Company Law Reform Bill [HL]

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL]

Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 3 — Auditors General
418

(b)
the Auditor General’s performance of his functions as a statutory
auditor.
(3)
A notice under subsection (1) must—
(a)
be in writing, and
(b)
state the date on which it takes effect (which must be after the period of
5
three months beginning with the date on which it is issued).
(4)
Before issuing a notice under subsection (1), the Independent Supervisor
must—
(a)
give written notice of its intention to do so to the Auditor General, and
(b)
publish the notice mentioned in paragraph (a) in such manner as it
10
thinks appropriate for bringing it to the attention of any other persons
who are likely to be affected.
(5)
A notice under subsection (4) must—
(a)
state the reasons for which the Independent Supervisor proposes to act,
and
15
(b)
give particulars of the rights conferred by subsection (6).
(6)
A person within subsection (7) may, within the period of three months
beginning with the date of service or publication of the notice under subsection
(4) or such longer period as the Independent Supervisor may allow, make
written representations to the Independent Supervisor and, if desired, oral
20
representations to a person appointed for that purpose by the Independent
Supervisor.
(7)
The persons within this subsection are—
(a)
the Auditor General, and
(b)
any other person who appears to the Independent Supervisor to be
25
affected.
(8)
The Independent Supervisor must have regard to any representations made in
accordance with subsection (6) in determining—
(a)
whether to issue a notice under subsection (1), and
(b)
the terms of any such notice.
30
(9)
If in any case the Independent Supervisor considers it appropriate to do so in
the public interest it may issue a notice under subsection (1), without regard to
the restriction in subsection (3)(b), even if—
(a)
no notice has been given or published under subsection (4), or
(b)
the period of time for making representations in pursuance of such a
35
notice has not expired.
(10)
On issuing a notice under subsection (1), the Independent Supervisor must—
(a)
give a copy of the notice to the Auditor General, and
(b)
publish the notice in such manner as it thinks appropriate for bringing
it to the attention of persons likely to be affected.
40
(11)
In this section “specified” means specified in, or of a description specified in,
the suspension notice in question.
864
Effect of suspension notices
(1)
An Auditor General must not act as a statutory auditor at any time when a
suspension notice issued to him in respect of the audited person has effect.
45

Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 3 — Auditors General
419

(2)
If at any time during an Auditor General’s term of office as a statutory auditor
a suspension notice issued to him in respect of the audited person takes effect,
he must immediately—
(a)
resign his office (with immediate effect), and
(b)
give notice in writing to the audited person that he has resigned by
5
reason of his becoming ineligible for appointment.
(3)
A suspension notice does not make an Auditor General ineligible for
appointment as a statutory auditor for the purposes of section 842 (effect of
ineligibility: criminal offences).
865
Compliance orders
10
(1)
If at any time it appears to the Independent Supervisor that an Auditor General
has failed to comply with an obligation imposed on him by or by virtue of this
Part, the Independent Supervisor may make an application to the court under
this section.
(2)
If on an application under this section the court decides that the Auditor
15
General has failed to comply with the obligation in question, it may order the
Auditor General to take such steps as the court directs for securing that the
obligation is complied with.
(3)
In this section “the court” means the High Court or, in Scotland, the Court of
Session.
20
Proceedings
866
Proceedings involving the Independent Supervisor
(1)
If the Independent Supervisor is an unincorporated association, any relevant
proceedings may be brought by or against it in the name of any body corporate
whose constitution provides for the establishment of the body.
25
(2)
For this purpose “relevant proceedings” means proceedings brought in or in
connection with the exercise of any function by the body as the Independent
Supervisor.
(3)
Where an appointment under section 857 is revoked, the revoking order may
make such provision as the Secretary of State thinks fit with respect to pending
30
proceedings.
Grants
867
Grants to the Independent Supervisor
In section 16 of the Companies (Audit, Investigations and Community
Enterprise) Act 2004 (c. 27) (grants to bodies concerned with accounting
35
standards etc), after subsection (2)(k) insert—
“(ka)
exercising functions of the Independent Supervisor appointed
under Chapter 3 of Part 35 of the Company Law Reform Act
2006;”.

Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 4 — The register of auditors etc
420

Chapter 4
The register of auditors etc
868
The register of auditors
(1)
The Secretary of State must make regulations requiring the keeping of a
register of—
5
(a)
the persons eligible for appointment as a statutory auditor, and
(b)
third country auditors (see Chapter 5) who apply to be registered in the
specified manner and in relation to whom specified requirements are
met.
(2)
The regulations must require each person’s entry in the register to contain—
10
(a)
his name and address,
(b)
in the case of an individual eligible for appointment as a statutory
auditor, the specified information relating to any firm on whose behalf
he is responsible for statutory audit work,
(c)
in the case of a firm eligible for appointment as a statutory auditor, the
15
specified information relating to the individuals responsible for
statutory audit work on its behalf,
(d)
in the case of an individual or firm eligible for appointment as a
statutory auditor by virtue of Chapter 2, the name of the relevant
supervisory body, and
20
(e)
in the case of a firm eligible for appointment as a statutory auditor by
virtue of Chapter 2 or a third country auditor, the information
mentioned in subsection (3),

and may require each person’s entry to contain other specified information.
(3)
The information referred to in subsection (2)(e) is—
25
(a)
in relation to a body corporate, except where paragraph (b) applies, the
name and address of each person who is a director of the body or holds
any shares in it;
(b)
in relation to a limited liability partnership, the name and address of
each member of the partnership;
30
(c)
in relation to a corporation sole, the name and address of the individual
for the time being holding the office by the name of which he is the
corporation sole;
(d)
in relation to a partnership, the name and address of each partner.
(4)
The regulations may provide that different parts of the register are to be kept
35
by different persons.
(5)
The regulations may impose such obligations as the Secretary of State thinks fit
on—
(a)
recognised supervisory bodies,
(b)
any body designated by order under section 881 (delegation of
40
Secretary of State’s functions),
(c)
persons eligible for appointment as a statutory auditor,
(d)
third country auditors,
(e)
any person with whom arrangements are made by one or more
recognised supervisory bodies, or by any body designated by order
45
under section 881, with respect to the keeping of the register, or

Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 4 — The register of auditors etc
421

(f)
the Independent Supervisor appointed under section 857.
(6)
The regulations may include—
(a)
provision requiring that specified entries in the register be open to
inspection at times and places specified or determined in accordance
with the regulations;
5
(b)
provision enabling a person to require a certified copy of specified
entries in the register;
(c)
provision authorising the charging of fees for inspection, or the
provision of copies, of such reasonable amount as may be specified or
determined in accordance with the regulations.
10
(7)
The Secretary of State may direct in writing that the requirements imposed by
the regulations in accordance with subsections (2)(e) and (3), or such of those
requirements as are specified in the direction, are not to apply, in whole or in
part, in relation to a particular registered third country auditor or class of
registered third country auditors.
15
(8)
The obligations imposed by regulations under this section on such persons as
are mentioned in subsection (5)(b) or (e) are enforceable on the application of
the Secretary of State by injunction or, in Scotland, by an order under section
45 of the Court of Session Act 1988 (c. 36).
(9)
In this section “specified” means specified by regulations under this section.
20
(10)
Regulations under this section are subject to negative resolution procedure.
869
Information to be made available to public
(1)
The Secretary of State may make regulations requiring a person eligible for
appointment as a statutory auditor, or a member of a specified class of such
persons, to keep and make available to the public specified information,
25
including information regarding—
(a)
the person’s ownership and governance,
(b)
the person’s internal controls with respect to the quality and
independence of its audit work,
(c)
the person’s turnover, and
30
(d)
the audited persons of whom the person has acted as statutory auditor.
(2)
Regulations under this section may—
(a)
impose such obligations as the Secretary of State thinks fit on persons
eligible for appointment as a statutory auditor;
(b)
require the information to be made available to the public in a specified
35
manner.
(3)
In this section “specified” means specified by regulations under this section.
(4)
Regulations under this section are subject to negative resolution procedure.

Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 5 — Registered third country auditors
422

Chapter 5
Registered third country auditors
Introductory
870
Meaning of “third country auditor”, “registered third country auditor” etc
(1)
In this Part—
5
“third country auditor” means the auditor of the accounts of a traded non-
Community company, and the expressions “third country audit” and
“third country audit work” are to be construed accordingly;
“registered third country auditor” means a third country auditor who is
entered in the register kept in accordance with regulations under
10
section 868(1).
(2)
In subsection (1) “traded non-Community company” means a body
corporate—
(a)
which is incorporated or formed under the law of a country or territory
which is not a member State or part of a member State,
15
(b)
whose transferable securities are admitted to trading on a regulated
market situated or operating in the United Kingdom, and
(c)
which has not been excluded, or is not of a description of bodies
corporate which has been excluded, from this definition by an order
made by the Secretary of State.
20
(3)
For this purpose—
“regulated market” has the meaning given by Article 4.1(14) of Directive
2004/39/EC of the European Parliament and of the Council on markets
in financial instruments;
“transferable securities” has the meaning given by Article 4.1(18) of that
25
Directive.
(4)
An order under this section is subject to negative resolution procedure.
Duties
871
Duties of registered third country auditors
(1)
A registered third country auditor must participate in—
30
(a)
arrangements within paragraph 1 of Schedule 12 (arrangements for
independent monitoring of audits of traded non-Community
companies), and
(b)
arrangements within paragraph 2 of that Schedule (arrangements for
independent investigation for disciplinary purposes of public interest
35
cases).
(2)
A registered third country auditor must—
(a)
take such steps as may be reasonably required of it to enable its
performance of third country audits to be monitored by means of
inspections carried out under the arrangements mentioned in
40
subsection (1)(a), and

Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 5 — Registered third country auditors
423

(b)
comply with any decision as to disciplinary action to be taken against
it made under the arrangements mentioned in subsection (1)(b).
(3)
Schedule 12 makes further provision with respect to the arrangements in
which registered third country auditors are required to participate.
(4)
The Secretary of State may direct in writing that subsections (1) to (3) are not to
5
apply, in whole or in part, in relation to a particular registered third country
auditor or class of registered third country auditors.
Information
872
Matters to be notified to the Secretary of State
(1)
The Secretary of State may require a registered third country auditor—
10
(a)
to notify him immediately of the occurrence of such events as he may
specify in writing and to give him such information in respect of those
events as is so specified;
(b)
to give him, at such times or in respect of such periods as he may
specify in writing, such information as is so specified.
15
(2)
The notices and information required to be given must be such as the Secretary
of State may reasonably require for the exercise of his functions under this Part.
(3)
The Secretary of State may require information given under this section to be
given in a specified form or verified in a specified manner.
(4)
Any notice or information required to be given under this section must be
20
given in writing unless the Secretary of State specifies or approves some other
manner.
873
The Secretary of State’s power to call for information
(1)
The Secretary of State may by notice in writing require a registered third
country auditor to give him such information as he may reasonably require for
25
the exercise of his functions under this Part.
(2)
The Secretary of State may require that any information which he requires
under this section is to be given within such reasonable time and verified in
such manner as he may specify.
Enforcement
30
874
Compliance orders
(1)
If at any time it appears to the Secretary of State that a registered third country
auditor has failed to comply with an obligation imposed on him by or by virtue
of this Part, the Secretary of State may make an application to the court under
this section.
35
(2)
If on an application under this section the court decides that the auditor has
failed to comply with the obligation in question, it may order the auditor to
take such steps as the court directs for securing that the obligation is complied
with.

Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 6 — Supplementary and general
424

(3)
In this section “the court” means the High Court or, in Scotland, the Court of
Session.
875
Removal of third country auditors from the register of auditors
(1)
The Secretary of State may, by regulations, confer on the person keeping the
register in accordance with regulations under section 868(1) power to remove
5
a third country auditor from the register.
(2)
Regulations under this section must require the person keeping the register, in
determining whether to remove a third country auditor from the register, to
have regard to the auditor’s compliance with obligations imposed on him by
or by virtue of this Part.
10
(3)
Where provision is made under section 868(4) (different parts of the register to
be kept by different persons), references in this section to the person keeping
the register are to the person keeping that part of the register which relates to
third country auditors.
(4)
Regulations under this section are subject to negative resolution procedure.
15
876
Grants to bodies concerned with arrangements under Schedule 12
In section 16 of the Companies (Audit, Investigations and Community
Enterprise) Act 2004 (c. 27) (grants to bodies concerned with accounting
standards etc), after subsection (2)(ka) (inserted by section 867) insert—
“(kb)
establishing, maintaining or carrying out arrangements within
20
paragraph 1 or 2 of Schedule 12 to the Company Law Reform
Act 2006;”.
Chapter 6
Supplementary and general
Power to require second company audit
25
877
Secretary of State’s power to require second audit of a company
(1)
This section applies where a person appointed as statutory auditor of a
company was not an appropriate person for any part of the period during
which the audit was conducted.
30
(2)
The Secretary of State may direct the company concerned to retain an
appropriate person—
(a)
to conduct a second audit of the relevant accounts, or
(b)
to review the first audit and to report (giving his reasons) whether a
second audit is needed.
35
(3)
For the purposes of subsections (1) and (2) a person is “appropriate” if he—
(a)
is eligible for appointment as a statutory auditor or, if the person is an
Auditor General, for appointment as statutory auditor of the company,
and