Company Law Reform Bill [HL] (254-260)

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL] (254-260)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 4 — Removal, resignation, etc of auditors
254

526
Notice to registrar of resolution removing auditor from office
(1)
Where a resolution is passed under section 524 (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.
527
Rights of auditor who has been removed from office
(1)
An auditor who has been removed by resolution under section 524 has,
notwithstanding his removal, the rights conferred by section 516(2) in relation
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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
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former auditor.
Failure to re-appoint auditor
528
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
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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
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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.
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(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
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copies of the resolution circulated in accordance with section 298 (resolution
proposed by directors) or section 300 (resolution proposed by members).

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 4 — Removal, resignation, etc of auditors
255

(6)
Where subsection (5) applies—
(a)
the period allowed under section 300(3) for service of copies of the
proposed resolution is 28 days instead of 21 days, and
(b)
the provisions of section 300(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
529
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—
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(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
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whom notice of the meeting is or has been sent.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 4 — Removal, resignation, etc of auditors
256

(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
530
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 533.
(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.
531
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.
532
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
533).
(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] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 4 — Removal, resignation, etc of auditors
257

(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;
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(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.
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(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 516(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
533
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
45

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 4 — Removal, resignation, etc of auditors
258

that need to be brought to the attention of members or creditors of the
company.
(2)
If he considers that there are no circumstances in connection with his ceasing
to hold office that need to be brought to the attention of members or creditors
of the company, he must deposit at the company’s registered office a statement
5
to that effect.
(3)
Where an auditor of a quoted 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.
(4)
The statement required by this section must be deposited—
10
(a)
in the case of resignation, along with the notice of resignation;
(b)
in the case of failure to seek re-appointment, not less than 14 days
before the end of the time allowed for next appointing an auditor;
(c)
in any other case, not later than the end of the period of 14 days
beginning with the date on which he ceases to hold office.
15
(5)
A person ceasing to hold office as auditor who fails to comply with this section
commits an offence.
(6)
In proceedings for such an offence it is a defence for the person charged to
show that he took all reasonable steps and exercised all due diligence to avoid
the commission of the offence.
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(7)
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
maximum.
534
Company’s duties in relation to statement
25
(1)
This section applies where the statement deposited under section 533 states the
circumstances connected with the auditor’s ceasing to hold office.
(2)
The company must within 14 days of the deposit of the statement either—
(a)
send a copy of it to every person who under section 429 is entitled to be
sent copies of the accounts, or
30
(b)
apply to the court.
(3)
If it applies to the court, the company must notify the auditor of the
application.
(4)
If the court is satisfied that the auditor is using the provisions of section 533 to
secure needless publicity for defamatory matter—
35
(a)
it shall direct that copies of the statement need not be sent out, and
(b)
it may further order the company’s costs (in Scotland, expenses) on the
application to be paid in whole or in part by the auditor, even if he is
not a party to the application.

The company must within 14 days of the court’s decision send to the persons
40
mentioned in subsection (2)(a) a statement setting out the effect of the order.
(5)
If no such direction is made the company must send copies of the statement to
the persons mentioned in subsection (2)(a) within 14 days of the court’s
decision or, as the case may be, of the discontinuance of the proceedings.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 4 — Removal, resignation, etc of auditors
259

(6)
In the event of default in complying with this section an offence is committed
by every officer of the company who is in default.
(7)
In proceedings for such an offence it is a defence for the person charged to
show that he took all reasonable steps and exercised all due diligence to avoid
the commission of the offence.
5
(8)
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
maximum.
535
Copy of statement to be sent to registrar
10
(1)
Unless within 21 days beginning with the day on which he deposited the
statement under section 533 the auditor receives notice of an application to the
court under section 534, he must within a further seven days send a copy of the
statement to the registrar.
(2)
If an application to the court is made under section 534 and the auditor
15
subsequently receives notice under subsection (5) of that section, he must
within seven days of receiving the notice send a copy of the statement to the
registrar.
(3)
An auditor who fails to comply with subsection (1) or (2) commits an offence.
(4)
In proceedings for such an offence it is a defence for the person charged to
20
show that he took all reasonable steps and exercised all due diligence to avoid
the commission of the offence.
(5)
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
25
maximum.
536
Duty of auditor to notify appropriate audit authority
(1)
Where—
(a)
in the case of a major audit, an auditor ceases for any reason to hold
office, or
30
(b)
in the case of an audit that is not a major audit, an auditor ceases to hold
office before the end of his term of office,

the auditor ceasing to hold office must notify the appropriate audit authority.
(2)
The notice must—
(a)
inform the appropriate audit authority that he has ceased to hold office,
35
and
(b)
be accompanied by a copy of the statement deposited by him at the
company’s registered office in accordance with section 533.
(3)
If the statement so deposited is to the effect that he considers that there are no
circumstances in connection with his ceasing to hold office that need to be
40
brought to the attention of members or creditors of the company, the notice
must also be accompanied by a statement of the reasons for his ceasing to hold
office.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 4 — Removal, resignation, etc of auditors
260

(4)
The auditor must comply with this section—
(a)
in the case of a major audit, at the same time as he deposits a statement
at the company’s registered office in accordance with section 533;
(b)
in the case of an audit that is not a major audit, at such time (not being
earlier than the time mentioned in paragraph (a)) as the appropriate
5
audit authority may require.
(5)
A person ceasing to hold office as auditor who fails to comply with this section
commits an offence.
(6)
If that person is a firm an offence is committed by—
(a)
the firm, and
10
(b)
every officer of the firm who is in default.
(7)
In proceedings for an offence under this section it is a defence for the person
charged to show that he took all reasonable steps and exercised all due
diligence to avoid the commission of the offence.
(8)
A person guilty of an offence under this section is liable—
15
(a)
on conviction on indictment, to a fine;
(b)
on summary conviction, to a fine not exceeding the statutory
maximum.
537
Duty of company to notify appropriate audit authority
(1)
Where an auditor ceases to hold office before the end of his term of office, the
20
company must notify the appropriate audit authority.
(2)
The notice must—
(a)
inform the appropriate audit authority that the auditor has ceased to
hold office, and
(b)
be accompanied by—
25
(i)
a statement by the company of the reasons for his ceasing to
hold office, or
(ii)
if the copy of the statement deposited by the auditor at the
company’s registered office in accordance with section 533
contains a statement of circumstances in connection with his
30
ceasing to hold office that need to be brought to the attention of
members or creditors of the company, a copy of that statement.
(3)
The company must give notice under this section not later than 14 days after
the date on which the auditor’s statement is deposited at the company’s
registered office in accordance with section 533.
35
(4)
If a company fails to comply with this section, an offence is committed by—
(a)
the company, and
(b)
every officer of the company who is in default.
(5)
In proceedings for such an offence it is a defence for the person charged to
show that he took all reasonable steps and exercised all due diligence to avoid
40
the commission of the offence.
(6)
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
maximum.
45