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]
Schedule 10 — Recognised supervisory bodies
Part 3 — Arrangements in which recognised supervisory bodies are required to participate
525

      (2)
This may be achieved by professional indemnity insurance or other
appropriate arrangements.
Register of auditors and other information to be made available
18
The body must have rules requiring persons eligible under its rules for
appointment as a statutory auditor to comply with any obligations imposed
5
on them by—
(a)
requirements under section 853 (Secretary of State’s power to call for
information);
(b)
regulations under section 868 (the register of auditors);
(c)
regulations under section 869 (information to be made available to
10
the public).
Taking account of costs of compliance
19
The body must have satisfactory arrangements for taking account, in
framing its rules, of the cost to those to whom the rules would apply of
complying with those rules and any other controls to which they are subject.
15
Promotion and maintenance of standards
20
The body must be able and willing—
(a)
to promote and maintain high standards of integrity in the conduct
of statutory audit work, and
(b)
to co-operate, by the sharing of information and otherwise, with the
20
Secretary of State and any other authority, body or person having
responsibility in the United Kingdom for the qualification,
supervision or regulation of auditors.
Part 3
Arrangements in which recognised supervisory bodies are required to
25
participate
Arrangements for setting standards relating to professional integrity and independence
21
The arrangements referred to in paragraph 9(2) are appropriate
arrangements—
(a)
for the determining of standards for the purposes of the rules and
30
practices mentioned in paragraph 9(1), and
(b)
for ensuring that the determination of those standards is done
independently of the body.
Arrangements for setting technical standards
22
The arrangements referred to in paragraph 10(2) are appropriate
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arrangements—
(a)
for the determining of standards for the purposes of the rules and
practices mentioned in paragraph 10(1), and
(b)
for ensuring that the determination of those standards is done
independently of the body.
40

Company Law Reform Bill [HL]
Schedule 10 — Recognised supervisory bodies
Part 3 — Arrangements in which recognised supervisory bodies are required to participate
526

Arrangements for independent monitoring of audits of listed companies and other major bodies
23    (1)
The arrangements referred to in paragraph 13(1) are appropriate
arrangements—
(a)
for enabling the performance by members of the body of statutory
audit functions in respect of major audits to be monitored by means
5
of inspections carried out under the arrangements, and
(b)
for ensuring that the carrying out of such monitoring and inspections
is done independently of the body.
      (2)
In this paragraph “major audit” and “statutory audit function” have the
same meaning as in paragraph 13.
10
Arrangements for independent investigation for disciplinary purposes of public interest cases
24    (1)
The arrangements referred to in paragraph 16(1) are appropriate
arrangements—
(a)
for the carrying out of investigations into public interest cases arising
in connection with the performance of statutory audit functions by
15
members of the body,
(b)
for the holding of disciplinary hearings relating to members of the
body which appear to be desirable following the conclusion of such
investigations,
(c)
for requiring such hearings to be held in public except where the
20
interests of justice otherwise require,
(d)
for the persons before whom such hearings have taken place to
decide whether (and, if so, what) disciplinary action should be taken
against the members to whom the hearings related, and
(e)
for ensuring that the carrying out of those investigations, the holding
25
of those hearings and the taking of those decisions are done
independently of the body.
      (2)
In this paragraph—
“public interest cases” means matters which raise or appear to raise
important issues affecting the public interest;
30
“statutory audit function” means any function performed as a statutory
auditor.
Supplementary: arrangements to operate independently of body
25    (1)
This paragraph applies for the purposes of—
(a)
paragraph 21(b),
35
(b)
paragraph 22(b),
(c)
paragraph 23(1)(b), or
(d)
paragraph 24(1)(e).
      (2)
Arrangements are not to be regarded as appropriate for the purpose of
ensuring that a thing is done independently of the body unless they are
40
designed to ensure that the body—
(a)
will have no involvement in the appointment or selection of any of
the persons who are to be responsible for doing that thing, and
(b)
will not otherwise be involved in the doing of that thing.

Company Law Reform Bill [HL]
Schedule 11 — Recognised professional qualifications
Part 1 — Grant and revocation of recognition of a professional qualification
527

      (3)
Sub-paragraph (2) imposes a minimum requirement and does not preclude
the possibility that additional criteria may need to be satisfied in order for
the arrangements to be regarded as appropriate for the purpose in question.
Supplementary: funding of arrangements
26
The body must pay any of the costs of maintaining any arrangements within
5
paragraph 21, 22, 23 or 24 which the arrangements provide are to be paid by
it.
Supplementary: scope of arrangement
27
Arrangements may qualify as arrangements within any of paragraphs 21,
22, 23 and 24 even though the matters for which they provide are more
10
extensive in any respect than those mentioned in the applicable paragraph.
Schedule 11
Section 849

Recognised professional qualifications
Part 1
Grant and revocation of recognition of a professional qualification
15
Application for recognition of professional qualification
1     (1)
A qualifying body may apply to the Secretary of State for an order declaring
a qualification offered by it to be a recognised professional qualification for
the purposes of this Part of this Act (“a recognition order”).
      (2)
In this Part of this Act “a recognised qualifying body” means a qualifying
20
body offering a recognised professional qualification.
      (3)
Any application must be—
(a)
made in such manner as the Secretary of State may direct, and
(b)
accompanied by such information as the Secretary of State may
reasonably require for the purpose of determining the application.
25
      (4)
At any time after receiving an application and before determining it the
Secretary of State may require the applicant to furnish additional
information.
      (5)
The directions and requirements given or imposed under sub-paragraphs
(3) and (4) may differ as between different applications.
30
      (6)
The Secretary of State may require any information to be furnished under
this paragraph to be in such form or verified in such manner as he may
specify.
      (7)
In the case of examination standards, the verification required may include
independent moderation of the examinations over such a period as the
35
Secretary of State considers necessary.
      (8)
Every application must be accompanied by—
(a)
a copy of the applicant’s rules, and

Company Law Reform Bill [HL]
Schedule 11 — Recognised professional qualifications
Part 1 — Grant and revocation of recognition of a professional qualification
528

(b)
a copy of any guidance issued by the applicant in writing.
      (9)
The reference in sub-paragraph (8)(b) to guidance issued by the applicant is
a reference to any guidance or recommendation—
(a)
issued or made by it to all or any class of persons holding or seeking
to hold a qualification, or approved or seeking to be approved by the
5
body for the purposes of giving practical training,
(b)
relevant for the purposes of this Part of this Act, and
(c)
intended to have continuing effect,

including any guidance or recommendation relating to a matter within sub-
paragraph (10).
10
     (10)
The matters within this sub-paragraph are—
(a)
admission to or expulsion from a course of study leading to a
qualification,
(b)
the award or deprivation of a qualification, and
(c)
the approval of a person for the purposes of giving practical training
15
or the withdrawal of such an approval,

so far as relevant for the purposes of this Part of this Act.
Grant and refusal of recognition
2     (1)
The Secretary of State may, on an application duly made in accordance with
paragraph 1 and after being furnished with all such information as he may
20
require under that paragraph, make or refuse to make a recognition order in
respect of the qualification in relation to which the application was made.
      (2)
The Secretary of State may make a recognition order only if it appears to
him, from the information furnished by the applicant and having regard to
any other information in his possession, that the requirements of Part 2 of
25
this Schedule are satisfied in relation to the qualification.
      (3)
Where the Secretary of State refuses an application for a recognition order he
must give the applicant a written notice to that effect specifying which
requirements, in his opinion, are not satisfied.
      (4)
A recognition order must state the date on which it takes effect.
30
R evocation of recognition
3     (1)
A recognition order may be revoked by a further order made by the
Secretary of State if at any time it appears to him—
(a)
that any requirement of Part 2 of this Schedule is not satisfied in
relation to the qualification to which the recognition order relates, or
35
(b)
that the qualifying body has failed to comply with any obligation
imposed on it by or by virtue of this Part of this Act.
      (2)
An order revoking a recognition order must state the date on which it takes
effect, which must be after the period of three months beginning with the
date on which the revocation order is made.
40
      (3)
Before revoking a recognition order the Secretary of State must—
(a)
give written notice of his intention to do so to the qualifying body,

Company Law Reform Bill [HL]
Schedule 11 — Recognised professional qualifications
Part 1 — Grant and revocation of recognition of a professional qualification
529

(b)
take such steps as he considers reasonably practicable for bringing
the notice to the attention of persons holding the qualification or in
the course of studying for it, and
(c)
publish the notice in such manner as he thinks appropriate for
bringing it to the attention of any other persons who are in his
5
opinion likely to be affected.
      (4)
A notice under sub-paragraph (3) must—
(a)
state the reasons for which the Secretary of State proposes to act, and
(b)
give particulars of the rights conferred by sub-paragraph (5).
      (5)
A person within sub-paragraph (6) may, within the period of three months
10
beginning with the date of service or publication or such longer period as the
Secretary of State may allow, make written representations to the Secretary
of State and, if desired, oral representations to a person appointed for that
purpose by the Secretary of State.
      (6)
The persons within this sub-paragraph are—
15
(a)
the qualifying body on which a notice is served under sub-paragraph
(3),
(b)
any person holding the qualification or in the course of studying for
it, and
(c)
any other person who appears to the Secretary of State to be affected.
20
      (7)
The Secretary of State must have regard to any representations made in
accordance with subsection (5) in determining whether to revoke the
recognition order.
      (8)
If in any case the Secretary of State considers it essential to do so in the public
interest he may revoke a recognition order without regard to the restriction
25
imposed by sub-paragraph (2), even if—
(a)
no notice has been given or published under sub-paragraph (3), or
(b)
the period of time for making representations in pursuance of such a
notice has not expired.
      (9)
An order revoking a recognition order may contain such transitional
30
provision as the Secretary of State thinks necessary or expedient.
     (10)
A recognition order may be revoked at the request or with the consent of the
qualifying body and any such revocation is not subject to—
(a)
the restrictions imposed by sub-paragraphs (1) and (2), or
(b)
the requirements of sub-paragraphs (3) to (5) and (7).
35
     (11)
On making an order revoking a recognition order the Secretary of State
must—
(a)
give written notice of the making of the order to the qualifying body,
(b)
take such steps as he considers reasonably practicable for bringing
the making of the order to the attention of persons holding the
40
qualification or in the course of studying for it, and
(c)
publish a notice of the making of the order in such manner as he
thinks appropriate for bringing it to the attention of any other
persons who are in his opinion likely to be affected.
Transitional provision
45
4
A recognition order made and not revoked under—

Company Law Reform Bill [HL]
Schedule 11 — Recognised professional qualifications
Part 2 — Requirements for recognition of a professional qualification
530

(a)
paragraph 2(1) of Schedule 12 to the Companies Act 1989 (c. 40), or
(b)
paragraph 2(1) of Schedule 12 to the Companies (Northern Ireland)
Order 1990 (S.I. 1990/593 (N.I. 5)),

before the commencement of this Chapter of this Part of this Act is to have
effect after the commencement of this Chapter as a recognition order made
5
under paragraph 2(1) of this Schedule.
Orders not statutory instruments
5
Orders under this Part of this Schedule shall not be made by statutory
instrument.
Part 2
10
Requirements for recognition of a professional qualification
Entry requirements
6     (1)
The qualification must only be open to persons who—
(a)
have attained university entrance level, or
(b)
have a sufficient period of professional experience.
15
      (2)
In relation to a person who has not been admitted to a university or other
similar establishment in the United Kingdom, “attaining university entrance
level” means—
(a)
being educated to such a standard as would entitle him to be
considered for such admission on the basis of—
20
(i)
academic or professional qualifications obtained in the
United Kingdom and recognised by the Secretary of State to
be of an appropriate standard, or
(ii)
academic or professional qualifications obtained outside the
United Kingdom which the Secretary of State considers to be
25
of an equivalent standard, or
(b)
being assessed, on the basis of written tests of a kind appearing to the
Secretary of State to be adequate for the purpose (with or without
oral examination), as of such a standard of ability as would entitle
him to be considered for such admission.
30
      (3)
The assessment, tests and oral examination referred to in sub-paragraph
(2)(b) may be conducted by—
(a)
the qualifying body, or
(b)
some other body approved by the Secretary of State.
      (4)
The reference in sub-paragraph (1)(b) to “a sufficient period of professional
35
experience” is to not less than seven years’ experience in a professional
capacity in the fields of finance, law and accountancy.
Requirement for theoretical instruction or professional experience
7     (1)
The qualification must be restricted to persons who—
(a)
have completed a course of theoretical instruction in the subjects
40
prescribed for the purposes of paragraph 8, or
(b)
have a sufficient period of professional experience.

Company Law Reform Bill [HL]
Schedule 11 — Recognised professional qualifications
Part 2 — Requirements for recognition of a professional qualification
531

      (2)
The reference in sub-paragraph (1)(b) to “a sufficient period of professional
experience” is to not less than seven years’ experience in a professional
capacity in the fields of finance, law and accountancy.
Examination
8     (1)
The qualification must be restricted to persons who have passed an
5
examination (at least part of which is in writing) testing—
(a)
theoretical knowledge of the subjects prescribed for the purposes of
this paragraph by regulations made by the Secretary of State, and
(b)
ability to apply that knowledge in practice,

and requiring a standard of attainment at least equivalent to that required to
10
obtain a degree from a university or similar establishment in the United
Kingdom.
      (2)
The qualification may be awarded to a person without his theoretical
knowledge of a subject being tested by examination if he has passed a
university or other examination of equivalent standard in that subject or
15
holds a university degree or equivalent qualification in it.
      (3)
The qualification may be awarded to a person without his ability to apply
his theoretical knowledge of a subject in practice being tested by
examination if he has received practical training in that subject which is
attested by an examination or diploma recognised by the Secretary of State
20
for the purposes of this paragraph.
      (4)
Regulations under this paragraph are subject to negative resolution
procedure.
Practical training
9     (1)
The qualification must be restricted to persons who have completed at least
25
three years’ practical training of which—
(a)
part was spent being trained in statutory audit work, and
(b)
a substantial part was spent being trained in statutory audit work or
other audit work of a description approved by the Secretary of State
as being similar to statutory audit work.
30
      (2)
For the purpose of sub-paragraph (1) “statutory audit work” includes the
work of a person appointed as the auditor of a person under the law of a
country or territory outside the United Kingdom where it appears to the
Secretary of State that the law and practice with respect to the audit of
accounts is similar to that in the United Kingdom.
35
      (3)
The training must be given by persons approved by the body offering the
qualification as persons whom the body is satisfied, in the light of
undertakings given by them and the supervision to which they are subject
(whether by the body in itself or some other body or organisation), will
provide adequate training.
40
      (4)
At least two-thirds of the training must be given by a person—
(a)
eligible for appointment as a statutory auditor, or
(b)
eligible for a corresponding appointment as an auditor under the law
of a member State, or part of a member State, other than the United
Kingdom.
45