Company Law Reform Bill [HL] (569-575)

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL] (569-575)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 3 — Auditors General
569

(c)
comply with any decision of the kind mentioned in subsection (3)(f) of
that section made under the supervision arrangements.
(2)
Each Auditor General must pay to the body or bodies with which the
Independent Supervisor enters into the supervision arrangements such
proportion of the costs incurred by the body or bodies for the purposes of the
5
arrangements as the Independent Supervisor may notify to him in writing.
(3)
Expenditure under subsection (2) is—
(a)
in the case of expenditure of the Comptroller and Auditor General, to
be regarded as expenditure of the National Audit Office for the
purposes of section 4(1) of the National Audit Act 1983 (c. 44);
10
(b)
in the case of expenditure of the Comptroller and Auditor General for
Northern Ireland, to be regarded as expenditure of the Northern
Ireland Audit Office for the purposes of Article 6(1) of the Audit
(Northern Ireland) Order 1987 (S.I. 1987/460 (N.I. 5)).
(4)
In this section “the supervision arrangements” means the arrangements
15
entered into under section 1193.
Reporting requirement
1195
Reports by the Independent Supervisor
(1)
The Independent Supervisor must, at least once in each calendar year, prepare
a report on the discharge of its functions.
20
(2)
The Independent Supervisor must give a copy of each report prepared under
subsection (1) to—
(a)
the Secretary of State;
(b)
the First Minister in Scotland;
(c)
the First Minister and the deputy First Minister in Northern Ireland;
25
(d)
the Assembly First Secretary in Wales.
(3)
The Secretary of State must lay before each House of Parliament a copy of each
report received by him under subsection (2)(a).
(4)
In relation to a calendar year during which an appointment of a body as the
Independent Supervisor is made or revoked by an order under section 1192,
30
this section applies with such modifications as may be specified in the order.
Information
1196
Matters to be notified to the Independent Supervisor
(1)
The Independent Supervisor may require an Auditor General—
(a)
to notify the Independent Supervisor immediately of the occurrence of
35
such events as it may specify in writing and to give it such information
in respect of those events as is so specified;
(b)
to give the Independent Supervisor, at such times or in respect of such
periods as it may specify in writing, such information as is so specified.
(2)
The notices and information required to be given must be such as the
40
Independent Supervisor may reasonably require for the exercise of the
functions conferred on it by or by virtue of this Part.

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Part 42 — Statutory Auditors
Chapter 3 — Auditors General
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(3)
The Independent Supervisor may require information given under this section
to be given in a specified form or verified in a specified manner.
(4)
Any notice or information required to be given under this section must be
given in writing unless the Independent Supervisor specifies or approves some
other manner.
5
1197
The Independent Supervisor’s power to call for information
(1)
The Independent Supervisor may by notice in writing require an Auditor
General to give it such information as it may reasonably require for the exercise
of the functions conferred on it by or by virtue of this Part.
(2)
The Independent Supervisor may require that any information which it
10
requires under this section is to be given within such reasonable time and
verified in such manner as it may specify.
Enforcement
1198
Suspension notices
(1)
The Independent Supervisor may issue —
15
(a)
a notice (a “suspension notice”) suspending an Auditor General’s
eligibility for appointment as a statutory auditor in relation to all
persons, or any specified person or persons, indefinitely or until a date
specified in the notice;
(b)
a notice amending or revoking a suspension notice previously issued to
20
an Auditor General.
(2)
In determining whether it is appropriate to issue a notice under subsection (1),
the Independent Supervisor must have regard to—
(a)
the Auditor General’s performance of the obligations imposed on him
by or by virtue of this Part, and
25
(b)
the Auditor General’s performance of his functions as a statutory
auditor.
(3)
A notice under subsection (1) must—
(a)
be in writing, and
(b)
state the date on which it takes effect (which must be after the period of
30
three months beginning with the date on which it is issued).
(4)
Before issuing a notice under subsection (1), the Independent Supervisor
must—
(a)
give written notice of its intention to do so to the Auditor General, and
(b)
publish the notice mentioned in paragraph (a) in such manner as it
35
thinks appropriate for bringing it to the attention of any other persons
who are likely to be affected.
(5)
A notice under subsection (4) must—
(a)
state the reasons for which the Independent Supervisor proposes to act,
and
40
(b)
give particulars of the rights conferred by subsection (6).
(6)
A person within subsection (7) may, within the period of three months
beginning with the date of service or publication of the notice under subsection

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 3 — Auditors General
571

(4) or such longer period as the Independent Supervisor may allow, make
written representations to the Independent Supervisor and, if desired, oral
representations to a person appointed for that purpose by the Independent
Supervisor.
(7)
The persons within this subsection are—
5
(a)
the Auditor General, and
(b)
any other person who appears to the Independent Supervisor to be
affected.
(8)
The Independent Supervisor must have regard to any representations made in
accordance with subsection (6) in determining—
10
(a)
whether to issue a notice under subsection (1), and
(b)
the terms of any such notice.
(9)
If in any case the Independent Supervisor considers it appropriate to do so in
the public interest it may issue a notice under subsection (1), without regard to
the restriction in subsection (3)(b), even if—
15
(a)
no notice has been given or published under subsection (4), or
(b)
the period of time for making representations in pursuance of such a
notice has not expired.
(10)
On issuing a notice under subsection (1), the Independent Supervisor must—
(a)
give a copy of the notice to the Auditor General, and
20
(b)
publish the notice in such manner as it thinks appropriate for bringing
it to the attention of persons likely to be affected.
(11)
In this section “specified” means specified in, or of a description specified in,
the suspension notice in question.
1199
Effect of suspension notices
25
(1)
An Auditor General must not act as a statutory auditor at any time when a
suspension notice issued to him in respect of the audited person has effect.
(2)
If at any time during an Auditor General’s term of office as a statutory auditor
a suspension notice issued to him in respect of the audited person takes effect,
he must immediately—
30
(a)
resign his office (with immediate effect), and
(b)
give notice in writing to the audited person that he has resigned by
reason of his becoming ineligible for appointment.
(3)
A suspension notice does not make an Auditor General ineligible for
appointment as a statutory auditor for the purposes of section 1177 (effect of
35
ineligibility: criminal offences).
1200
Compliance orders
(1)
If at any time it appears to the Independent Supervisor that an Auditor General
has failed to comply with an obligation imposed on him by or by virtue of this
Part, the Independent Supervisor may make an application to the court under
40
this section.
(2)
If on an application under this section the court decides that the Auditor
General has failed to comply with the obligation in question, it may order the

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 4 — The register of auditors etc
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Auditor General to take such steps as the court directs for securing that the
obligation is complied with.
(3)
In this section “the court” means the High Court or, in Scotland, the Court of
Session.
Proceedings
5
1201
Proceedings involving the Independent Supervisor
(1)
If the Independent Supervisor is an unincorporated association, any relevant
proceedings may be brought by or against it in the name of any body corporate
whose constitution provides for the establishment of the body.
(2)
For this purpose “relevant proceedings” means proceedings brought in or in
10
connection with the exercise of any function by the body as the Independent
Supervisor.
(3)
Where an appointment under section 1192 is revoked, the revoking order may
make such provision as the Secretary of State thinks fit with respect to pending
proceedings.
15
Grants
1202
Grants to the Independent Supervisor
In section 16 of the Companies (Audit, Investigations and Community
Enterprise) Act 2004 (c. 27) (grants to bodies concerned with accounting
standards etc), after subsection (2)(k) insert—
20
“(ka)
exercising functions of the Independent Supervisor appointed
under Chapter 3 of Part 42 of the Company Law Reform Act
2006;”.
Chapter 4
The register of auditors etc
25
1203
The register of auditors
(1)
The Secretary of State must make regulations requiring the keeping of a
register of—
(a)
the persons eligible for appointment as a statutory auditor, and
(b)
third country auditors (see Chapter 5) who apply to be registered in the
30
specified manner and in relation to whom specified requirements are
met.
(2)
The regulations must require each person’s entry in the register to contain—
(a)
his name and address,
(b)
in the case of an individual eligible for appointment as a statutory
35
auditor, the specified information relating to any firm on whose behalf
he is responsible for statutory audit work,

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 4 — The register of auditors etc
573

(c)
in the case of a firm eligible for appointment as a statutory auditor, the
specified information relating to the individuals responsible for
statutory audit work on its behalf,
(d)
in the case of an individual or firm eligible for appointment as a
statutory auditor by virtue of Chapter 2, the name of the relevant
5
supervisory body, and
(e)
in the case of a firm eligible for appointment as a statutory auditor by
virtue of Chapter 2 or a third country auditor, the information
mentioned in subsection (3),

and may require each person’s entry to contain other specified information.
10
(3)
The information referred to in subsection (2)(e) is—
(a)
in relation to a body corporate, except where paragraph (b) applies, the
name and address of each person who is a director of the body or holds
any shares in it;
(b)
in relation to a limited liability partnership, the name and address of
15
each member of the partnership;
(c)
in relation to a corporation sole, the name and address of the individual
for the time being holding the office by the name of which he is the
corporation sole;
(d)
in relation to a partnership, the name and address of each partner.
20
(4)
The regulations may provide that different parts of the register are to be kept
by different persons.
(5)
The regulations may impose such obligations as the Secretary of State thinks fit
on—
(a)
recognised supervisory bodies,
25
(b)
any body designated by order under section 1216 (delegation of
Secretary of State’s functions),
(c)
persons eligible for appointment as a statutory auditor,
(d)
third country auditors,
(e)
any person with whom arrangements are made by one or more
30
recognised supervisory bodies, or by any body designated by order
under section 1216, with respect to the keeping of the register, or
(f)
the Independent Supervisor appointed under section 1192.
(6)
The regulations may include—
(a)
provision requiring that specified entries in the register be open to
35
inspection at times and places specified or determined in accordance
with the regulations;
(b)
provision enabling a person to require a certified copy of specified
entries in the register;
(c)
provision authorising the charging of fees for inspection, or the
40
provision of copies, of such reasonable amount as may be specified or
determined in accordance with the regulations.
(7)
The Secretary of State may direct in writing that the requirements imposed by
the regulations in accordance with subsections (2)(e) and (3), or such of those
requirements as are specified in the direction, are not to apply, in whole or in
45
part, in relation to a particular registered third country auditor or class of
registered third country auditors.

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Part 42 — Statutory Auditors
Chapter 5 — Registered third country auditors
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(8)
The obligations imposed by regulations under this section on such persons as
are mentioned in subsection (5)(b) or (e) are 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).
(9)
In this section “specified” means specified by regulations under this section.
5
(10)
Regulations under this section are subject to negative resolution procedure.
1204
Information to be made available to public
(1)
The Secretary of State may make regulations requiring a person eligible for
appointment as a statutory auditor, or a member of a specified class of such
persons, to keep and make available to the public specified information,
10
including information regarding—
(a)
the person’s ownership and governance,
(b)
the person’s internal controls with respect to the quality and
independence of its audit work,
(c)
the person’s turnover, and
15
(d)
the audited persons of whom the person has acted as statutory auditor.
(2)
Regulations under this section may—
(a)
impose such obligations as the Secretary of State thinks fit on persons
eligible for appointment as a statutory auditor;
(b)
require the information to be made available to the public in a specified
20
manner.
(3)
In this section “specified” means specified by regulations under this section.
(4)
Regulations under this section are subject to negative resolution procedure.
Chapter 5
Registered third country auditors
25
Introductory
1205
Meaning of “third country auditor”, “registered third country auditor” etc
(1)
In this Part—
“third country auditor” means the auditor of the accounts of a traded non-
Community company, and the expressions “third country audit” and
30
“third country audit work” are to be construed accordingly;
“registered third country auditor” means a third country auditor who is
entered in the register kept in accordance with regulations under
section 1203(1).
(2)
In subsection (1) “traded non-Community company” means a body
35
corporate—
(a)
which is incorporated or formed under the law of a country or territory
which is not a member State or part of a member State,
(b)
whose transferable securities are admitted to trading on a regulated
market situated or operating in the United Kingdom, and
40

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 5 — Registered third country auditors
575

(c)
which has not been excluded, or is not of a description of bodies
corporate which has been excluded, from this definition by an order
made by the Secretary of State.
(3)
For this purpose—
“regulated market” has the meaning given by Article 4.1(14) of Directive
5
2004/39/EC of the European Parliament and of the Council on markets
in financial instruments;
“transferable securities” has the meaning given by Article 4.1(18) of that
Directive.
(4)
An order under this section is subject to negative resolution procedure.
10
Duties
1206
Duties of registered third country auditors
(1)
A registered third country auditor must participate in—
(a)
arrangements within paragraph 1 of Schedule 12 (arrangements for
independent monitoring of audits of traded non-Community
15
companies), and
(b)
arrangements within paragraph 2 of that Schedule (arrangements for
independent investigation for disciplinary purposes of public interest
cases).
(2)
A registered third country auditor must—
20
(a)
take such steps as may be reasonably required of it to enable its
performance of third country audits to be monitored by means of
inspections carried out under the arrangements mentioned in
subsection (1)(a), and
(b)
comply with any decision as to disciplinary action to be taken against
25
it made under the arrangements mentioned in subsection (1)(b).
(3)
Schedule 12 makes further provision with respect to the arrangements in
which registered third country auditors are required to participate.
(4)
The Secretary of State may direct in writing that subsections (1) to (3) are not to
apply, in whole or in part, in relation to a particular registered third country
30
auditor or class of registered third country auditors.
Information
1207
Matters to be notified to the Secretary of State
(1)
The Secretary of State may require a registered third country auditor—
(a)
to notify him immediately of the occurrence of such events as he may
35
specify in writing and to give him such information in respect of those
events as is so specified;
(b)
to give him, at such times or in respect of such periods as he may
specify in writing, such information as is so specified.
(2)
The notices and information required to be given must be such as the Secretary
40
of State may reasonably require for the exercise of his functions under this Part.