Company Law Reform Bill [HL] (261-264)

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL] (261-264)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 4 — Removal, resignation, etc of auditors
261

538
Information to be given to accounting authorities
(1)
The appropriate audit authority on receiving notice under section 536 or 537 of
an auditor’s ceasing to hold office—
(a)
must inform the accounting authorities, and
(b)
may if it thinks fit forward to those authorities a copy of the statement
5
or statements accompanying the notice.
(2)
The accounting authorities are—
(a)
the Secretary of State, and
(b)
any person authorised by the Secretary of State for the purposes of
section 464 (revision of defective accounts: persons authorised to apply
10
to court).
(3)
If either of the accounting authorities is also the appropriate audit authority it
is only necessary to comply with this section as regards any other accounting
authority.
(4)
If the court has made an order under section 534(4) directing that copies of the
15
statement need not be sent out by the company, sections 468 and 469
(restriction on further disclosure) apply in relation to the copies sent to the
accounting authorities as they apply to information obtained under section 467
(power to require documents etc).
539
Meaning of “appropriate audit authority” and “major audit”
20
(1)
In sections 536, 537 and 538 “appropriate audit authority” means—
(a)
in the case of a major audit—
(i)
the Secretary of State, or
(ii)
if the Secretary of State has delegated functions under section
1216 to a body whose functions include receiving the notice in
25
question, that body;
(b)
in the case of an audit that is not a major audit, the relevant supervisory
body.
(2)
In sections 536 and this section “major audit” means a statutory audit
conducted in respect of—
30
(a)
a company any of whose securities have been admitted to the official
list (within the meaning of Part 6 of the Financial Services and Markets
Act 2000 (c. 8)), or
(b)
any other person in whose financial condition there is a major public
interest.
35
(3)
In determining whether an audit is a major audit within subsection (2)(b),
regard shall be had to any guidance issued by any of the authorities mentioned
in subsection (1).
Supplementary
540
Effect of casual vacancies
40

If an auditor ceases to hold office for any reason, any surviving or continuing
auditor or auditors may continue to act.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 5 — Quoted companies: right of members to raise audit concerns at accounts meeting
262

Chapter 5
Quoted companies: right of members to raise audit concerns at accounts
meeting
541
Members’ power to require website publication of audit concerns
(1)
The members of a quoted company may require the company to publish on a
5
website a statement setting out any matter relating to—
(a)
the audit of the company’s accounts (including the auditor’s report and
the conduct of the audit) that are to be laid before the next accounts
meeting, or
(b)
any circumstances connected with an auditor of the company ceasing
10
to hold office since the previous accounts meeting,

that the members propose to raise at the next accounts meeting of the
company.
(2)
A company is required to do so once it has received requests to that effect
from—
15
(a)
members representing at least 5% of the total voting rights of all the
members who have a relevant right to vote (excluding any voting rights
attached to any shares in the company held as treasury shares), or
(b)
at least 100 members who have a relevant right to vote and hold shares
in the company on which there has been paid up an average sum, per
20
member, of at least £100.
(3)
In subsection (2) a “relevant right to vote” means a right to vote at the accounts
meeting.
(4)
A request—
(a)
may be sent to the company in hard copy or electronic form,
25
(b)
must identify the statement to which it relates,
(c)
must be authenticated by the person or persons making it, and
(d)
must be received by the company at least one week before the meeting
to which it relates.
(5)
A quoted company is not required to place on a website a statement under this
30
section if, on an application by the company or another person who claims to
be aggrieved, the court is satisfied that the rights conferred by this section are
being abused.
(6)
The court may order the members requesting website publication to pay the
whole or part of the company’s costs (in Scotland, expenses) on such an
35
application, even if they are not parties to the application.
542
Requirements as to website availability
(1)
The following provisions apply for the purposes of section 541 (website
publication of members’ statement of audit concerns).
(2)
The information must be made available on a website that—
40
(a)
is maintained by or on behalf of the company, and
(b)
identifies the company in question.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 5 — Quoted companies: right of members to raise audit concerns at accounts meeting
263

(3)
Access to the information on the website, and the ability to obtain a hard copy
of the information from the website, must not be conditional on the payment
of a fee or otherwise restricted.
(4)
The statement—
(a)
must be made available within three working days of the company
5
being required to publish it on a website, and
(b)
must be kept available until after the meeting to which it relates.
(5)
A failure to make information available on a website throughout the period
specified in subsection (4)(b) is disregarded if—
(a)
the information is made available on the website for part of that period,
10
and
(b)
the failure is wholly attributable to circumstances that it would not be
reasonable to have expected the company to prevent or avoid.
543
Website publication: company’s supplementary duties
(1)
A quoted company must in the notice it gives of the accounts meeting draw
15
attention to—
(a)
the possibility of a statement being placed on a website in pursuance of
members’ requests under section 541, and
(b)
the effect of the following provisions of this section.
(2)
A company may not require the members requesting website publication to
20
pay its expenses in complying with that section or section 542 (requirements in
connection with website publication).
(3)
Where a company is required to place a statement on a website under section
541 it must forward the statement to the company’s auditor not later than the
time when it makes the statement available on the website.
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(4)
The business which may be dealt with at the accounts meeting includes any
statement that the company has been required under section 541 to publish on
a website.
544
Website publication: offences
(1)
In the event of default in complying with
30
(a)
section 542 (requirements as to website publication), or
(b)
section 543 (companies’ supplementary duties in relation to request for
website publication),

an offence is committed by every officer of the company who is in default.
(2)
A person guilty of an offence under this section is liable—
35
(a)
on conviction on indictment, to a fine;
(b)
on summary conviction, to a fine not exceeding the statutory
maximum.
545
Meaning of “quoted company”
(1)
For the purposes of this Chapter a company is a quoted company if it is a
40
quoted company in accordance with section 391 (quoted and unquoted
companies for the purposes of Part 16) in relation to the financial year to which
the accounts to be laid at the next accounts meeting relate.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 17 — Audit
Chapter 6 — Auditors’ liability
264

(2)
The provisions of subsections (4) to (6) of that section (power to amend
definition by regulations) apply in relation to the provisions of this Chapter as
in relation to the provisions of that Part.
Chapter 6
Auditors’ liability
5
Voidness of provisions protecting auditors from liability
546
Voidness of provisions protecting auditors from liability
(1)
This section applies to any provision—
(a)
for exempting an auditor of a company (to any extent) from any
liability that would otherwise attach to him in connection with any
10
negligence, default, breach of duty or breach of trust in relation to the
company occurring in the course of the audit of accounts, or
(b)
by which a company directly or indirectly provides an indemnity (to
any extent) for an auditor of the company, or of an associated company,
against any liability attaching to him in connection with any
15
negligence, default, breach of duty or breach of trust in relation to the
company of which he is auditor occurring in the course of the audit of
accounts.
(2)
Any such provision is void, except as permitted by—
(a)
section 547 (indemnity for costs of successfully defending
20
proceedings), or
(b)
sections 548 to 550 (liability limitation agreements).
(3)
This section applies to any provision, whether contained in a company’s
articles or in any contract with the company or otherwise.
(4)
For the purposes of this section companies are associated if one is a subsidiary
25
of the other or both are subsidiaries of the same body corporate.
Indemnity for costs of defending proceedings
547
Indemnity for costs of successfully defending proceedings

Section 546 (general voidness of provisions protecting auditors from liability)
does not prevent a company from indemnifying an auditor against any liability
30
incurred by him—
(a)
in defending proceedings (whether civil or criminal) in which
judgment is given in his favour or he is acquitted, or
(b)
in connection with an application under section 1123 (power of court to
grant relief in case of honest and reasonable conduct) in which relief is
35
granted to him by the court.