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 12 — Arrangements in which registered third country auditors are required to participate
532

Supplementary provision with respect to a sufficient period of professional experience
10    (1)
Periods of theoretical instruction in the fields of finance, law and
accountancy may be deducted from the required period of professional
experience, provided the instruction—
(a)
lasted at least one year, and
5
(b)
is attested by an examination recognised by the Secretary of State for
the purposes of this paragraph;

but the period of professional experience may not be so reduced by more
than four years.
      (2)
The period of professional experience together with the practical training
10
required in the case of persons satisfying the requirement in paragraph 7 by
virtue of having a sufficient period of professional experience must not be
shorter than the course of theoretical instruction referred to in that
paragraph and the practical training required in the case of persons
satisfying the requirement of that paragraph by virtue of having completed
15
such a course.
The body offering the qualification
11    (1)
The body offering the qualification must have—
(a)
rules and arrangements adequate to ensure compliance with the
requirements of paragraphs 6 to 10, and
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(b)
adequate arrangements for the effective monitoring of its continued
compliance with those requirements.
      (2)
The arrangements must include arrangements for monitoring—
(a)
the standard of the body’s examinations, and
(b)
the adequacy of the practical training given by the persons approved
25
by it for that purpose.
Schedule 12
Section 871

Arrangements in which registered third country auditors are required to
participate
Arrangements for independent monitoring of audits of traded non-Community companies
30
1     (1)
The arrangements referred to in section 871(1)(a) are appropriate
arrangements—
(a)
for enabling the performance by the registered third country auditor
of third country audit functions to be monitored by means of
inspections carried out under the arrangements, and
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(b)
for ensuring that the carrying out of such monitoring and inspections
is done independently of the registered third country auditor.
      (2)
In this paragraph “third country audit function” means any function
performed as a third country auditor.

Company Law Reform Bill [HL]
Schedule 12 — Arrangements in which registered third country auditors are required to participate
533

Arrangements for independent investigations for disciplinary purposes
2     (1)
The arrangements referred to in section 871(1)(b) are appropriate
arrangements—
(a)
for the carrying out of investigations into matters arising in
connection with the performance of third country audit functions by
5
the registered third country auditor,
(b)
for the holding of disciplinary hearings relating to the registered
third country auditor which appear to be desirable following the
conclusion of such investigations,
(c)
for requiring such hearings to be held in public except where the
10
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 registered third country auditor, and
(e)
for ensuring that the carrying out of those investigations, the holding
15
of those hearings and the taking of those decisions are done
independently of the registered third country auditor.
      (2)
In this paragraph—
“disciplinary action” includes the imposition of a fine; and
“third country audit function” means any function performed as a third
20
country auditor.
Supplementary: arrangements to operate independently of third country auditor
3     (1)
This paragraph applies for the purposes of—
(a)
paragraph 1(1)(b), or
(b)
paragraph 2(1)(e).
25
      (2)
Arrangements are not to be regarded as appropriate for the purpose of
ensuring that a thing is done independently of the registered third country
auditor unless they are designed to ensure that the registered third country
auditor—
(a)
will have no involvement in the appointment or selection of any of
30
the persons who are to be responsible for doing that thing, and
(b)
will not otherwise be involved in the doing of that thing.
      (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.
35
Supplementary: funding of arrangements
4     (1)
The registered third country auditor must pay any of the costs of
maintaining any relevant arrangements which the arrangements provide
are to be paid by it.
      (2)
For this purpose “relevant arrangements” are arrangements within
40
paragraph 1 or 2 in which the registered third country auditor is obliged to
participate.

Company Law Reform Bill [HL]
Schedule 13 — Supplementary provisions with respect to delegation order
534

Supplementary: scope of arrangements
5
Arrangements may qualify as arrangements within either of paragraphs 1
and 2 even though the matters for which they provide are more extensive in
any respect than those mentioned in the applicable paragraph.
Specification of particular arrangements by the Secretary of State
5
6     (1)
If there exist two or more sets of arrangements within paragraph 1 or within
paragraph 2, the obligation of a registered third country auditor under
section 871(1)(a) or (b), as the case may be, is to participate in such set of
arrangements as the Secretary of State may by order specify.
      (2)
An order under sub-paragraph (1) is subject to negative resolution
10
procedure.
Schedule 13
Section 881

Supplementary provisions with respect to delegation order
Operation of this Schedule
1     (1)
This Schedule has effect in relation to a body designated by a delegation
15
order under section 881 as follows—
(a)
paragraphs 2 to 12 have effect in relation to the body where it is
established by the order;
(b)
paragraphs 2 and 6 to 11 have effect in relation to the body where it
is an existing body;
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(c)
paragraph 13 has effect in relation to the body where it is an existing
body that is an unincorporated association.
      (2)
In their operation in accordance with sub-paragraph (1)(b), paragraphs 2
and 6 apply only in relation to—
(a)
things done by or in relation to the body in or in connection with the
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exercise of functions transferred to it by the delegation order, and
(b)
functions of the body which are functions so transferred.
      (3)
Any power conferred by this Schedule to make provision by order is a
power to make provision by an order under section 881.
Status
30
2
The body is not to be regarded as acting on behalf of the Crown and its
members, officers and employees are not to be regarded as Crown servants.
Name, members and chairman
3     (1)
The body is to be known by such name as may be specified in the delegation
order.
35
      (2)
The body is to consist of such persons (not being less than eight) as the
Secretary of State may appoint after such consultation as he thinks
appropriate.

Company Law Reform Bill [HL]
Schedule 13 — Supplementary provisions with respect to delegation order
535

      (3)
The chairman of the body is to be such person as the Secretary of State may
appoint from among its members.
      (4)
The Secretary of State may make provision by order as to—
(a)
the terms on which the members of the body are to hold and vacate
office;
5
(b)
the terms on which a person appointed as chairman is to hold and
vacate the office of chairman.
Financial provisions
4     (1)
The body must pay to its chairman and members such remuneration, and
such allowances in respect of expenses properly incurred by them in the
10
performance of their duties, as the Secretary of State may determine.
      (2)
As regards any chairman or member in whose case the Secretary of State so
determines, the body must pay or make provision for the payment of—
(a)
such pension, allowance or gratuity to or in respect of that person on
his retirement or death, or
15
(b)
such contributions or other payment towards the provision of such a
pension, allowance or gratuity,

as the Secretary of State may determine.
      (3)
Where—
(a)
a person ceases to be a member of the body otherwise than on the
20
expiry of his term of office, and
(b)
it appears to the Secretary of State that there are special
circumstances which make it right for that person to receive
compensation,

the body must make a payment to him by way of compensation of such
25
amount as the Secretary of State may determine.
Proceedings
5     (1)
The delegation order may contain such provision as the Secretary of State
considers appropriate with respect to the proceedings of the body.
      (2)
The delegation order may, in particular—
30
(a)
authorise the body to discharge any functions by means of
committees consisting wholly or partly of members of the body;
(b)
provide that the validity of proceedings of the body, or of any such
committee, is not affected by any vacancy among the members or
any defect in the appointment of any member.
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Fees
6     (1)
The body may retain fees payable to it.
      (2)
The fees must be applied for—
(a)
meeting the expenses of the body in discharging its functions, and
(b)
any purposes incidental to those functions.
40
      (3)
Those expenses include any expenses incurred by the body on such staff,
accommodation, services and other facilities as appear to it to be necessary
or expedient for the proper performance of its functions.

Company Law Reform Bill [HL]
Schedule 13 — Supplementary provisions with respect to delegation order
536

      (4)
In prescribing the amount of fees in the exercise of the functions transferred
to it the body must prescribe such fees as appear to it sufficient to defray
those expenses, taking one year with another.
      (5)
Any exercise by the body of the power to prescribe fees requires the
approval of the Secretary of State.
5
      (6)
The Secretary of State may, after consultation with the body, by order vary
or revoke any regulations prescribing fees made by the body.
Legislative functions
7     (1)
Regulations or an order made by the body in the exercise of the functions
transferred to it must be made by instrument in writing, but not by statutory
10
instrument.
      (2)
The instrument must specify the provision of this Part of this Act under
which it is made.
      (3)
The Secretary of State may by order impose such requirements as he thinks
necessary or expedient as to the circumstances and manner in which the
15
body must consult on any regulations or order it proposes to make.
      (4)
Nothing in this Part applies to make regulations or an order made by the
body subject to negative resolution procedure or affirmative resolution
procedure.
8     (1)
Immediately after an instrument is made it must be printed and made
20
available to the public with or without payment.
      (2)
A person is not to be taken to have contravened any regulation or order if he
shows that at the time of the alleged contravention the instrument
containing the regulation or order had not been made available as required
by this paragraph.
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9     (1)
The production of a printed copy of an instrument purporting to be made by
the body on which is endorsed a certificate signed by an officer of the body
authorised by it for the purpose and stating—
(a)
that the instrument was made by the body,
(b)
that the copy is a true copy of the instrument, and
30
(c)
that on a specified date the instrument was made available to the
public as required by paragraph 8,

is evidence (or, in Scotland, sufficient evidence) of the facts stated in the
certificate.
      (2)
A certificate purporting to be signed as mentioned in sub-paragraph (1) is to
35
be deemed to have been duly signed unless the contrary is shown.
      (3)
Any person wishing in any legal proceedings to cite an instrument made by
the body may require the body to cause a copy of it to be endorsed with such
a certificate as is mentioned in this paragraph.
Report and accounts
40
10    (1)
The body must, at least once in each calendar year for which the delegation
order is in force, make a report to the Secretary of State on—
(a)
the discharge of the functions transferred to it, and

Company Law Reform Bill [HL]
Schedule 13 — Supplementary provisions with respect to delegation order
537

(b)
such other matters as the Secretary of State may by order require.
      (2)
The delegation order may modify subsection (1) as it has effect in relation to
the calendar year in which the order comes into force or is revoked.
      (3)
The Secretary of State must lay before Parliament copies of each report
received by him under this paragraph.
5
      (4)
The following provisions of this paragraph apply as follows—
(a)
sub-paragraphs (5) and (6) apply only where the body is established
by the order, and
(b)
sub-paragraphs (7) and (8) apply only where the body is an existing
body.
10
      (5)
The Secretary of State may, with the consent of the Treasury, give directions
to the body with respect to its accounts and the audit of its accounts.
      (6)
A person may only be appointed as auditor of the body if he is eligible for
appointment as a statutory auditor.
      (7)
Unless the body is a company to which section 226 of the Companies Act
15
1985 (c. 6) (duty to prepare individual company accounts) applies, the
Secretary of State may, with the consent of the Treasury, give directions to
the body with respect to its accounts and the audit of its accounts.
      (8)
Whether or not the body is a company to which section 226 of the
Companies Act 1985 applies, the Secretary of State may direct that any
20
provisions of that Act specified in the directions are to apply to the body,
with or without any modifications so specified.
Other supplementary provisions
11    (1)
The transfer of a function to a body designated by a delegation order does
not affect anything previously done in the exercise of the function
25
transferred; and the resumption of a function so transferred does not affect
anything previously done in exercise of the function resumed.
      (2)
The Secretary of State may by order make such transitional and other
supplementary provision as he thinks necessary or expedient in relation to
the transfer or resumption of a function.
30
      (3)
The provision that may be made in connection with the transfer of a function
includes, in particular, provision—
(a)
for modifying or excluding any provision of this Part of this Act in its
application to the function transferred;
(b)
for applying to the body designated by the delegation order, in
35
connection with the function transferred, any provision applying to
the Secretary of State which is contained in or made under any other
enactment;
(c)
for the transfer of any property, rights or liabilities from the Secretary
of State to that body;
40
(d)
for the carrying on and completion by that body of anything in the
process of being done by the Secretary of State when the order takes
effect;
(e)
for the substitution of that body for the Secretary of State in any
instrument, contract or legal proceedings.
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Company Law Reform Bill [HL]
Schedule 14 — Statutory auditors: consequential amendments
538

      (4)
The provision that may be made in connection with the resumption of a
function includes, in particular, provision—
(a)
for the transfer of any property, rights or liabilities from that body to
the Secretary of State;
(b)
for the carrying on and completion by the Secretary of State of
5
anything in the process of being done by that body when the order
takes effect;
(c)
for the substitution of the Secretary of State for that body in any
instrument, contract or legal proceedings.
12
Where a delegation order is revoked, the Secretary of State may by order
10
make provision—
(a)
for the payment of compensation to persons ceasing to be employed
by the body established by the delegation order;
(b)
as to the winding up and dissolution of the body.
13    (1)
This paragraph applies where the body is an unincorporated association.
15
      (2)
Any relevant proceedings may be brought by or against the body in the
name of any body corporate whose constitution provides for the
establishment of the body.
      (3)
In sub-paragraph (2) “relevant proceedings” means proceedings brought in
or in connection with the exercise of any transferred function.
20
      (4)
In relation to proceedings brought as mentioned in sub-paragraph (2), any
reference in paragraph 11(3)(e) or (4)(c) to the body replacing or being
replaced by the Secretary of State in any legal proceedings is to be read with
the appropriate modifications.
Schedule 14
25
Section 893

Statutory auditors: consequential amendments
Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27)
1     (1)
Section 16 of the Companies (Audit, Investigations and Community
Enterprise) Act 2004 (grants to bodies concerned with accounting standards
etc) is amended as follows.
30
      (2)
In subsection (2)—
(a)
in paragraph (f) for “paragraph 17” to the end substitute “paragraph
21, 22, 23(1) or 24(1) of Schedule 10 to the Company Law Reform Act
2006;”,
(b)
in paragraph (g) for “Part 2 of that Act” substitute “Part 35 of that
35
Act”.
      (3)
In subsection (5), in the definition of “professional accountancy body”—
(a)
in paragraph (a) for “Part 2 of the Companies Act 1989 (c. 40)”
substitute “Part 35 of the Company Law Reform Act 2006”, and
(b)
in paragraph (b) for “section 32” substitute “section 849”.
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