Office of Public Sector Information
PART 16 continued CHAPTER 4 continued
(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 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 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—
(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.
(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.
(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.
(1) This section applies where the statement deposited under section 519 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 423 is entitled to be sent copies of the accounts, or
(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 519 to secure needless publicity for defamatory matter—
(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 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.
(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.
(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.
(1) Unless within 21 days beginning with the day on which he deposited the statement under section 519 the auditor receives notice of an application to the court under section 520, 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 520 and the auditor 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 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 maximum.
(1) Where—
(a) in the case of a major audit, an auditor ceases for any reason to hold office, or
(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, and
(b) be accompanied by a copy of the statement deposited by him at the company’s registered office in accordance with section 519.
(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 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.
(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 519;
(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 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
(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—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.
(1) Where an auditor ceases to hold office before the end of his term of office, the 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—
(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 519 contains a statement of circumstances in connection with his 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 519.
(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 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.
(1) The appropriate audit authority on receiving notice under section 522 or 523 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 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 456 (revision of defective accounts: persons authorised to apply 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 520(4) directing that copies of the statement need not be sent out by the company, sections 460 and 461 (restriction on further disclosure) apply in relation to the copies sent to the accounting authorities as they apply to information obtained under section 459 (power to require documents etc).
(1) In sections 522, 523 and 524 “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 1252 to a body whose functions include receiving the notice in question, that body;
(b) in the case of an audit that is not a major audit, the relevant supervisory body.
“Supervisory body” has the same meaning as in Part 42 (statutory auditors) (see section 1217).
(2) In sections 522 and this section “major audit” means a statutory audit conducted in respect of—
(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.
(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).
If an auditor ceases to hold office for any reason, any surviving or continuing auditor or auditors may continue to act.
(1) The members of a quoted company may require the company to publish on a 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 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—
(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 member, of at least £100.
See also section 153 (exercise of rights where shares held on behalf of others).
(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,
(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 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 application, even if they are not parties to the application.
(1) The following provisions apply for the purposes of section 527 (website publication of members' statement of audit concerns).
(2) The information must be made available on a website that—
(a) is maintained by or on behalf of the company, and
(b) identifies the company in question.
(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 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, and
(b) the failure is wholly attributable to circumstances that it would not be reasonable to have expected the company to prevent or avoid.
(1) A quoted company must in the notice it gives of the accounts meeting draw attention to—
(a) the possibility of a statement being placed on a website in pursuance of members' requests under section 527, and
(b) the effect of the following provisions of this section.
(2) A company may not require the members requesting website publication to pay its expenses in complying with that section or section 528 (requirements in connection with website publication).
(3) Where a company is required to place a statement on a website under section 527 it must forward the statement to the company’s auditor not later than the time when it makes the statement available on the website.
(4) The business which may be dealt with at the accounts meeting includes any statement that the company has been required under section 527 to publish on a website.
(1) In the event of default in complying with
(a) section 528 (requirements as to website publication), or
(b) section 529 (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—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.
(1) For the purposes of this Chapter a company is a quoted company if it is a quoted company in accordance with section 385 (quoted and unquoted companies for the purposes of Part 15) in relation to the financial year to which the accounts to be laid at the next accounts meeting relate.
(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.
(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 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 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 533 (indemnity for costs of successfully defending proceedings), or
(b) sections 534 to 536 (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 of the other or both are subsidiaries of the same body corporate.
Section 532 (general voidness of provisions protecting auditors from liability) does not prevent a company from indemnifying an auditor against any liability 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 1157 (power of court to grant relief in case of honest and reasonable conduct) in which relief is granted to him by the court.
(1) A “liability limitation agreement” is an agreement that purports to limit the amount of a liability owed to a company by its auditor in respect of any negligence, default, breach of duty or breach of trust, occurring in the course of the audit of accounts, of which the auditor may be guilty in relation to the company.
(2) Section 532 (general voidness of provisions protecting auditors from liability) does not affect the validity of a liability limitation agreement that—
(a) complies with section 535 (terms of liability limitation agreement) and of any regulations under that section, and
(b) is authorised by the members of the company (see section 536).
(3) Such an agreement—
(a) is effective to the extent provided by section 537, and
(b) is not subject—
(i) in England and Wales or Northern Ireland, to section 2(2) or 3(2)(a) of the Unfair Contract Terms Act 1977 (c. 50);
(ii) in Scotland, to section 16(1)(b) or 17(1)(a) of that Act.
(1) A liability limitation agreement—
(a) must not apply in respect of acts or omissions occurring in the course of the audit of accounts for more than one financial year, and
(b) must specify the financial year in relation to which it applies.
(2) The Secretary of State may by regulations—
(a) require liability limitation agreements to contain specified provisions or provisions of a specified description;
(b) prohibit liability limitation agreements from containing specified provisions or provisions of a specified description.
“Specified” here means specified in the regulations.
(3) Without prejudice to the generality of the power conferred by subsection (2), that power may be exercised with a view to preventing adverse effects on competition.
(4) Subject to the preceding provisions of this section, it is immaterial how a liability limitation agreement is framed.
In particular, the limit on the amount of the auditor’s liability need not be a sum of money, or a formula, specified in the agreement.
(5) Regulations under this section are subject to negative resolution procedure.
(1) A liability limitation agreement is authorised by the members of the company if it has been authorised under this section and that authorisation has not been withdrawn.
(2) A liability limitation agreement between a private company and its auditor may be authorised—
(a) by the company passing a resolution, before it enters into the agreement, waiving the need for approval,
(b) by the company passing a resolution, before it enters into the agreement, approving the agreement’s principal terms, or
(c) by the company passing a resolution, after it enters into the agreement, approving the agreement.
(3) A liability limitation agreement between a public company and its auditor may be authorised—
(a) by the company passing a resolution in general meeting, before it enters into the agreement, approving the agreement’s principal terms, or
(b) by the company passing a resolution in general meeting, after it enters into the agreement, approving the agreement.
(4) The “principal terms” of an agreement are terms specifying, or relevant to the determination of—
(a) the kind (or kinds) of acts or omissions covered,
(b) the financial year to which the agreement relates, or
(c) the limit to which the auditor’s liability is subject.
(5) Authorisation under this section may be withdrawn by the company passing an ordinary resolution to that effect—
(a) at any time before the company enters into the agreement, or
(b) if the company has already entered into the agreement, before the beginning of the financial year to which the agreement relates.
Paragraph (b) has effect notwithstanding anything in the agreement.
(1) A liability limitation agreement is not effective to limit the auditor’s liability to less than such amount as is fair and reasonable in all the circumstances of the case having regard (in particular) to—
(a) the auditor’s responsibilities under this Part,
(b) the nature and purpose of the auditor’s contractual obligations to the company, and
(c) the professional standards expected of him.
(2) A liability limitation agreement that purports to limit the auditor’s liability to less than the amount mentioned in subsection (1) shall have effect as if it limited his liability to that amount.
(3) In determining what is fair and reasonable in all the circumstances of the case no account is to be taken of—
(a) matters arising after the loss or damage in question has been incurred, or
(b) matters (whenever arising) affecting the possibility of recovering compensation from other persons liable in respect of the same loss or damage.
(1) A company which has entered into a liability limitation agreement must make such disclosure in connection with the agreement as the Secretary of State may require by regulations.
(2) The regulations may provide, in particular, that any disclosure required by the regulations shall be made—
(a) in a note to the company’s annual accounts (in the case of its individual accounts) or in such manner as is specified in the regulations (in the case of group accounts), or
(b) in the directors' report.
(3) Regulations under this section are subject to negative resolution procedure.
In this Part—
“e-money issuer” means a person who has permission under Part 4 of the Financial Services and Markets Act 2000 (c. 8) to carry on the activity of issuing electronic money within the meaning of article 9B of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544);
“ISD investment firm” has the meaning given by the Glossary forming part of the Handbook made by the Financial Services Authority under the Financial Services and Markets Act 2000;
“qualified”, in relation to an auditor’s report (or a statement contained in an auditor’s report), means that the report or statement does not state the auditor’s unqualified opinion that the accounts have been properly prepared in accordance with this Act or, in the case of an undertaking not required to prepare accounts in accordance with this Act, under any corresponding legislation under which it is required to prepare accounts;
“turnover”, in relation to a company, means the amounts derived from the provision of goods and services falling within the company’s ordinary activities, after deduction of—
trade discounts,
value added tax, and
any other taxes based on the amounts so derived;
“UCITS management company” has the meaning given by the Glossary forming part of the Handbook made by the Financial Services Authority under the Financial Services and Markets Act 2000.
Companies Act 2006