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Company Law Reform Bill [HL]


Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 3 — Functions of auditor

238

 

(2)   

The conditions are that the company—

(a)   

considering on reasonable grounds that statement of the name would

create or be likely to create a serious risk that the auditor or senior

statutory auditor, or any other person, would be subject to violence or

intimidation, has resolved that the name should not be stated, and

5

(b)   

has given notice of the resolution to the Secretary of State, stating—

(i)   

the name and registered number of the company,

(ii)   

the financial year of the company to which the report relates,

and

(iii)   

the name of the auditor and (where the auditor is a firm) the

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name of the person who signed the report as senior statutory

auditor.

Offences in connection with auditor’s report

497     

Offences in connection with auditor’s report

(1)   

A person to whom this section applies commits an offence if he knowingly or

15

recklessly causes a report under section 485 (auditor’s report on company’s

annual accounts) to include any matter that is misleading, false or deceptive in

a material particular.

(2)   

A person to whom this section applies commits an offence if he knowingly or

recklessly causes such a report to omit a statement required by—

20

(a)   

section 488(2)(b) (statement that company’s accounts do not agree with

accounting records and returns),

(b)   

section 488(3) (statement that necessary information and explanations

not obtained), or

(c)   

section 488(5) (statement that directors wrongly took advantage of

25

exemption from obligation to prepare group accounts).

(3)   

This section applies to—

(a)   

where the auditor is an individual, that individual and any employee

or agent of his who is eligible for appointment as auditor of the

company;

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(b)   

where the auditor is a firm, any director, member, employee or agent of

the firm who is eligible for appointment as auditor of the company.

(4)   

A person guilty of an offence under this section is liable—

(a)   

on conviction on indictment, to a fine;

(b)   

on summary conviction, to a fine not exceeding the statutory

35

maximum.

498     

Guidance for regulatory and prosecuting authorities: England, Wales and

Northern Ireland

(1)   

The Secretary of State may issue guidance for the purpose of helping relevant

regulatory and prosecuting authorities to determine how they should carry out

40

their functions in cases where behaviour occurs that—

(a)   

appears to involve the commission of an offence under section 497

(offences in connection with auditor’s report), and

(b)   

has been, is being or may be investigated pursuant to arrangements—

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 3 — Functions of auditor

239

 

(i)   

under paragraph 15 of Schedule 10 (investigation of complaints

against auditors and supervisory bodies), or

(ii)   

of a kind mentioned in paragraph 24 of that Schedule

(independent investigation for disciplinary purposes of public

interest cases).

5

(2)   

The Secretary of State must obtain the consent of the Attorney General before

issuing any such guidance.

(3)   

In this section “relevant regulatory and prosecuting authorities” means—

(a)   

supervisory bodies within the meaning of Part 35 of this Act,

(b)   

bodies to which the Secretary of State may make grants under section

10

16(1) of the Companies (Audit, Investigations and Community

Enterprise) Act 2004 (c. 27) (bodies concerned with accounting

standards etc),

(c)   

the Director of the Serious Fraud Office,

(d)   

the Director of Public Prosecutions or the Director of Public

15

Prosecutions for Northern Ireland, and

(e)   

the Secretary of State.

(4)   

This section does not apply to Scotland.

499     

Guidance for regulatory authorities: Scotland

(1)   

The Lord Advocate may issue guidance for the purpose of helping relevant

20

regulatory authorities to determine how they should carry out their functions

in cases where behaviour occurs that—

(a)   

appears to involve the commission of an offence under section 497

(offences in connection with auditor’s report), and

(b)   

has been, is being or may be investigated pursuant to arrangements—

25

(i)   

under paragraph 15 of Schedule 10 (investigation of complaints

against auditors and supervisory bodies), or

(ii)   

of a kind mentioned in paragraph 24 of that Schedule

(independent investigation for disciplinary purposes of public

interest cases).

30

(2)   

The Lord Advocate must consult the Secretary of State before issuing any such

guidance.

(3)   

In this section “relevant regulatory authorities” means—

(a)   

supervisory bodies within the meaning of Part 35 of this Act,

(b)   

bodies to which the Secretary of State may make grants under section

35

16(1) of the Companies (Audit, Investigations and Community

Enterprise) Act 2004 (bodies concerned with accounting standards etc),

and

(c)   

the Secretary of State.

(4)   

This section applies only to Scotland.

40

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 4 — Removal, resignation, etc of auditors

240

 

Chapter 4

Removal, resignation, etc of auditors

Removal of auditor

500     

Resolution removing auditor from office

(1)   

The members of a company may by ordinary resolution at any time remove an

5

auditor from office.

(2)   

This power is exercisable only in accordance with section 501 (special notice of

resolution to remove auditor).

(3)   

Nothing in this section is to be taken as depriving the person removed of

compensation or damages payable to him in respect of the termination—

10

(a)   

of his appointment as auditor, or

(b)   

of any appointment terminating with that as auditor.

(4)   

An auditor may not be removed from office before the expiration of his term of

office except by resolution under this section.

501     

Special notice required for resolution removing auditor from office

15

(1)   

Special notice is required for a resolution at a general meeting of a company

removing an auditor from office.

(2)   

On receipt of notice of such an intended resolution the company must

immediately send a copy of it to the person proposed to be removed.

(3)   

The auditor proposed to be removed may make with respect to the intended

20

resolution representations in writing to the company (not exceeding a

reasonable length) and request their notification to members of the company.

(4)   

The company must (unless the representations are received by it too late for it

to do so)—

(a)   

in any notice of the resolution given to members of the company, state

25

the fact of the representations having been made, and

(b)   

send a copy of the representations to every member of the company to

whom notice of the meeting is or has been sent.

(5)   

If a copy of any such representations is not sent out as required because

received too late or because of the company’s default, the auditor may (without

30

prejudice to his right to be heard orally) require that the representations be

read out at the meeting.

(6)   

Copies of the representations need not be sent out and the representations need

not be read at the meeting if, on the application either of the company or of any

other person claiming to be aggrieved, the court is satisfied that the auditor is

35

using the provisions of this section to secure needless publicity for defamatory

matter.

   

The court may order the company’s costs (in Scotland, expenses) on the

application to be paid in whole or in part by the auditor, notwithstanding that

he is not a party to the application.

40

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 4 — Removal, resignation, etc of auditors

241

 

502     

Notice to registrar of resolution removing auditor from office

(1)   

Where a resolution is passed under section 500 (resolution removing auditor

from office), the company must give notice of that fact to the registrar within

14 days.

(2)   

If a company fails to give the notice required by this section, an offence is

5

committed by—

(a)   

the company, and

(b)   

every officer of it who is in default.

(3)   

A person guilty of an offence under this section is liable on summary

conviction to a fine not exceeding level 3 on the standard scale and, for

10

continued contravention, a daily default fine not exceeding one-tenth of level

3 on the standard scale.

503     

Rights of auditor who has been removed from office

(1)   

An auditor who has been removed by resolution under section 500 has,

notwithstanding his removal, the rights conferred by section 492(2) in relation

15

to any general meeting of the company—

(a)   

at which his term of office would otherwise have expired, or

(b)   

at which it is proposed to fill the vacancy caused by his removal.

(2)   

In such a case the references in that section to matters concerning the auditor

as auditor shall be construed as references to matters concerning him as a

20

former auditor.

Failure to re-appoint auditor

504     

Failure to re-appoint auditor: special procedure required for written

resolution

(1)   

This section applies where a resolution is proposed as a written resolution of a

25

private company whose effect would be to appoint a person as auditor in place

of a person (the “outgoing auditor”) whose term of office has expired, or is to

expire, at the end of the period for appointing auditors.

(2)   

The following provisions apply if—

(a)   

no period for appointing auditors has ended since the outgoing auditor

30

ceased to hold office, or

(b)   

such a period has ended and an auditor or auditors should have been

appointed but were not.

(3)   

The company must send a copy of the proposed resolution to the person

proposed to be appointed and to the outgoing auditor.

35

(4)   

The outgoing auditor may, within 14 days after receiving the notice, make with

respect to the proposed resolution representations in writing to the company

(not exceeding a reasonable length) and request their circulation to members of

the company.

(5)   

The company must circulate the representations together with the copy or

40

copies of the resolution circulated in accordance with section 274 (resolution

proposed by directors) or section 276 (resolution proposed by members).

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 4 — Removal, resignation, etc of auditors

242

 

(6)   

Where subsection (5) applies—

(a)   

the period allowed under section 276(3) for service of copies of the

proposed resolution is 28 days instead of 21 days, and

(b)   

the provisions of section 276(6) and (7) (offences) apply in relation to a

failure to comply with that subsection as in relation to a default in

5

complying with that section.

(7)   

Copies of the representations need not be circulated if, on the application either

of the company or of any other person claiming to be aggrieved, the court is

satisfied that the auditor is using the provisions of this section to secure

needless publicity for defamatory matter.

10

   

The court may order the company’s costs (in Scotland, expenses) on the

application to be paid in whole or in part by the auditor, notwithstanding that

he is not a party to the application.

(8)   

If any requirement of this section is not complied with, the resolution is

ineffective.

15

505     

Failure to re-appoint auditor: special notice required for resolution at general

meeting

(1)   

This section applies to a resolution at a general meeting of a company whose

effect would be to appoint a person as auditor in place of a person (the

“outgoing auditor”) whose term of office has ended, or is to end—

20

(a)   

in the case of a private company, at the end of the period for appointing

auditors;

(b)   

in the case of a public company, at the end of the next accounts meeting.

(2)   

Special notice is required of such a resolution if—

(a)   

in the case of a private company—

25

(i)   

no period for appointing auditors has ended since the outgoing

auditor ceased to hold office, or

(ii)   

such a period has ended and an auditor or auditors should have

been appointed but were not;

(b)   

in the case of a public company—

30

(i)   

there has been no accounts meeting of the company since the

outgoing auditor ceased to hold office, or

(ii)   

there has been an accounts meeting at which an auditor or

auditors should have been appointed but were not.

(3)   

On receipt of notice of such an intended resolution the company shall

35

forthwith send a copy of it to the person proposed to be appointed and to the

outgoing auditor.

(4)   

The outgoing auditor may make with respect to the intended resolution

representations in writing to the company (not exceeding a reasonable length)

and request their notification to members of the company.

40

(5)   

The company must (unless the representations are received by it too late for it

to do so)—

(a)   

in any notice of the resolution given to members of the company, state

the fact of the representations having been made, and

(b)   

send a copy of the representations to every member of the company to

45

whom notice of the meeting is or has been sent.

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 4 — Removal, resignation, etc of auditors

243

 

(6)   

If a copy of any such representations is not sent out as required because

received too late or because of the company’s default, the outgoing auditor

may (without prejudice to his right to be heard orally) require that the

representations be read out at the meeting.

(7)   

Copies of the representations need not be sent out and the representations need

5

not be read at the meeting if, on the application either of the company or of any

other person claiming to be aggrieved, the court is satisfied that the auditor is

using the provisions of this section to secure needless publicity for defamatory

matter.

   

The court may order the company’s costs (in Scotland, expenses) on the

10

application to be paid in whole or in part by the outgoing auditor,

notwithstanding that he is not a party to the application.

Resignation of auditor

506     

Resignation of auditor

(1)   

An auditor of a company may resign his office by depositing a notice in writing

15

to that effect at the company’s registered office.

(2)   

The notice is not effective unless it is accompanied by the statement required

by section 509.

(3)   

An effective notice of resignation operates to bring the auditor’s term of office

to an end as of the date on which the notice is deposited or on such later date

20

as may be specified in it.

507     

Notice to registrar of resignation of auditor

(1)   

Where an auditor resigns the company must within 14 days of the deposit of a

notice of resignation send a copy of the notice to the registrar of companies.

(2)   

If default is made in complying with this section, an offence is committed by—

25

(a)   

the company, and

(b)   

every officer of the company who is in default.

(3)   

A person guilty of an offence under this section is liable—

(a)   

on conviction on indictment, to a fine and, for continued contravention,

a daily default fine not exceeding one-tenth of the statutory maximum;

30

(b)   

on summary conviction, to a fine not exceeding the statutory maximum

and, for continued contravention, a daily default fine not exceeding

one-tenth of the statutory maximum.

508     

Rights of resigning auditor

(1)   

This section applies where an auditor’s notice of resignation is accompanied by

35

a statement of the circumstances connected with his resignation (see section

509).

(2)   

He may deposit with the notice a signed requisition calling on the directors of

the company forthwith duly to convene a general meeting of the company for

the purpose of receiving and considering such explanation of the

40

circumstances connected with his resignation as he may wish to place before

the meeting.

 
 

Company Law Reform Bill [HL]
Part 16 — Audit
Chapter 4 — Removal, resignation, etc of auditors

244

 

(3)   

He may request the company to circulate to its members—

(a)   

before the meeting convened on his requisition, or

(b)   

before any general meeting at which his term of office would otherwise

have expired or at which it is proposed to fill the vacancy caused by his

resignation,

5

   

a statement in writing (not exceeding a reasonable length) of the circumstances

connected with his resignation.

(4)   

The company must (unless the statement is received too late for it to comply)—

(a)   

in any notice of the meeting given to members of the company, state the

fact of the statement having been made, and

10

(b)   

send a copy of the statement to every member of the company to whom

notice of the meeting is or has been sent.

(5)   

The directors must within 21 days from the date of the deposit of a requisition

under this section proceed duly to convene a meeting for a day not more than

28 days after the date on which the notice convening the meeting is given.

15

(6)   

If default is made in complying with subsection (5), every director who failed

to take all reasonable steps to secure that a meeting was convened commits an

offence.

(7)   

A person guilty of an offence under this section is liable—

(a)   

on conviction on indictment, to a fine;

20

(b)   

on summary conviction to a fine not exceeding the statutory maximum.

(8)   

If a copy of the statement mentioned above is not sent out as required because

received too late or because of the company’s default, the auditor may (without

prejudice to his right to be heard orally) require that the statement be read out

at the meeting.

25

(9)   

Copies of a statement need not be sent out and the statement need not be read

out at the meeting if, on the application either of the company or of any other

person who claims to be aggrieved, the court is satisfied that the auditor is

using the provisions of this section to secure needless publicity for defamatory

matter.

30

   

The court may order the company’s costs (in Scotland, expenses) on such an

application to be paid in whole or in part by the auditor, notwithstanding that

he is not a party to the application.

(10)   

An auditor who has resigned has, notwithstanding his resignation, the rights

conferred by section 492(2) in relation to any such general meeting of the

35

company as is mentioned in subsection (3)(a) or (b) above.

   

In such a case the references in that section to matters concerning the auditor

as auditor shall be construed as references to matters concerning him as a

former auditor.

Statement by auditor on ceasing to hold office

40

509     

Statement by auditor to be deposited with company

(1)   

Where an auditor of an unquoted company ceases for any reason to hold office,

he must deposit at the company’s registered office a statement of the

circumstances connected with his ceasing to hold office, unless he considers

that there are no circumstances in connection with his ceasing to hold office

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