Company Law Reform Bill [HL] (576-582)

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Company Law Reform Bill [HL] (576-582)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 5 — Registered third country auditors
576

(3)
The Secretary of State 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 Secretary of State specifies or approves some other
manner.
5
1208
The Secretary of State’s power to call for information
(1)
The Secretary of State may by notice in writing require a registered third
country auditor to give him such information as he may reasonably require for
the exercise of his functions under this Part.
(2)
The Secretary of State may require that any information which he requires
10
under this section is to be given within such reasonable time and verified in
such manner as he may specify.
Enforcement
1209
Compliance orders
(1)
If at any time it appears to the Secretary of State that a registered third country
15
auditor has failed to comply with an obligation imposed on him by or by virtue
of this Part, the Secretary of State may make an application to the court under
this section.
(2)
If on an application under this section the court decides that the auditor has
failed to comply with the obligation in question, it may order the auditor to
20
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.
1210
Removal of third country auditors from the register of auditors
25
(1)
The Secretary of State may, by regulations, confer on the person keeping the
register in accordance with regulations under section 1203(1) power to remove
a third country auditor from the register.
(2)
Regulations under this section must require the person keeping the register, in
determining whether to remove a third country auditor from the register, to
30
have regard to the auditor’s compliance with obligations imposed on him by
or by virtue of this Part.
(3)
Where provision is made under section 1203(4) (different parts of the register
to be kept by different persons), references in this section to the person keeping
the register are to the person keeping that part of the register which relates to
35
third country auditors.
(4)
Regulations under this section are subject to negative resolution procedure.
1211
Grants to bodies concerned with arrangements under Schedule 12
In section 16 of the Companies (Audit, Investigations and Community
Enterprise) Act 2004 (c. 27) (grants to bodies concerned with accounting
40

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 6 — Supplementary and general
577

standards etc), after subsection (2)(ka) (inserted by section 1202) insert—
“(kb)
establishing, maintaining or carrying out arrangements within
paragraph 1 or 2 of Schedule 12 to the Company Law Reform
Act 2006;”.
Chapter 6
5
Supplementary and general
Power to require second company audit
1212
Secretary of State’s power to require second audit of a company
(1)
This section applies where a person appointed as statutory auditor of a
company was not an appropriate person for any part of the period during
10
which the audit was conducted.
(2)
The Secretary of State may direct the company concerned to retain an
appropriate person—
(a)
to conduct a second audit of the relevant accounts, or
(b)
to review the first audit and to report (giving his reasons) whether a
15
second audit is needed.
(3)
For the purposes of subsections (1) and (2) a person is “appropriate” if he—
(a)
is eligible for appointment as a statutory auditor or, if the person is an
Auditor General, for appointment as statutory auditor of the company,
and
20
(b)
is not prohibited by section 1178(1) from acting as statutory auditor of
the company.
(4)
The Secretary of State must send a copy of a direction under subsection (2) to
the registrar of companies.
(5)
The company is guilty of an offence if—
25
(a)
it fails to comply with a direction under subsection (2) within the period
of 21 days beginning with the date on which it is given, or
(b)
it has been convicted of a previous offence under this subsection and
the failure to comply with the direction which led to the conviction
continues after the conviction.
30
(6)
The company must—
(a)
send a copy of a report under subsection (2)(b) to the registrar of
companies, and
(b)
if the report states that a second audit is needed, take such steps as are
necessary for the carrying out of that audit.
35
(7)
The company is guilty of an offence if—
(a)
it fails to send a copy of a report under subsection (2)(b) to the registrar
within the period of 21 days beginning with the date on which it
receives it,
(b)
in a case within subsection (6)(b), it fails to take the steps mentioned
40
immediately it receives the report, or

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 6 — Supplementary and general
578

(c)
it has been convicted of a previous offence under this subsection and
the failure to send a copy of the report, or take the steps, which led to
the conviction continues after the conviction.
(8)
A company guilty of an offence under this section is liable on summary
conviction—
5
(a)
in a case within subsection (5)(a) or (7)(a) or (b), to a fine not exceeding
level 5 on the standard scale, and
(b)
in a case within subsection (5)(b) or (7)(c), to a fine not exceeding one-
tenth of level 5 on the standard scale for each day on which the failure
continues.
10
(9)
In this section “registrar of companies” has the meaning given by section 1026.
1213
Supplementary provision about second audits
(1)
If a person accepts an appointment, or continues to act, as statutory auditor of
a company at a time when he knows he is not an appropriate person, the
company may recover from him any costs incurred by it in complying with the
15
requirements of section 1212.
For this purpose “appropriate” is to be construed in accordance with
subsection (3) of that section.
(2)
Where a second audit is carried out under section 1212, any statutory or other
provision applying in relation to the first audit applies also, in so far as
20
practicable, in relation to the second audit.
(3)
A direction under section 1212(2) is, on the application of the Secretary of State,
enforceable by injunction or, in Scotland, by an order under section 45 of the
Court of Session Act 1988 (c. 36).
False and misleading statements
25
1214
Misleading, false and deceptive statements
(1)
A person is guilty of an offence if—
(a)
for the purposes of or in connection with any application under this
Part, or
(b)
in purported compliance with any requirement imposed on him by or
30
by virtue of this Part,

he knowingly or recklessly furnishes information which is misleading, false or
deceptive in a material particular.
(2)
It is an offence for a person whose name does not appear on the register of
auditors kept under regulations under section 1203 in an entry made under
35
subsection (1)(a) of that section to describe himself as a registered auditor or so
to hold himself out as to indicate, or be reasonably understood to indicate, that
he is a registered auditor.
(3)
It is an offence for a person whose name does not appear on the register of
auditors kept under regulations under that section in an entry made under
40
subsection (1)(b) of that section to describe himself as a registered third country
auditor or so to hold himself out as to indicate, or be reasonably understood to
indicate, that he is a registered third country auditor.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 6 — Supplementary and general
579

(4)
It is an offence for a body which is not a recognised supervisory body or a
recognised qualifying body to describe itself as so recognised or so to describe
itself or hold itself out as to indicate, or be reasonably understood to indicate,
that it is so recognised.
(5)
A person guilty of an offence under subsection (1) is liable—
5
(a)
on conviction on indictment, to imprisonment for a term not exceeding
two years or to a fine (or both);
(b)
on summary conviction—
(i)
in England and Wales, to imprisonment for a term not
exceeding twelve months or to a fine not exceeding the
10
statutory maximum (or both),
(ii)
in Scotland or Northern Ireland, to imprisonment for a term not
exceeding six months or to a fine not exceeding the statutory
maximum (or both).

In relation to an offence committed before the commencement of section 154(1)
15
of the Criminal Justice Act 2003 (c. 44), for “twelve months” in paragraph (b)(i)
substitute “six months”.
(6)
Subject to subsection (7), a person guilty of an offence under subsection (2), (3)
or (4) is liable on summary conviction—
(a)
in England and Wales, to imprisonment for a term not exceeding 51
20
weeks or to a fine not exceeding level 5 on the standard scale (or both),
(b)
in Scotland or Northern Ireland, to imprisonment for a term not
exceeding six months or to a fine not exceeding level 5 on the standard
scale (or both).

In relation to an offence committed before the commencement of section 281(5)
25
of the Criminal Justice Act 2003, for “51 weeks” in paragraph (a) substitute “six
months”.
(7)
Where a contravention of subsection (2), (3) or (4) involves a public display of
the offending description, the maximum fine that may be imposed is an
amount equal to level 5 on the standard scale multiplied by the number of days
30
for which the display has continued.
(8)
It is a defence for a person charged with an offence under subsection (2), (3) or
(4) to show that he took all reasonable precautions and exercised all due
diligence to avoid the commission of the offence.
Fees
35
1215
Fees
(1)
An applicant for a recognition order under this Part must pay such fee in
respect of his application as the Secretary of State may by regulations prescribe;
and no application is to be regarded as duly made unless this subsection is
complied with.
40
(2)
The Secretary of State may by regulations prescribe periodical fees to be paid
by—
(a)
every recognised supervisory body,
(b)
every recognised qualifying body,
(c)
every Auditor General, and
45
(d)
every registered third country auditor.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 6 — Supplementary and general
580

(3)
Fees received by the Secretary of State by virtue of this Part are to be paid into
the Consolidated Fund.
(4)
Regulations under this section are subject to negative resolution procedure.
Delegation of Secretary of State’s functions
1216
Delegation of the Secretary of State’s functions
5
(1)
The Secretary of State may make an order under this section (a “delegation
order”) for the purpose of enabling functions of the Secretary of State under
this Part to be exercised by a body designated by the order.
(2)
The body designated by a delegation order may be either—
(a)
a body corporate which is established by the order, or
10
(b)
subject to section 1217, a body (whether a body corporate or an
unincorporated association) which is already in existence (“an existing
body”).
(3)
A delegation order has the effect of transferring to the body designated by it all
functions of the Secretary of State under this Part—
15
(a)
subject to such exceptions and reservations as may be specified in the
order, and
(b)
except—
(i)
his functions in relation to the body itself, and
(ii)
his functions under section 1192 (appointment of Independent
20
Supervisor).
(4)
A delegation order may confer on the body designated by it such other
functions supplementary or incidental to those transferred as appear to the
Secretary of State to be appropriate.
(5)
Any transfer of functions under the following provisions must be subject to the
25
reservation that the functions remain exercisable concurrently by the Secretary
of State—
(a)
section 1188 (power to call for information from recognised bodies etc);
(b)
section 1208 (power to call for information from registered third
country auditors);
30
(c)
section 1218 (directions to comply with international obligations).
(6)
Any transfer of—
(a)
the function of refusing to make a declaration under section 1185(1) on
the grounds referred to in section 1185(4) (lack of comparable
treatment), or
35
(b)
the function of withdrawing such a declaration under section 1185(7)
on those grounds,

must be subject to the reservation that the function is exercisable only with the
consent of the Secretary of State.
(7)
A delegation order may be amended or, if it appears to the Secretary of State
40
that it is no longer in the public interest that the order should remain in force,
revoked by a further order under this section.
(8)
Where functions are transferred or resumed, the Secretary of State may by
order confer or, as the case may be, take away such other functions

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 6 — Supplementary and general
581

supplementary or incidental to those transferred or resumed as appear to him
to be appropriate.
(9)
Where a delegation order is made, Schedule 13 has effect with respect to—
(a)
the status of the body designated by the order in exercising functions of
the Secretary of State under this Part,
5
(b)
the constitution and proceedings of the body where it is established by
the order,
(c)
the exercise by the body of certain functions transferred to it, and
(d)
other supplementary matters.
(10)
An order under this section which has the effect of transferring or resuming
10
any functions is subject to affirmative resolution procedure.
(11)
Any other order under this section is subject to negative resolution procedure.
1217
Delegation of functions to an existing body
(1)
The Secretary of State’s power to make a delegation order under section 1216
which designates an existing body is exercisable in accordance with this
15
section.
(2)
The Secretary of State may make such a delegation order if it appears to him
that—
(a)
the body is able and willing to exercise the functions that would be
transferred by the order, and
20
(b)
the body has arrangements in place relating to the exercise of those
functions which are such as to be likely to ensure that the conditions in
subsection (3) are met.
(3)
The conditions are—
(a)
that the functions in question will be exercised effectively, and
25
(b)
where the delegation order is to contain any requirements or other
provisions specified under subsection (4), that those functions will be
exercised in accordance with any such requirements or provisions.
(4)
The delegation order may contain such requirements or other provision
relating to the exercise of the functions by the designated body as appear to the
30
Secretary of State to be appropriate.
(5)
An existing body—
(a)
may be designated by a delegation order under section 1216, and
(b)
may accordingly exercise functions of the Secretary of State in
pursuance of the order,
35

despite any involvement of the body in the exercise of any functions under
arrangements within paragraph 21, 22, 23(1) or 24(1) of Schedule 10 or
paragraph 1 or 2 of Schedule 12.
International obligations
1218
Directions to comply with international obligations
40
(1)
If it appears to the Secretary of State—
(a)
that any action proposed to be taken by a recognised supervisory body
or a recognised qualifying body, or a body designated by order under

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 42 — Statutory Auditors
Chapter 6 — Supplementary and general
582

section 1216, would be incompatible with Community obligations or
any other international obligations of the United Kingdom, or
(b)
that any action which that body has power to take is required for the
purpose of implementing any such obligations,

he may direct the body not to take or, as the case may be, to take the action in
5
question.
(2)
A direction may include such supplementary or incidental requirements as the
Secretary of State thinks necessary or expedient.
(3)
A direction under this section given to a body designated by order under
section 1216 is enforceable on the application of the Secretary of State by
10
injunction or, in Scotland, by an order under section 45 of the Court of Session
Act 1988 (c. 36).
General provision relating to offences
1219
Offences by bodies corporate, partnerships and unincorporated associations
(1)
Where an offence under this Part committed by a body corporate is proved to
15
have been committed with the consent or connivance of, or to be attributable
to any neglect on the part of, an officer of the body, or a person purporting to
act in any such capacity, he as well as the body corporate is guilty of the offence
and liable to be proceeded against and punished accordingly.
(2)
Where an offence under this Part committed by a partnership is proved to have
20
been committed with the consent or connivance of, or to be attributable to any
neglect on the part of, a partner, he as well as the partnership is guilty of the
offence and liable to be proceeded against and punished accordingly.
(3)
Where an offence under this Part committed by an unincorporated association
(other than a partnership) is proved to have been committed with the consent
25
or connivance of, or to be attributable to any neglect on the part of, any officer
of the association or any member of its governing body, he as well as the
association is guilty of the offence and liable to be proceeded against and
punished accordingly.
1220
Time limits for prosecution of offences
30
(1)
An information relating to an offence under this Part which is triable by a
magistrates’ court in England and Wales may be so tried if it is laid at any time
within the period of twelve months beginning with the date on which evidence
sufficient in the opinion of the Director of Public Prosecutions or the Secretary
of State to justify the proceedings comes to his knowledge.
35
(2)
Proceedings in Scotland for an offence under this Part may be commenced at
any time within the period of twelve months beginning with the date on which
evidence sufficient in the Lord Advocate’s opinion to justify proceedings came
to his knowledge or, where such evidence was reported to him by the Secretary
of State, within the period of twelve months beginning with the date on which
40
it came to the knowledge of the Secretary of State.
(3)
For the purposes of subsection (2) proceedings are to be deemed to be
commenced on the date on which a warrant to apprehend or cite the accused
is granted, if the warrant is executed without undue delay.