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 6 — Supplementary and general
425

(b)
is not prohibited by section 843(1) from acting as statutory auditor of
the company.
(4)
The Secretary of State must send a copy of a direction under subsection (2) to
the registrar of companies.
(5)
The company is guilty of an offence if—
5
(a)
it fails to comply with a direction under subsection (2) within the period
of 21 days beginning with the date on which it is given, or
(b)
it has been convicted of a previous offence under this subsection and
the failure to comply with the direction which led to the conviction
continues after the conviction.
10
(6)
The company must—
(a)
send a copy of a report under subsection (2)(b) to the registrar of
companies, and
(b)
if the report states that a second audit is needed, take such steps as are
necessary for the carrying out of that audit.
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(7)
The company is guilty of an offence if—
(a)
it fails to send a copy of a report under subsection (2)(b) to the registrar
within the period of 21 days beginning with the date on which it
receives it,
(b)
in a case within subsection (6)(b), it fails to take the steps mentioned
20
immediately it receives the report, or
(c)
it has been convicted of a previous offence under this subsection and
the failure to send a copy of the report, or take the steps, which led to
the conviction continues after the conviction.
(8)
A company guilty of an offence under this section is liable on summary
25
conviction—
(a)
in a case within subsection (5)(a) or (7)(a) or (b), to a fine not exceeding
level 5 on the standard scale, and
(b)
in a case within subsection (5)(b) or (7)(c), to a fine not exceeding one-
tenth of level 5 on the standard scale for each day on which the failure
30
continues.
(9)
In this section “registrar of companies” has the meaning given by section 713.
878
Supplementary provision about second audits
(1)
If a person accepts an appointment, or continues to act, as statutory auditor of
a company at a time when he knows he is not an appropriate person, the
35
company may recover from him any costs incurred by it in complying with the
requirements of section 877.
For this purpose “appropriate” is to be construed in accordance with
subsection (3) of that section.
(2)
Where a second audit is carried out under section 877, any statutory or other
40
provision applying in relation to the first audit applies also, in so far as
practicable, in relation to the second audit.
(3)
A direction under section 877(2) is, on the application of the Secretary of State,
enforceable by injunction or, in Scotland, by an order under section 45 of the
Court of Session Act 1988 (c. 36).
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Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 6 — Supplementary and general
426

False and misleading statements
879
Misleading, false and deceptive statements
(1)
A person is guilty of an offence if—
(a)
for the purposes of or in connection with any application under this
Part, or
5
(b)
in purported compliance with any requirement imposed on him by or
by virtue of this Part,

he knowingly or recklessly furnishes information which is misleading, false or
deceptive in a material particular.
(2)
It is an offence for a person whose name does not appear on the register of
10
auditors kept under regulations under section 868 in an entry made under
subsection (1)(a) of that section to describe himself as a registered auditor or so
to hold himself out as to indicate, or be reasonably understood to indicate, that
he is a registered auditor.
(3)
It is an offence for a person whose name does not appear on the register of
15
auditors kept under regulations under that section in an entry made under
subsection (1)(b) of that section to describe himself as a registered third country
auditor or so to hold himself out as to indicate, or be reasonably understood to
indicate, that he is a registered third country auditor.
(4)
It is an offence for a body which is not a recognised supervisory body or a
20
recognised qualifying body to describe itself as so recognised or so to describe
itself or hold itself out as to indicate, or be reasonably understood to indicate,
that it is so recognised.
(5)
A person guilty of an offence under subsection (1) is liable—
(a)
on conviction on indictment, to imprisonment for a term not exceeding
25
two years or to a fine (or both);
(b)
on summary conviction—
(i)
in England and Wales, to imprisonment for a term not
exceeding twelve months or to a fine not exceeding the
statutory maximum (or both),
30
(ii)
in Scotland or Northern Ireland, to imprisonment for a term not
exceeding six months or to a fine not exceeding the statutory
maximum (or both).

In relation to an offence committed before the commencement of section 154(1)
of the Criminal Justice Act 2003 (c. 44), for “twelve months” in paragraph (b)(i)
35
substitute “six months”.
(6)
Subject to subsection (7), a person guilty of an offence under subsection (2), (3)
or (4) is liable on summary conviction—
(a)
in England and Wales, to imprisonment for a term not exceeding 51
weeks or to a fine not exceeding level 5 on the standard scale (or both),
40
(b)
in Scotland or Northern Ireland, to imprisonment for a term not
exceeding six months or to a fine not exceeding level 5 on the standard
scale (or both).

In relation to an offence committed before the commencement of section 281(5)
of the Criminal Justice Act 2003, for “51 weeks” in paragraph (a) substitute “six
45
months”.

Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 6 — Supplementary and general
427

(7)
Where a contravention of subsection (2), (3) or (4) involves a public display of
the offending description, the maximum fine that may be imposed is an
amount equal to level 5 on the standard scale multiplied by the number of days
for which the display has continued.
(8)
It is a defence for a person charged with an offence under subsection (2), (3) or
5
(4) to show that he took all reasonable precautions and exercised all due
diligence to avoid the commission of the offence.
Fees
880
Fees
(1)
An applicant for a recognition order under this Part must pay such fee in
10
respect of his application as the Secretary of State may by regulations prescribe;
and no application is to be regarded as duly made unless this subsection is
complied with.
(2)
The Secretary of State may by regulations prescribe periodical fees to be paid
by—
15
(a)
every recognised supervisory body,
(b)
every recognised qualifying body,
(c)
every Auditor General, and
(d)
every registered third country auditor.
(3)
Fees received by the Secretary of State by virtue of this Part are to be paid into
20
the Consolidated Fund.
(4)
Regulations under this section are subject to negative resolution procedure.
Delegation of Secretary of State’s functions
881
Delegation of the Secretary of State’s functions
(1)
The Secretary of State may make an order under this section (a “delegation
25
order”) for the purpose of enabling functions of the Secretary of State under
this Part to be exercised by a body designated by the order.
(2)
The body designated by a delegation order may be either—
(a)
a body corporate which is established by the order, or
(b)
subject to section 882, a body (whether a body corporate or an
30
unincorporated association) which is already in existence (“an existing
body”).
(3)
A delegation order has the effect of making the body designated by the order
designated under section 5 of the Freedom of Information Act 2000 (c. 36)
(further powers to designate public authorities).
35
(4)
A delegation order has the effect of transferring to the body designated by it all
functions of the Secretary of State under this Part—
(a)
subject to such exceptions and reservations as may be specified in the
order, and
(b)
except—
40
(i)
his functions in relation to the body itself, and

Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 6 — Supplementary and general
428

(ii)
his functions under section 857 (appointment of Independent
Supervisor).
(5)
A delegation order may confer on the body designated by it such other
functions supplementary or incidental to those transferred as appear to the
Secretary of State to be appropriate.
5
(6)
Any transfer of functions under the following provisions must be subject to the
reservation that the functions remain exercisable concurrently by the Secretary
of State—
(a)
section 853 (power to call for information from recognised bodies etc);
(b)
section 873 (power to call for information from registered third country
10
auditors);
(c)
section 883 (directions to comply with international obligations).
(7)
Any transfer of—
(a)
the function of refusing to make a declaration under section 850(1) on
the grounds referred to in section 850(4) (lack of comparable treatment),
15
or
(b)
the function of withdrawing such a declaration under section 850(7) on
those grounds,

must be subject to the reservation that the function is exercisable only with the
consent of the Secretary of State.
20
(8)
A delegation order may be amended or, if it appears to the Secretary of State
that it is no longer in the public interest that the order should remain in force,
revoked by a further order under this section.
(9)
Where functions are transferred or resumed, the Secretary of State may by
order confer or, as the case may be, take away such other functions
25
supplementary or incidental to those transferred or resumed as appear to him
to be appropriate.
(10)
Where a delegation order is made, Schedule 13 has effect with respect to—
(a)
the status of the body designated by the order in exercising functions of
the Secretary of State under this Part,
30
(b)
the constitution and proceedings of the body where it is established by
the order,
(c)
the exercise by the body of certain functions transferred to it, and
(d)
other supplementary matters.
(11)
An order under this section which has the effect of transferring or resuming
35
any functions is subject to affirmative resolution procedure.
(12)
Any other order under this section is subject to negative resolution procedure.
882
Delegation of functions to an existing body
(1)
The Secretary of State’s power to make a delegation order under section 881
which designates an existing body is exercisable in accordance with this
40
section.
(2)
The Secretary of State may make such a delegation order if it appears to him
that—
(a)
the body is able and willing to exercise the functions that would be
transferred by the order, and
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Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 6 — Supplementary and general
429

(b)
the body has arrangements in place relating to the exercise of those
functions which are such as to be likely to ensure that the conditions in
subsection (3) are met.
(3)
The conditions are—
(a)
that the functions in question will be exercised effectively, and
5
(b)
where the delegation order is to contain any requirements or other
provisions specified under subsection (4), that those functions will be
exercised in accordance with any such requirements or provisions.
(4)
The delegation order may contain such requirements or other provision
relating to the exercise of the functions by the designated body as appear to the
10
Secretary of State to be appropriate.
(5)
An existing body—
(a)
may be designated by a delegation order under section 881, and
(b)
may accordingly exercise functions of the Secretary of State in
pursuance of the order,
15

despite any involvement of the body in the exercise of any functions under
arrangements within paragraph 21, 22, 23(1) or 24(1) of Schedule 10 or
paragraph 1 or 2 of Schedule 12.
International obligations
883
Directions to comply with international obligations
20
(1)
If it appears to the Secretary of State—
(a)
that any action proposed to be taken by a recognised supervisory body
or a recognised qualifying body, or a body designated by order under
section 881, would be incompatible with Community obligations or
any other international obligations of the United Kingdom, or
25
(b)
that any action which that body has power to take is required for the
purpose of implementing any such obligations,

he may direct the body not to take or, as the case may be, to take the action in
question.
(2)
A direction may include such supplementary or incidental requirements as the
30
Secretary of State thinks necessary or expedient.
(3)
A direction under this section given to a body designated by order under
section 881 is 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).
35
General provision relating to offences
884
Offences by bodies corporate, partnerships and unincorporated associations
(1)
Where an offence under this Part committed by a body corporate is proved to
have been committed with the consent or connivance of, or to be attributable
to any neglect on the part of, an officer of the body, or a person purporting to
40
act in any such capacity, he as well as the body corporate is guilty of the offence
and liable to be proceeded against and punished accordingly.

Company Law Reform Bill [HL]
Part 35 — Statutory Auditors
Chapter 6 — Supplementary and general
430

(2)
Where an offence under this Part committed by a partnership is proved to have
been committed with the consent or connivance of, or to be attributable to any
neglect on the part of, a partner, he as well as the partnership is guilty of the
offence and liable to be proceeded against and punished accordingly.
(3)
Where an offence under this Part committed by an unincorporated association
5
(other than a partnership) is proved to have been committed with the consent
or connivance of, or to be attributable to any neglect on the part of, any officer
of the association or any member of its governing body, he as well as the
association is guilty of the offence and liable to be proceeded against and
punished accordingly.
10
885
Time limits for prosecution of offences
(1)
An information relating to an offence under this Part which is triable by a
magistrates’ court in England and Wales may be so tried if it is laid at any time
within the period of twelve months beginning with the date on which evidence
sufficient in the opinion of the Director of Public Prosecutions or the Secretary
15
of State to justify the proceedings comes to his knowledge.
(2)
Proceedings in Scotland for an offence under this Part may be commenced at
any time within the period of twelve months beginning with the date on which
evidence sufficient in the Lord Advocate’s opinion to justify proceedings came
to his knowledge or, where such evidence was reported to him by the Secretary
20
of State, within the period of twelve months beginning with the date on which
it came to the knowledge of the Secretary of State.
(3)
For the purposes of subsection (2) proceedings are to be deemed to be
commenced on the date on which a warrant to apprehend or cite the accused
is granted, if the warrant is executed without undue delay.
25
(4)
A complaint charging an offence under this Part which is triable by a
magistrates’ court in Northern Ireland may be so tried if it is made at any time
within the period of twelve months beginning with the date on which evidence
sufficient in the opinion of the Director of Public Prosecutions for Northern
Ireland or the Secretary of State to justify the proceedings comes to his
30
knowledge.
(5)
This section does not authorise—
(a)
in the case of proceedings in England and Wales, the trial of an
information laid,
(b)
in the case of proceedings in Scotland, the commencement of
35
proceedings, or
(c)
in the case of proceedings in Northern Ireland, the trial of a complaint
made,

more than three years after the commission of the offence.
(6)
For the purposes of this section a certificate of the Director of Public
40
Prosecutions, the Lord Advocate, the Director of Public Prosecutions for
Northern Ireland or the Secretary of State as to the date on which such evidence
as is referred to above came to his knowledge is conclusive evidence.
(7)
Nothing in this section affects proceedings within the time limits prescribed by
section 127(1) of the Magistrates’ Courts Act 1980 (c. 43), section 331 of the
45
Criminal Procedure (Scotland) Act 1975 or Article 19 of the Magistrates’ Courts
(Northern Ireland) Order 1981 (S.I. 1981/1675 (N.I. 26)) (the usual time limits
for criminal proceedings).