Companies Act 2006

• (b) the guarantee is enforceable against the parent undertaking by any person to whom the subsidiary company is liable in respect of those liabilities.

Exemption from audit: dormant companies

Dormant companies: conditions for exemption from audit

480

• (1) A company is exempt from the requirements of this Act relating to the audit of accounts in respect of a financial year if—

• (a) it has been dormant since its formation, or

• (b) it has been dormant since the end of the previous financial year and the following conditions are met.

• (2) The conditions are that the company—

• (a) as regards its individual accounts for the financial year in question—

• (i) is entitled to prepare accounts in accordance with the small companies regime (see sections 381 to 384), or

• (ii) would be so entitled but for having been a public company or a member of an ineligible group, and

• (b) is not required to prepare group accounts for that year.

• (3) This section has effect subject to—

• section 475(2) and (3) (requirements as to statements to be contained in balance sheet),

• section 476 (right of members to require audit), and

• section 481 (companies excluded from dormant companies exemption).

Companies excluded from dormant companies exemption

481

A company is not entitled to the exemption conferred by section 480 (dormant companies) if it was at any time within the financial year in question a company that—

• (za) is a traded company as defined in section 474(1),

• (a) is an authorised insurance company, a banking company, an e-money issuer, a MiFID investment firm or a UCITS management company, or

• (b) carries on insurance market activity.

Companies subject to public sector audit

Non-profit-making companies subject to public sector audit

482

• (1) The requirements of this Part as to audit of accounts do not apply to a company for a financial year if it is non-profit-making and its accounts—

• (a) are subject to audit by the Comptroller and Auditor General by virtue of an order under section 25(6) of the Government Resources and Accounts Act 2000;

• (ab) are subject to audit by the Auditor General for Wales by virtue of—

• (i) an order under section 144 of the Government of Wales Act 1998, or

• (ii) paragraph 18 of Schedule 8 to the Government of Wales Act 2006;

• (b) are accounts—

• (i) in relation to which section 21 of the Public Finance and Accountability (Scotland) Act 2000 (asp 1) (audit of accounts: Auditor General for Scotland) applies, or

• (ii) that are subject to audit by the Auditor General for Scotland by virtue of an order under section 483 (Scottish public sector companies: audit by Auditor General for Scotland); or

• (c) are subject to audit by the Comptroller and Auditor General for Northern Ireland by virtue of an order under Article 5(3) of the Audit and Accountability (Northern Ireland) Order 2003 (S.I. 2003/418 (N.I. 5)).

• (2) In the case of a company that is a parent company or a subsidiary undertaking, subsection (1) applies only if every group undertaking is non-profit-making.

• (3) In this section “non-profit-making” has the same meaning as in Article 54 of the Treaty on the Functioning of the European Union.

• (4) This section has effect subject to section 475(2) (balance sheet to contain statement that company entitled to exemption under this section).

Scottish public sector companies: audit by Auditor General for Scotland

483

• (1) The Scottish Ministers may by order provide for the accounts of a company having its registered office in Scotland to be audited by the Auditor General for Scotland.

• (2) An order under subsection (1) may be made in relation to a company only if it appears to the Scottish Ministers that the company—

• (a) exercises in or as regards Scotland functions of a public nature none of which relate to reserved matters (within the meaning of the Scotland Act 1998 (c. 46)), or

• (b) is entirely or substantially funded from a body having accounts falling within paragraph (a) or (b) of subsection (3).

• (3) Those accounts are—

• (a) accounts in relation to which section 21 of the Public Finance and Accountability (Scotland) Act 2000 (asp 1) (audit of accounts: Auditor General for Scotland) applies,

• (b) accounts which are subject to audit by the Auditor General for Scotland by virtue of an order under this section.

• (4) An order under subsection (1) may make such supplementary or consequential provision (including provision amending an enactment) as the Scottish Ministers think expedient.

• (5) An order under subsection (1) shall not be made unless a draft of the statutory instrument containing it has been laid before, and approved by resolution of, the Scottish Parliament.

General power of amendment by regulations

General power of amendment by regulations

484

• (1) The Secretary of State may by regulations amend this Chapter or section 539 (minor definitions) so far as applying to this Chapter by adding, altering or repealing provisions.

• (2) The regulations may make consequential amendments or repeals in other provisions of this Act, or in other enactments.

• (3) Regulations under this section imposing new requirements, or rendering existing requirements more onerous, are subject to affirmative resolution procedure.

• (4) Other regulations under this section are subject to negative resolution procedure.

Chapter 2 — Appointment of auditors

Private companies

Appointment of auditors of private company: general

485

• (1) An auditor or auditors of a private company must be appointed for each financial year of the company, unless the directors reasonably resolve otherwise on the ground that audited accounts are unlikely to be required.

• (2) For each financial year for which an auditor or auditors is or are to be appointed (other than the company's first financial year), the appointment must be made before the end of the period of 28 days beginning with—

• (a) the end of the time allowed for sending out copies of the company's annual accounts and reports for the previous financial year (see section 424), or

• (b) if earlier, the day on which copies of the company's annual accounts and reports for the previous financial year are sent out under section 423.

This is the “period for appointing auditors”.

• (3) The directors may appoint an auditor or auditors of the company—

• (a) at any time before the company's first period for appointing auditors,

• (b) following a period during which the company (being exempt from audit) did not have any auditor, at any time before the company's next period for appointing auditors, or

• (c) to fill a casual vacancy in the office of auditor.

• (4) The members may appoint an auditor or auditors by ordinary resolution—

• (a) during a period for appointing auditors,

• (b) if the company should have appointed an auditor or auditors during a period for appointing auditors but failed to do so, or

• (c) where the directors had power to appoint under subsection (3) but have failed to make an appointment.

• (5) An auditor or auditors of a private company may only be appointed—

• (a) in accordance with this section, or

• (b) in accordance with section 486 or 486A (default power of Secretary of State).

This is without prejudice to any deemed re-appointment under section 487.

Appointment of auditors of private company: additional requirements for public interest entities with audit committees

485A

• (1) This section applies to the appointment under section 485(4) of an auditor or auditors of a private company—

• (a) which is also a public interest entity; and

• (b) which has an audit committee.

• (2) But it does not apply to the appointment of an Auditor General as auditor or one of the auditors of the company.

• (3) Before an appointment to which this section applies is made—

• (a) the audit committee of the company must make a recommendation to the directors in connection with the appointment, and

• (b) the directors must propose an auditor or auditors for appointment ...

• (4) Before the audit committee makes a recommendation or the directors make a proposal under subsection (3), the committee ... must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation , unless the company is a small or medium sized enterprise within the meaning in Article 2(1)(f) of Directive 2003/71/EC .

• (5) The audit committee must in its recommendation—

• (a) identify its first and second choice candidates for appointment, drawn from those auditors who have participated in a selection procedure under subsection (4),

• (b) give reasons for the choices so identified,

• (c) state that—

• (i) the recommendation is free from influence by a third party, and

• (ii) no contractual term of the kind mentioned in Article 16(6) of the Audit Regulation has been imposed on the company.

• (6) The directors must include in their proposal—

• (a) the recommendation made by the audit committee in connection with the appointment, and

• (b) if the proposal of the directors departs from the preference of the audit committee—

• (i) a recommendation for a candidate or candidates for appointment drawn from those auditors who have participated in a selection procedure under subsection (4), and

• (ii) the reasons for not following the audit committee’s recommendation.

• (7) Where the audit committee recommends re-appointment of the company’s existing auditor or auditors, and the directors are in agreement, subsections (4) and (5)(a) and (b) do not apply.

Appointment of auditors of private company: additional requirements for public interest entities without audit committees

485B

• (1) This section applies to the appointment under section 485(4) of an auditor or auditors of a private company—

• (a) which is also a public interest entity; and

• (b) which does not have an audit committee.

• (2) But it does not apply to the appointment of an Auditor General as auditor or one of the auditors of the company.

• (3) Before an appointment to which this section applies is made the directors must propose an auditor or auditors for appointment.

• (4) Before the directors make a proposal under subsection (3), they must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation , from which their proposed auditor or auditors must be drawn, unless the company is a small or medium sized enterprise within the meaning in Article 2(1)(f) of Directive 2003/71/EC .

• (5) Subsection (4) does not apply in relation to a proposal to re-appoint the company’s existing auditor or auditors.

Restriction on appointment of auditor of private company which is a public interest entity

485C

• (1) A person who has been, or will have been, auditor of a private company which is a public interest entity for every financial year comprised in the maximum engagement period (see section 494ZA) may not be appointed as auditor of the company for any financial year which begins within the period of 4 years beginning with the day after the last day of the last financial year of the maximum engagement period.

• (2) A person who is a member of the same network as the auditor mentioned in subsection (1) may not be appointed as auditor of the company for any financial year which begins within the period of 4 years mentioned in that subsection.

• (3) This section does not apply in relation to an Auditor General.

Appointment of auditors of private company: default power of Secretary of State

486

• (1) If a private company fails to appoint an auditor or auditors in accordance with section 485... the Secretary of State may appoint one or more persons to fill the vacancy.

• (2) Where subsection (2) of section 485 applies and the company fails to make the necessary appointment before the end of the period for appointing auditors, the company must within one week of the end of that period give notice to the Secretary of State of his power having become exercisable.

• (3) If a company fails to give the notice required by this section, an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (4) 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 continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Defective appointments: default power of Secretary of State

486A

• (1) If—

• (a) a private company appoints, or purports to appoint, an auditor or auditors, and

• (b) the appointment or purported appointment is made in breach of section 485A, 485B or 485C (requirements applying to appointment of auditors by public interest entities),

the Secretary of State may appoint another auditor or auditors in place of the auditor or auditors referred to in paragraph (a).

• (2) The breach of section 485A, 485B or 485C does not invalidate any report made under Chapter 3 of this Part by the auditor or auditors on the company’s annual reports or accounts before the auditor or auditors are replaced under subsection (1) of this section.

• (3) But where the breach in question is a breach of section 485C, sections 1248 and 1249 (Secretary of State’s power to require second audit) apply as if the auditor was not an appropriate person, or the auditors were not appropriate persons, for the period during which the audit was conducted.

• (4) Within one week of becoming aware of the breach of section 485A, 485B or 485C, the company must give notice to the Secretary of State that the power under subsection (1) of this section has become exercisable.

• (5) If the company fails to give the notice required by subsection (4), an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (6) 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 continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Term of office of auditors of private company

487

• (1) An auditor or auditors of a private company hold office in accordance with the terms of their appointment, subject to the requirements that—

• (a) they do not take office until any previous auditor or auditors cease to hold office, and

• (b) they cease to hold office at the end of the next period for appointing auditors unless re-appointed.

• (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1E) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) Where no auditor has been appointed by the end of the next period for appointing auditors, any auditor in office immediately before that time is deemed to be re-appointed at that time, unless—

• (a) he was appointed by the directors, or

• (b) the company's articles require actual re-appointment, or

• (c) the deemed re-appointment is prevented by the members under section 488, or

• (d) the members have resolved that he should not be re-appointed, or

• (e) the directors have resolved that no auditor or auditors should be appointed for the financial year in question or

• (f) the auditor’s appointment would be in breach of section 485C.

• (3) This is without prejudice to the provisions of this Part as to removal and resignation of auditors.

• (4) No account shall be taken of any loss of the opportunity of deemed re-appointment under this section in ascertaining the amount of any compensation or damages payable to an auditor on his ceasing to hold office for any reason.

Maximum engagement period: transitional arrangements

487A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Prevention by members of deemed re-appointment of auditor

488

• (1) An auditor of a private company is not deemed to be re-appointed under section 487(2) if the company has received notices under this section from members representing at least the requisite percentage of the total voting rights of all members who would be entitled to vote on a resolution that the auditor should not be re-appointed.

• (2) The “requisite percentage” is 5%, or such lower percentage as is specified for this purpose in the company's articles.

• (3) A notice under this section—

• (a) may be in hard copy or electronic form,

• (b) must be authenticated by the person or persons giving it, and

• (c) must be received by the company before the end of the accounting reference period immediately preceding the time when the deemed re-appointment would have effect.

Public companies

Appointment of auditors of public company: general

489

• (1) An auditor or auditors of a public company must be appointed for each financial year of the company, unless the directors reasonably resolve otherwise on the ground that audited accounts are unlikely to be required.

• (2) For each financial year for which an auditor or auditors is or are to be appointed (other than the company's first financial year), the appointment must be made before the end of the accounts meeting of the company at which the company's annual accounts and reports for the previous financial year are laid.

• (3) The directors may appoint an auditor or auditors of the company—

• (a) at any time before the company's first accounts meeting;

• (b) following a period during which the company (being exempt from audit) did not have any auditor, at any time before the company's next accounts meeting;

• (c) to fill a casual vacancy in the office of auditor.

• (4) The members may appoint an auditor or auditors by ordinary resolution—

• (a) at an accounts meeting;

• (b) if the company should have appointed an auditor or auditors at an accounts meeting but failed to do so;

• (c) where the directors had power to appoint under subsection (3) but have failed to make an appointment.

• (5) An auditor or auditors of a public company may only be appointed—

• (a) in accordance with this section, or

• (b) in accordance with section 490 or 490A (default power of Secretary of State).

Appointment of auditors of public company: additional requirements for public interest entities with audit committees

489A

• (1) This section applies to the appointment under section 489(4) of an auditor or auditors of a public company—

• (a) which is also a public interest entity; and

• (b) which has an audit committee.

• (2) But it does not apply to the appointment of an Auditor General as auditor or one of the auditors of the company.

• (3) Before an appointment to which this section applies is made—

• (a) the audit committee of the company must make a recommendation to the directors in connection with the appointment, and

• (b) the directors must propose an auditor or auditors for appointment ...

• (4) Before the audit committee makes a recommendation or the directors make a proposal under subsection (3), the committee ... must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation , unless the company is—

• (a) a small or medium sized enterprise within the meaning in Article 2(1)(f) of Directive 2003/71/EC ; or

• (b) a company with reduced market capitalisation within the meaning in Article 2(1)(t) of that Directive.

• (5) The audit committee must in its recommendation—

• (a) identify its first and second choice candidates for appointment, drawn from those auditors who have participated in a selection procedure under subsection (4),

• (b) give reasons for the choices so identified,

• (c) state that—

• (i) the recommendation is free from influence by a third party, and

• (ii) no contractual term of the kind mentioned in Article 16(6) of the Audit Regulation has been imposed on the company.

• (6) The directors must include in their proposal—

• (a) the recommendation made by the audit committee in connection with the appointment, and

• (b) if the proposal of the directors departs from the preference of the audit committee—

• (i) a recommendation for a candidate or candidates for appointment drawn from those auditors who have participated in a selection procedure under subsection (4), and

• (ii) the reasons for not following the audit committee’s recommendation.

• (7) Where the audit committee recommends re-appointment of the company’s existing auditor or auditors, and the directors are in agreement, subsections (4) and (5)(a) and (b) do not apply.

Appointment of auditors of public company: additional requirements for public interest entities without audit committees

489B

• (1) This section applies to the appointment under section 489(4) of an auditor or auditors of a public company—

• (a) which is also a public interest entity; and

• (b) which does not have an audit committee.

• (2) But it does not apply to the appointment of an Auditor General as auditor or one of the auditors of the company.

• (3) Before an appointment to which this section applies is made the directors must propose an auditor or auditors for appointment.

• (4) Before the directors make a proposal under subsection (3), the directors must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation , from which their proposed auditor or auditors must be drawn, unless the company is—

• (a) a small or medium sized enterprise within the meaning in Article 2(1)(f) of Directive 2003/71/EU ; or

• (b) a company with reduced market capitalisation within the meaning in Article 2(1)(t) of that Directive.

• (5) Subsection (4) does not apply in relation to a proposal to re-appoint the company’s existing auditor or auditors.

Restriction on appointment of auditor of public company which is a public interest entity

489C

• (1) A person who has been, or will have been, auditor of a public company which is a public interest entity for every financial year comprised in the maximum engagement period (see section 494ZA) may not be appointed as auditor of the company for any financial year which begins within the period of 4 years beginning with the day after the last day of the last financial year of the maximum engagement period.

• (2) A person who is a member of the same network as the auditor mentioned in subsection (1) may not be appointed as auditor of the company for any financial year which begins within the period of 4 years mentioned in that subsection.

• (3) This section does not apply in relation to an Auditor General.

Appointment of auditors of public company: default power of Secretary of State

490

• (1) If a public company fails to appoint an auditor or auditors in accordance with section 489... the Secretary of State may appoint one or more persons to fill the vacancy.

• (2) Where subsection (2) of section 489 applies and the company fails to make the necessary appointment before the end of the accounts meeting, the company must within one week of the end of that meeting give notice to the Secretary of State of his power having become exercisable.

• (3) If a company fails to give the notice required by this section, an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (4) 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 continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Defective appointments: default power of Secretary of State

490A

• (1) If—

• (a) a public company appoints, or purports to appoint, an auditor or auditors, and

• (b) the appointment or purported appointment is made in breach of section 489A, 489B or 489C (requirements applying to appointment of auditors by public interest entities),

the Secretary of State may appoint another auditor or auditors in place of the auditor or auditors referred to in paragraph (a).

• (2) The breach of section 489A, 489B or 489C does not invalidate any report made under Chapter 3 of this Part by the auditor or auditors on the company’s annual reports or accounts before the auditor or auditors are replaced under subsection (1) of this section.

• (3) But where the breach in question is a breach of section 489C, sections 1248 and 1249 (Secretary of State’s power to require second audit) apply as if the auditor was not an appropriate person, or the auditors were not appropriate persons, for the period during which the audit was conducted.

• (4) Within one week of becoming aware of the breach of section 489A, 489B or 489C, the company must give notice to the Secretary of State that the power under subsection (1) of this section has become exercisable.

• (5) If the company fails to give the notice required by subsection (4), an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (6) 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 continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Term of office of auditors of public company

491

• (1) The auditor or auditors of a public company hold office in accordance with the terms of their appointment, subject to the requirements that—

• (a) they do not take office until the previous auditor or auditors have ceased to hold office, and

• (b) they cease to hold office at the conclusion of the accounts meeting next following their appointment, unless re-appointed.

• (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1E) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) This is without prejudice to the provisions of this Part as to removal and resignation of auditors.

Maximum engagement period: transitional arrangements

491A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General provisions

Fixing of auditor's remuneration

492

• (1) The remuneration of an auditor appointed by the members of a company must be fixed by the members by ordinary resolution or in such manner as the members may by ordinary resolution determine.

• (2) The remuneration of an auditor appointed by the directors of a company must be fixed by the directors.

• (3) The remuneration of an auditor appointed by the Secretary of State must be fixed by the Secretary of State.

• (4) For the purposes of this section “remuneration” includes sums paid in respect of expenses.

• (5) This section applies in relation to benefits in kind as to payments of money.

Disclosure of terms of audit appointment

493

• (1) The Secretary of State may make provision by regulations for securing the disclosure of the terms on which a company's auditor is appointed, remunerated or performs his duties.

Nothing in the following provisions of this section affects the generality of this power.

• (2) The regulations may—

• (a) require disclosure of—

• (i) a copy of any terms that are in writing, and

• (ii) a written memorandum setting out any terms that are not in writing;

• (b) require disclosure to be at such times, in such places and by such means as are specified in the regulations;

• (c) require the place and means of disclosure to be stated—

• (i) 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),

• (ii) inthe strategic report or the directors' report, or

• (iii) in the auditor's report on the company's annual accounts.

• (3) The provisions of this section apply to a variation of the terms mentioned in subsection (1) as they apply to the original terms.

• (4) Regulations under this section are subject to affirmative resolution procedure.

Disclosure of services provided by auditor or associates and related remuneration

494

• (1) The Secretary of State may make provision by regulations for securing the disclosure of—

• (a) the nature of any services provided for a company by the company's auditor (whether in his capacity as auditor or otherwise) or by his associates;

• (b) the amount of any remuneration received or receivable by a company's auditor, or his associates, in respect of any such services.

Nothing in the following provisions of this section affects the generality of this power.

• (2) The regulations may provide—

• (a) for disclosure of the nature of any services provided to be made by reference to any class or description of services specified in the regulations (or any combination of services, however described);

• (b) for the disclosure of amounts of remuneration received or receivable in respect of services of any class or description specified in the regulations (or any combination of services, however described);

• (c) for the disclosure of separate amounts so received or receivable by the company's auditor or any of his associates, or of aggregate amounts so received or receivable by all or any of those persons.

• (3) The regulations may—

• (a) provide that “remuneration” includes sums paid in respect of expenses;

• (b) apply to benefits in kind as well as to payments of money, and require the disclosure of the nature of any such benefits and their estimated money value;

• (c) apply to services provided for associates of a company as well as to those provided for a company;

• (d) define “associate” in relation to an auditor and a company respectively.

• (4) The regulations may provide that any disclosure required by the regulations is to 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),

• (b) inthe strategic report or the directors' report, or

• (c) in the auditor's report on the company's annual accounts.

• (5) If the regulations provide that any such disclosure is to be made as mentioned in subsection (4)(a) or (b), the regulations may require the auditor to supply the directors of the company with any information necessary to enable the disclosure to be made.

• (6) Regulations under this section are subject to negative resolution procedure.

The maximum engagement period

494ZA

• (1) Where a person is auditor of a company for consecutive financial years, the maximum engagement period of the person as auditor of the company—

• (a) begins with the first of those years (see the appropriate entry in the first column of the following Table), and

• (b) ends with the financial year specified in the corresponding entry in the second column of the Table:

First financial year of the maximum engagement period	Last financial year of the maximum engagement period
A financial year of the company beginning before 17 June 1994	The last financial year of the company to begin before 17 June 2020.
A financial year of the company beginning—(a) on or after 17 June 1994, and(b) before 17 June 2003	The last financial year of the company to begin before 17 June 2023.
A financial year of the company beginning—(a) on or after 17 June 2003, and(b) before 17 June 2016	No qualifying selection procedureWhere neither the first financial year of the maximum engagement period nor any subsequent financial year is one for which the auditor has been appointed following the carrying out of a qualifying selection procedure, the later of-(a) the last financial year of the company to begin before 17 June 2016, and(b) the last financial year of the company to begin within the period of 10 years beginning with the first day of the first financial year of the maximum engagement period.No qualifying selection procedure within 10 yearsWhere the last day of the last financial year of the company to begin within the period of 10 years beginning with the first day of the last financial year of the company for which the auditor was appointed following a qualifying selection procedure is before 17 June 2016—(a) the last financial year of the company to begin before 17 June 2016, unless(b) the auditor is appointed following a qualifying selection procedure for the first financial year of the company to begin on or after 17 June 2016, in which case it is the last financial year of the company to begin within the period of 20 years beginning with the first day of the first financial year of the maximum engagement period.Qualifying selection procedure within 10 yearsIn any other case, the earlier of-(a) the last financial year of the company to begin within the period of 10 years beginning with the first day of the last financial year of the company for which the auditor was appointed following a qualifying selection procedure, and(b) the last financial year of the company to begin within the period of 20 years beginning with the first day of the first financial year of the maximum engagement period.
A financial year of the company beginning on or after 17 June 2016	The earlier of—(a) the last financial year of the company to begin within the period of 10 years beginning with the first day of the last financial year of the company for which the auditor was appointed following a qualifying selection procedure, and(b) the last financial year of the company to begin within the period of 20 years beginning with the first day of the first financial year of the maximum engagement period.

• (2) Where the first financial year of the maximum engagement period begins on or after 17 June 2003, the maximum engagement period may be extended by a period of no more than 2 years with the approval of the competent authority.

• (3) Such approval may be given by the competent authority only if it is satisfied that exceptional circumstances exist.

• (4) Where the competent authority gives its approval as mentioned in subsection (2)—

• (a) the second column of the Table in subsection (1) has effect with the necessary modifications, and

• (b) the first appointment to be made after the end of the period as so extended must be made following a qualifying selection procedure.

• (5) In this section “qualifying selection procedure” means—

• (a) in the case of an appointment for a financial year beginning on or after 17 June 2016 made after the Statutory Auditors and Third Country Auditors Regulations 2017 come into force—

• (i) if the company is a private company and has an audit committee, a selection procedure that complies with the requirements of section 485A(4) and (5)(a) and (b),

• (ii) if the company is a public company and has an audit committee, a selection procedure that complies with the requirements of subsections 489A(4) and (5)(a) and(b), ...

• (iii) if the company is a private company and does not have an audit committee, a selection procedure that complies with the requirements of section 485B(4),

• (iv) if the company is a public company and does not have an audit committee, a selection procedure that complies with the requirements of section 489B(4),

• (b) in any other case, a selection procedure that substantially meets the requirements of Article 16(2) to (5) of the Audit Regulation as it had effect immediately before IP completion day, having regard to the circumstances at the time (including whether the company had an audit committee).

Interpretation

494A

In this Chapter—

• “audit committee” means a body which performs—the functions referred to in—rule 7.1.3 of the Disclosure Guidance and Transparency Rules sourcebook made by the Financial Conduct Authority (audit committees and their functions) under the Financial Services and Markets Act 2000, orrule 2.4 of the Audit Committee Part of the Rulebook made by the Prudential Regulation Authority (audit committee) under that Act,as they have effect on IP completion day, orequivalent functions.

• ...

• “Auditor General” means—the Comptroller and Auditor General,the Auditor General for Scotland,the Auditor General for Wales, orthe Comptroller and Auditor General for Northern Ireland;

• “issuer” has the same meaning as in Part 6 of the Financial Services and Markets Act 2000 (see section 102A(6));

• “network” means an association of persons other than a firm co-operating in audit work by way of—profit-sharing;cost sharing;common ownership, control or management;common quality control policies and procedures;common business strategy; oruse of a common name;

• “public interest entity ” means—an issuer whose transferable securities are admitted to trading on a UK regulated market;a credit institution within the meaning given by Article 4(1)(1) of Regulation (EU) No. 575/2013 of the European Parliament and of the Council, which is a CRR firm within the meaning of Article 4(1)(2A) of that Regulation; a person who would be an insurance undertaking as defined in Article 2(1) of Council Directive 91/674/EEC of 19 December 1991 of the European Parliament and of the Council on the annual accounts and consolidated accounts of insurance undertakings as that Article had effect immediately before IP completion day, were the United Kingdom a member State;

• ...

• ...

Chapter 3 — Functions of auditor

Auditor's report

Auditor's report on company's annual accounts

495

• (1) A company's auditor must make a report to the company's members on all annual accounts of the company of which copies are, during his tenure of office—

• (a) in the case of a private company, to be sent out to members under section 423;

• (b) in the case of a public company, to be laid before the company in general meeting under section 437.

• (2) The auditor’s report must include—

• (a) the identity of the company whose annual accounts are the subject of the audit,

• (b) a description of the annual accounts that are the subject of the audit (including the period covered by those accounts),

• (c) a description of the financial reporting framework that has been applied in the preparation of those accounts, and

• (d) a description of the scope of the audit identifying the auditing standards in accordance with which the audit was conducted.

• (3) The report must state clearly whether, in the auditor's opinion, the annual accounts—

• (a) give a true and fair view—

• (i) in the case of an individual balance sheet, of the state of affairs of the company as at the end of the financial year,

• (ii) in the case of an individual profit and loss account, of the profit or loss of the company for the financial year,

• (iii) in the case of group accounts, of the state of affairs as at the end of the financial year and of the profit or loss for the financial year of the undertakings included in the consolidation as a whole, so far as concerns members of the company;

• (b) have been properly prepared in accordance with the relevant financial reporting framework; and

• (c) have been prepared in accordance with the requirements of this Act ....

Expressions used in this subsectionor subsection (3A) that are defined for the purposes of Part 15 (see sections 464, 471 and 474) have the same meaning as in that Part.

• (3A) The following provisions apply to the auditors of a company which qualifies as a micro-entity in relation to a financial year (see sections 384A and 384B) in their consideration of whether the Companies Act individual accounts of the company for that year give a true and fair view as mentioned in subsection (3)(a)—

• (a) where the accounts comprise only micro-entity minimum accounting items, the auditors must disregard any provision of an accounting standard which would require the accounts to contain information additional to those items,

• (b) in relation to a micro-entity minimum accounting item contained in the accounts, the auditors must disregard any provision of an accounting standard which would require the accounts to contain further information in relation to that item, and

• (c) where the accounts contain an item of information additional to the micro-entity minimum accounting items, the auditors must have regard to any provision of an accounting standard which relates to that item.

• (4) The auditor’s report—

• (a) must be either unqualified or qualified,

• (b) must include a reference to any matters to which the auditor wishes to draw attention by way of emphasis without qualifying the report,

• (c) must include a statement on any material uncertainty relating to events or conditions that may cast significant doubt about the company’s ability to continue to adopt the going concern basis of accounting, and

• (d) must identify the auditor’s place of establishment.

• (5) Where more than one person is appointed as an auditor—

• (a) all the persons appointed must jointly make a report under this section and the report must include a statement as to whether all the persons appointed agree on the matters contained in the report, and

• (b) if all the persons appointed cannot agree on the matters contained in the report, the report must include the opinions of each person appointed and give reasons for the disagreement.

Auditor's report on strategic report and on directors' report

496

• (1) In his report on the company's annual accounts, the auditor must-

• (a) state whether, in his opinion, based on the work undertaken in the course of the audit—

• (i) the information given in the strategic report (if any) and the directors’ report for the financial year for which the accounts are prepared is consistent with those accounts, and

• (ii) any such strategic report and the directors’ report have been prepared in accordance with applicable legal requirements,

• (b) state whether, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, he has identified material misstatements in the strategic report (if any) and the directors’ report, and

• (c) if applicable, give an indication of the nature of each of the misstatements referred to in paragraph (b).

• (2) Where more than one person is appointed as auditor, the report must include a statement as to whether all the persons appointed agree on the statements and indications given under subsection (1) and, if they cannot agree on those statements and indications, the report must include the opinions of each person appointed and give reasons for the disagreement.

Auditor's report on auditable part of directors' remuneration report

497

• (1) If the company is a quoted company ..., the auditor, in his report on the company's annual accounts for the financial year, must—

• (a) report to the company's members on the auditable part of the directors' remuneration report, and

• (b) state whether in his opinion that part of the directors' remuneration report has been properly prepared in accordance with this Act.

• (2) For the purposes of this Part, “the auditable part” of a directors' remuneration report is the part identified as such by regulations under section 421.

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Auditor's report on separate corporate governance statement

497A

• (1) Where the company prepares a separate corporate governance statement in respect of a financial year, the auditor must, in his report of the company’s annual accounts for that year—

• (a) state whether, in his opinion, based on the work undertaken in the course of the audit, the information given in the statement in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules sourcebook made by the Financial Conduct Authority (information about internal control and risk management systems in relation to financial reporting processes and about share capital structures)—

• (i) is consistent with those accounts, and

• (ii) has been prepared in accordance with applicable legal requirements,

• (b) state whether, in the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, he has identified material misstatements in the information in the statement referred to in paragraph (a),

• (c) if applicable, give an indication of the nature of each of the misstatements referred to in paragraph (b), and

• (d) state whether, in his opinion, based on the work undertaken in the course of the audit, rules 7.2.2, 7.2.3 and 7.2.7 in the Disclosure Rules and Transparency Rules sourcebook made by the Financial Conduct Authority (information about the company’s corporate governance code and practices and about its administrative, management and supervisory bodies and their committees) have been complied with, if applicable.

• (2) Where more than one person is appointed as auditor, the report must include a statement as to whether all the persons appointed agree on the statements and indications given under subsection (1) and, if they cannot agree on those statements and indications, the report must include the opinions of each person appointed and give reasons for the disagreement.

Duties and rights of auditors

Duties of auditor

498

• (1) A company's auditor, in preparing his report, must carry out such investigations as will enable him to form an opinion as to—

• (a) whether adequate accounting records have been kept by the company and returns adequate for their audit have been received from branches not visited by him, and

• (b) whether the company's individual accounts are in agreement with the accounting records and returns, and

• (c) in the case of a quoted company ..., whether the auditable part of the company's directors' remuneration report is in agreement with the accounting records and returns.

• (2) If the auditor is of the opinion—

• (a) that adequate accounting records have not been kept, or that returns adequate for their audit have not been received from branches not visited by him, or

• (b) that the company's individual accounts are not in agreement with the accounting records and returns, or

• (c) in the case of a quoted company ..., that the auditable part of its directors' remuneration report is not in agreement with the accounting records and returns,

the auditor shall state that fact in his report.

• (3) If the auditor fails to obtain all the information and explanations which, to the best of his knowledge and belief, are necessary for the purposes of his audit, he shall state that fact in his report.

• (4) If—

• (a) the requirements of regulations under section 412 (disclosure of directors' benefits: remuneration, pensions and compensation for loss of office) are not complied with in the annual accounts, or

• (b) in the case of a quoted company, the requirements of regulations under section 421 as to information forming the auditable part of the directors' remuneration report are not complied with in that report,

the auditor must include in his report, so far as he is reasonably able to do so, a statement giving the required particulars.

• (5) If the directors of the company—

• (a) have prepared accounts in accordance with the small companies regime, or

• (b) have taken advantage of small companies exemption from the requirement to prepare a strategic report or in preparing the directors' report,

and in the auditor's opinion they were not entitled to do so, the auditor shall state that fact in his report.

• (6) Where more than one person is appointed as auditor, the report must include a statement as to whether all the persons appointed agree on the statements given under subsections (2) to (5) and, if they cannot agree on those statements, the report must include the opinions of each person appointed and give reasons for the disagreement.

• (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Auditor's duties in relation to separate corporate governance statement

498A

Where the company is required to prepare a corporate governance statement in respect of a financial year and no such statement is included in the directors' report—

• (a) the company's auditor, in preparing his report on the company's annual accounts for that year, must ascertain whether a corporate governance statement has been prepared, and

• (b) if it appears to the auditor that no such statement has been prepared, he must state that fact in his report.

Auditor's general right to information

499

• (1) An auditor of a company—

• (a) has a right of access at all times to the company's books, accounts and vouchers (in whatever form they are held), and

• (b) may require any of the following persons to provide him with such information or explanations as he thinks necessary for the performance of his duties as auditor.

• (2) Those persons are—

• (a) any officer or employee of the company;

• (b) any person holding or accountable for any of the company's books, accounts or vouchers;

• (c) any subsidiary undertaking of the company which is a body corporate incorporated in the United Kingdom;

• (d) any officer, employee or auditor of any such subsidiary undertaking or any person holding or accountable for any books, accounts or vouchers of any such subsidiary undertaking;

• (e) any person who fell within any of paragraphs (a) to (d) at a time to which the information or explanations required by the auditor relates or relate.

• (3) A statement made by a person in response to a requirement under this section may not be used in evidence against him in criminal proceedings except proceedings for an offence under section 501.

• (4) Nothing in this section compels a person to disclose information in respect of which a claim to legal professional privilege (in Scotland, to confidentiality of communications) could be maintained in legal proceedings.

Auditor's right to information from overseas subsidiaries

500

• (1) Where a parent company has a subsidiary undertaking that is not a body corporate incorporated in the United Kingdom, the auditor of the parent company may require it to obtain from any of the following persons such information or explanations as he may reasonably require for the purposes of his duties as auditor.

• (2) Those persons are—

• (a) the undertaking;

• (b) any officer, employee or auditor of the undertaking;

• (c) any person holding or accountable for any of the undertaking's books, accounts or vouchers;

• (d) any person who fell within paragraph (b) or (c) at a time to which the information or explanations relates or relate.

• (3) If so required, the parent company must take all such steps as are reasonably open to it to obtain the information or explanations from the person concerned.

• (4) A statement made by a person in response to a requirement under this section may not be used in evidence against him in criminal proceedings except proceedings for an offence under section 501.

• (5) Nothing in this section compels a person to disclose information in respect of which a claim to legal professional privilege (in Scotland, to confidentiality of communications) could be maintained in legal proceedings.

Auditor's rights to information: offences

501

• (1) A person commits an offence who knowingly or recklessly makes to an auditor of a company a statement (oral or written) that—

• (a) conveys or purports to convey any information or explanations which the auditor requires, or is entitled to require, under section 499, and

• (b) is misleading, false or deceptive in a material particular.

• (2) A person guilty of an offence under subsection (1) is liable—

• (a) on conviction on indictment, to imprisonment for a term not exceeding two years or 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 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).

• (3) A person who fails to comply with a requirement under section 499 without delay commits an offence unless it was not reasonably practicable for him to provide the required information or explanations.

• (4) If a parent company fails to comply with section 500, an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (5) A person guilty of an offence under subsection (3) or (4) is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

• (6) Nothing in this section affects any right of an auditor to apply for an injunction (in Scotland, an interdict or an order for specific performance) to enforce any of his rights under section 499 or 500.

Auditor's rights in relation to resolutions and meetings

502

• (1) In relation to a written resolution proposed to be agreed to by a private company, the company's auditor is entitled to receive all such communications relating to the resolution as, by virtue of any provision of Chapter 2 of Part 13 of this Act, are required to be supplied to a member of the company.

• (2) A company's auditor is entitled—

• (a) to receive all notices of, and other communications relating to, any general meeting which a member of the company is entitled to receive,

• (b) to attend any general meeting of the company, and

• (c) to be heard at any general meeting which he attends on any part of the business of the meeting which concerns him as auditor.

• (3) Where the auditor is a firm, the right to attend or be heard at a meeting is exercisable by an individual authorised by the firm in writing to act as its representative at the meeting.

Signature of auditor's report

Signature of auditor's report

503

• (1) The auditor's report must state the name of the auditor and be signed and dated.

• (2) Where the auditor is an individual, the report must be signed by him.

• (3) Where the auditor is a firm, the report must be signed by the senior statutory auditor in his own name, for and on behalf of the auditor.

• (4) Where more than one person is appointed as auditor, the report must be signed by all those appointed.

Senior statutory auditor

504

• (1) The senior statutory auditor means the individual identified by the firm as senior statutory auditor in relation to the audit in accordance with—

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) ... any relevant guidance issued by—

• (i) the Secretary of State, or

• (ii) a body appointed by order of the Secretary of State.

• (2) The person identified as senior statutory auditor must be eligible for appointment as auditor of the company in question (see Chapter 2 of Part 42 of this Act).

• (3) The senior statutory auditor is not, by reason of being named or identified as senior statutory auditor or by reason of his having signed the auditor's report, subject to any civil liability to which he would not otherwise be subject.

• (4) An order appointing a body for the purpose of subsection (1)(b)(ii) is subject to negative resolution procedure.

Names to be stated in published copies of auditor's report

505

• (1) Every copy of the auditor's report that is published by or on behalf of the company must—

• (a) state the name of the auditor and (where the auditor is a firm) the name of the person who signed it as senior statutory auditor, or

• (b) if the conditions in section 506 (circumstances in which names may be omitted) are met, state that a resolution has been passed and notified to the Secretary of State in accordance with that section.

• (1A) If more than one person is appointed as auditor, the reference in subsection (1)(a) to the name of the auditor is to be read as a reference to the names of all the auditors.

• (2) For the purposes of this section a company is regarded as publishing the report if it publishes, issues or circulates it or otherwise makes it available for public inspection in a manner calculated to invite members of the public generally, or any class of members of the public, to read it.

• (3) If a copy of the auditor's report is published without the statement required by this section, an offence is committed by—

• (a) the company, and

• (b) every officer of the company who is in default.

• (4) 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.

Circumstances in which names may be omitted

506

• (1) An auditor’s name and, where the auditor is a firm, the name of the person who signed the report as senior statutory auditor, may be omitted from—

• (a) published copies of the report, and

• (b) the copy of the report delivered to the registrar under Chapter 10 of Part 15 (filing of accounts and reports),

if the following conditions are met.

• (2) The conditions are that the company—

• (a) considering on reasonable grounds that statement of the name would create or be likely to create a serious risk that the auditor or senior statutory auditor, or any other person, would be subject to violence or intimidation, has resolved that the name should not be stated, and

• (b) has given notice of the resolution to the Secretary of State, stating—

• (i) the name and registered number of the company,

• (ii) the financial year of the company to which the report relates, and

• (iii) the name of the auditor and (where the auditor is a firm) the name of the person who signed the report as senior statutory auditor.

Offences in connection with auditor's report

Offences in connection with auditor's report

507

• (1) A person to whom this section applies commits an offence if he knowingly or recklessly causes a report under section 495 (auditor's report on company's annual accounts) to include any matter that is misleading, false or deceptive in a material particular.

• (2) A person to whom this section applies commits an offence if he knowingly or recklessly causes such a report to omit a statement required by—

• (a) section 498(2)(b) (statement that company's accounts do not agree with accounting records and returns),

• (b) section 498(3) (statement that necessary information and explanations not obtained), or

• (c) section 498(5) (statement that directors wrongly took advantage of exemption from obligation to prepare group accounts).

• (3) This section applies to—

• (a) where the auditor is an individual, that individual and any employee or agent of his who is eligible for appointment as auditor of the company;

• (b) where the auditor is a firm, any director, member, employee or agent of the firm who is eligible for appointment as auditor of the company.

• (4) 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.

Guidance for regulatory and prosecuting authorities: England, Wales and Northern Ireland

508

• (1) The Secretary of State may issue guidance for the purpose of helping relevant regulatory and prosecuting authorities to determine how they should carry out their functions in cases where behaviour occurs that—

• (a) appears to involve the commission of an offence under section 507 (offences in connection with auditor's report), and

• (b) has been, is being or may be investigated—

• (i) pursuant to arrangements under paragraph 15 of Schedule 10 (investigation of complaints against auditors and supervisory bodies), or

• (ii) by the competent authority under the Statutory Auditors and Third Country Auditors Regulations 2016.

• (2) The Secretary of State must obtain the consent of the Attorney General before issuing any such guidance.

• (3) In this section “relevant regulatory and prosecuting authorities” means—

• (a) supervisory bodies within the meaning of Part 42 of this Act,

• (b) bodies to which the Secretary of State may make grants under section 16(1) of the Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27) (bodies concerned with accounting standards etc),

• (c) the Director of the Serious Fraud Office,

• (d) the Director of Public Prosecutions or the Director of Public Prosecutions for Northern Ireland, and

• (e) the Secretary of State.

• (4) This section does not apply to Scotland.

Guidance for regulatory authorities: Scotland

509

• (1) The Lord Advocate may issue guidance for the purpose of helping relevant regulatory authorities to determine how they should carry out their functions in cases where behaviour occurs that—

• (a) appears to involve the commission of an offence under section 507 (offences in connection with auditor's report), and

• (b) has been, is being or may be investigated—

• (i) pursuant to arrangements under paragraph 15 of Schedule 10 (investigation of complaints against auditors and supervisory bodies), or

• (ii) by the competent authority under the Statutory Auditors and Third Country Auditors Regulations 2016.

• (2) The Lord Advocate must consult the Secretary of State before issuing any such guidance.

• (3) In this section “relevant regulatory authorities” means—

• (a) supervisory bodies within the meaning of Part 42 of this Act,

• (b) bodies to which the Secretary of State may make grants under section 16(1) of the Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27) (bodies concerned with accounting standards etc), and

• (c) the Secretary of State.

• (4) This section applies only to Scotland.

Chapter 4 — Removal, resignation, etc of auditors

Removal of auditor

Resolution removing auditor from office

510

• (1) The members of a company may remove an auditor from office at any time.

• (2) This power is exercisable only—

• (a) by ordinary resolution at a meeting, and

• (b) in accordance with section 511 (special notice of resolution to remove auditor).

• (3) Nothing in this section is to be taken as depriving the person removed of compensation or damages payable to him in respect of the termination—

• (a) of his appointment as auditor, or

• (b) of any appointment terminating with that as auditor.

• (4) An auditor may not be removed from office before the expiration of his term of office except—

• (a) by resolution under this section, or

• (b) in accordance with section 511A.

Special notice required for resolution removing auditor from office

511

• (1) Special notice is required for a resolution at a general meeting of a company removing an auditor from office.

• (2) On receipt of notice of such an intended resolution the company must immediately send a copy of it to the auditor proposed to be removed.

• (3) The auditor proposed to be removed 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.

• (4) 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 whom notice of the meeting is or has been sent.

• (5) 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 auditor may (without prejudice to his right to be heard orally) require that the representations be read out at the meeting.

• (6) Copies of the representations need not be sent out and the representations need 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 application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application.

Public interest companies: application to court to remove auditor from office

511A

• (1) This section applies only to a public interest company.

• (2) The competent authority may apply to the court for an order removing an auditor of a company from office if the authority considers that there are proper grounds for removing the auditor from office.

• (3) The members of a company may apply to the court for an order removing an auditor of the company from office if the applicant or applicants consider that there are proper grounds for removing the auditor from office.

• (4) If the court is satisfied, on hearing an application under subsection (2), that there are proper grounds for removing the auditor from office, it may make an order removing the auditor from office.

• (5) If the court is satisfied, on hearing an application under subsection (3), that—

• (a) the applicants represent in total—

• (i) not less than 5% of the voting rights of all the members having a right to vote at a general meeting of the company, or

• (ii) not less than 5% in nominal value of the company’s share capital, and

• (b) there are proper grounds for removing the auditor from office,

the court may make an order removing the auditor from office.

• (6) For the purposes of this section, divergence of opinions on accounting treatments or audit procedures are not to be taken to be proper grounds for removing an auditor from office.

• (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notice to registrar of resolution removing auditor from office

512

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rights of auditor who has been removed from office

513

• (1) An auditor who has been removed by resolution under section 510 or by order of the court under section 511A has, notwithstanding his removal, the rights conferred by section 502(2) in relation 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 former auditor.

Failure to re-appoint auditor

Failure to re-appoint auditor: special procedure required for written resolution

514

• (1) This section applies where a resolution is proposed as a written resolution of a private company whose effect would be to appoint a person as auditor in place of a person (the “outgoing auditor”) who, at the time the resolution is proposed, is an auditor of the company and who is to cease to hold office at the end of a period for appointing auditors.

But this section does not apply if the auditor is to cease to hold office by virtue of section 510 , 511A or 516.

• (2) This section also applies where a resolution is proposed as a written resolution of a private company whose effect would be to appoint a person as auditor where, at the time the resolution is proposed, the company does not have an auditor and the person proposed to be appointed is not a person (the “outgoing auditor”) who was an auditor of the company when the company last had an auditor.

But this is subject to subsection (2A).

• (2A) This section does not apply (by virtue of subsection (2)) if— ”

• (a) a period for appointing auditors has ended since the outgoing auditor ceased to hold office,

• (b) the outgoing auditor ceased to hold office by virtue of section 510 , 511A or 516, or

• (c) the outgoing auditor has previously had the opportunity to make representations with respect to a proposed resolution under subsection (4) of this section or an intended resolution under section 515(4).

• (3) Where this section applies, the company must send a copy of the proposed resolution to the person proposed to be appointed and to the outgoing auditor.

• (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 copies of the resolution circulated in accordance with section 291 (resolution proposed by directors) or section 293 (resolution proposed by members).

• (6) Where subsection (5) applies—

• (a) the period allowed under section 293(3) for service of copies of the proposed resolution is 28 days instead of 21 days, and

• (b) the provisions of section 293(5) and (6) (offences) apply in relation to a failure to comply with that subsection as in relation to a default in 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.

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.

Failure to re-appoint auditor: special notice required for resolution at general meeting

515

• (1) Special notice is required for a resolution at a general meeting of a private company whose effect would be to appoint a person as auditor in place of a person (the “outgoing auditor”) who, at the time the notice is given, is an auditor of the company and who is to cease to hold office at the end of a period for appointing auditors.