A company may, in pursuance of such a provision, enter a contract with any such auditor to limit any liability which by virtue of any rule of law would otherwise attach to him in respect of any such negligence, default or breach of duty to an amount equal to twenty times the fees paid in respect of the audit of the company, provided such contract is approved by members in general meeting.
(5) Where an act of negligence, default or breach of duty arises in two or more consecutive periods of account, the liability under subsection (5) shall be restricted to twenty times the average of the audit fee for the company for those periods of account".'.
Amendment of Companies Act 1985: limit on auditor's liability (No. 3)
Mr Andrew Mitchell
Mr Peter Atkinson
Mrs Gillian Shephard
Mr Ian Taylor
NC3
To move the following Clause:—
'(1) Section 310 of the Companies Act 1985 (c 6) (provisions exempting officers and auditors from liability) is amended as follows.
(2) In subsection (2) delete "subsection" and insert "subsections".
(3) After subsection (3) insert—
"(4) A company may, in pursuance of such a provision, enter a contract with any such auditor to limit any liability which by virtue of any rule of law would otherwise attach to him in respect of any such negligence, default or breach of duty to the sum of £75 million.
(5) Where the company is a member of a group of companies the sum of £75 million shall be divided between members of the group pro rata to the audit fee charged to each company within the group, provided such contract is approved by members in general meeting.
(6) Where an act of negligence, default or breach of duty arises in two or more consecutive periods of account, the liability under subsection (4) shall be restricted to £75 million for those periods of account".'.
Amendment of Companies Act 1985: limit on auditor's liability (No. 4)
Mr Andrew Mitchell
Mr Peter Atkinson
Mrs Gillian Shephard
Mr Ian Taylor
NC4
To move the following Clause:—
'Section 310(3) of the Companies Act 1985 (c 6) (provisions exempting officers and auditors from liability) is amended, by adding at the end—
| "(iii) | From entering a contract with its auditors to limit their liability in respect of any negligence, default or breach of duty provided such contract is approved by members in general meeting.".'. |
Limit on auditor's liability (No. 1)
Mr Andrew Mitchell
Mr Peter Atkinson
Mrs Gillian Shephard
Mr Ian Taylor
NC5
To move the following Clause:—
'The liability of an auditor which by virtue of any rule of law would otherwise attach to him in respect of negligence, default or breach of duty shall be limited to an amount equal to the proportion of the total loss or damage suffered which is directly attributable to the negligence, default or breach of duty of the auditor, having regard to the contribution to the loss or damage of any other person.'.
Limit on auditor's liability (No. 2)
Mr Andrew Mitchell
Mr Peter Atkinson
Mrs Gillian Shephard
Mr Ian Taylor
NC6
To move the following Clause:—
'(1) The liability of an auditor which by virtue of any rule of law would otherwise attach to him in respect of any negligence, default or breach of duty shall be limited to an amount equal to twenty times the fees paid in respect of the audit of the company.
(2) Where an act of negligence, default or breach of duty arises in two or more consecutive periods of account, liability under subsection (1) shall be restricted to twenty times the average of the audit fee for the company for those periods of account.'.
Limit on auditor's liability (No. 3)
Mr Andrew Mitchell
Mr Peter Atkinson
Mrs Gillian Shephard
Mr Ian Taylor
NC7
To move the following Clause:—
'(1) The liability of an auditor in respect of any liability which by virtue of any rule of law would otherwise attach to him in respect of any negligence, default or breach of duty shall be limited to the sum of £75 million.
(2) Where the company is a member of a group of companies, the sum of £75 million specified in subsection (1)(b) shall be divided between members of the group pro rata to the audit fee charged to each company within the group.'.
Limit on auditor's liability (No. 4)
Mr Andrew Mitchell
Mr Peter Atkinson
Mrs Gillian Shephard
Mr Ian Taylor
NC8
To move the following Clause:—
'(1) The liability of an auditor in respect of any liability which by virtue of any rule of law would otherwise attach to him in respect of any negligence, default or breach of duty shall be limited to the lower of—
| (a) | an amount equal to the proportion of the total loss or damage suffered which is directly attributable to the negligence, default or breach of duty of the auditor having regard to the contribution to the loss or damage of any other person; and |
| (b) | the sum of £75 million. |
(2) Where the company is a member of a group of companies, the sum of £75 million specified in subsection (1)(b) shall be divided between members of the group pro rata to the audit fee charged to each company within the group.'.
Amendment of the Companies Act 1985: Auditors—ineligibility
Mr Jim Cousins
Lynne Jones
NC9
To move the following Clause:—
'(1) The Companies Act 1989 (c. 40) is amended as follows.
(2) After section 27 (Ineligibility on ground of lack of independence) there is inserted—
"Ineligibility on ground of the sale of non-audit services
| 27A. | Any auditor or audit partnership that has sold consultancy and advisory services or tax avoidance schemes requiring registry to a company shall be ineligible to act as an auditor for the financial statements covering the period of the sale. |
Ineligibility on ground of lack of rotation
| 27B(1) | In the case of a large company, an auditor completing five continuous terms in office shall become ineligible for appointment for the next five years. |
| (2) | Upon completing the five continuous terms in office, the outgoing auditor shall issue a statement addressed to shareholders, creditors and employees. |
| (3) | A statement pursuant to subsection (2) shall be accompanied by a notice stating— |
| (a) | that there are no circumstances in connection with company financial statements that shareholders, creditors and employees need to be aware of; or |
| (b) | that there are circumstances connected with company financial statements that shareholders, creditors and employees need to be aware of; and in such cases, full details of the circumstances shall be provided. |
| (4) | Within 14 days of the receipt of the statement from the outgoing auditor the company shall— |
| (a) | circulate it to all shareholders, creditors and employees; and |
| (b) | file it with the Registrar of Companies.".'. |
Amendment of the Companies Act 1985: Exemption, indemnity and limits on auditor's liability
Mr Jim Cousins
Lynne Jones
NC10
To move the following Clause:—
'(1) Section 310 of the Companies Act 1985 (c. 6) (provisions exempting offices and auditors from liability) is amended as follows.
(2) At the end of subsection (1) add—
"; but before considering any exemption, indemnity or limit on auditor liability, the auditors shall prepare a statement of terms for the approval of shareholders and the information of employees.
(2) A statement prepared in pursuance of subsection (1) shall—
| (a) | recognise a duty of care owed to each individual who is a shareholder or employee; |
| (b) | recognise the auditor's duty to detect material fraud; and |
| (c) | set out how the audit working papers and files to which any exemptions, indemnity or limit of liability is applied will be made fully available to the listing and regulatory authorities.".'. |
Mr Andrew Mitchell
Mr Peter Atkinson
Mrs Gillian Shephard
Mr Ian Taylor
1
Page 27, line 29 [Clause 21], at beginning insert 'Where there appears to be good reason.'.
