Legalize / United Kingdom / Public General Act

Companies Act 2006

Type Public General Act

Publication 2006-11-08

Last updated 2026-07-24

State In force

Department Statute Law Database

Source legislation.gov.uk

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(a) resign his office (with immediate effect), and

(b) give notice in writing to the audited person that he has resigned by reason of his becoming ineligible for appointment.

(3) A suspension notice does not make an Auditor General ineligible for appointment as a statutory auditor for the purposes of section 1213 (effect of ineligibility: criminal offences).

Compliance orders

1236

(1) If at any time it appears to the Independent Supervisor that an Auditor General has failed to comply with an obligation imposed on him by or by virtue of this Part, the Independent Supervisor may make an application to the court under this section.

(2) If on an application under this section the court decides that the Auditor General has failed to comply with the obligation in question, it may order the Auditor General to take such steps as the court directs for securing that the obligation is complied with.

(3) In this section “the court” means the High Court or, in Scotland, the Court of Session.

Proceedings

Proceedings involving the Independent Supervisor

1237

(1) If the Independent Supervisor is an unincorporated association, any relevant proceedings may be brought by or against it in the name of any body corporate whose constitution provides for the establishment of the body.

(2) For this purpose “relevant proceedings” means proceedings brought in or in connection with the exercise of any function by the body as the Independent Supervisor.

(3) Where an appointment under section 1228 is revoked, the revoking order may make such provision as the Secretary of State thinks fit with respect to pending proceedings.

Grants

Grants to the Independent Supervisor

1238

In section 16 of the Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27) (grants to bodies concerned with accounting standards etc), after subsection (2)(k) insert—

(ka) exercising functions of the Independent Supervisor appointed under Chapter 3 of Part 42 of the Companies Act 2006;

Chapter 4 — The register of auditors etc

The register of auditors

1239

(1) The Secretary of State must make regulations requiring the keeping of a register of—

(a) the persons eligible for appointment as a statutory auditor, and

(b) third country auditors (see Chapter 5) who apply to be registered in the specified manner and in relation to whom specified requirements are met.

(2) The regulations must require each person's entry in the register to contain—

(a) his name and address,

(b) in the case of an individual eligible for appointment as a statutory auditor, the specified information relating to any firm on whose behalf he is responsible for statutory audit work,

(c) in the case of a firm eligible for appointment as a statutory auditor, the specified information relating to the individuals responsible for statutory audit work on its behalf,

(d) in the case of an individual or firm eligible for appointment as a statutory auditor by virtue of Chapter 2, the name of the relevant supervisory body, . . .

(e) in the case of a firm eligible for appointment as a statutory auditor by virtue of Chapter 2 . . . , the information mentioned in subsection (3), and

(f) in the case of a third country auditor which is a firm, the name and address of each person who is—

(i) an owner or shareholder of the firm, or

(ii) a member of the firm's administrative or management body.

and may require each person's entry to contain other specified information.

(3) The information referred to in subsection (2)(e) is—

(a) in relation to a body corporate, except where paragraph (b) applies, the name and address of each person who is a director of the body or holds any shares in it;

(b) in relation to a limited liability partnership, the name and address of each member of the partnership;

(c) in relation to a corporation sole, the name and address of the individual for the time being holding the office by the name of which he is the corporation sole;

(d) in relation to a partnership, the name and address of each partner.

(4) The regulations may provide that different parts of the register are to be kept by different persons.

(5) The regulations may impose such obligations as the Secretary of State thinks fit on—

(a) recognised supervisory bodies,

(b) any body designated by order under section 1252 (delegation of Secretary of State's functions),

(d) third country auditors,

(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(f) the Independent Supervisor appointed under section 1228.

(g) the competent authority

(6) The regulations may include—

(a) provision requiring that specified entries in the register be open to inspection at times and places specified or determined in accordance with the regulations;

(b) provision enabling a person to require a certified copy of specified entries in the register;

(c) provision authorising the charging of fees for inspection, or the provision of copies, of such reasonable amount as may be specified or determined in accordance with the regulations.

(7) The Secretary of State may direct in writing that the requirements imposed by the regulations . . . , or such of those requirements as are specified in the direction, are not to apply, in whole or in part, in relation to a particular registered third country auditor or class of registered third country auditors.

(8) The obligations imposed by regulations under this section on such persons as are mentioned in subsection (5)(b) or (e) are enforceable on the application of the Secretary of State by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988 (c. 36).

(9) In this section “specified” means specified by regulations under this section.

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

Information to be made available to public

1240

(1) The Secretary of State may make regulations requiring a person eligible for appointment as a statutory auditor, or a member of a specified class of such persons, to keep and make available to the public specified information, including information regarding—

(a) the person's ownership and governance,

(b) the person's internal controls with respect to the quality and independence of its audit work,

(d) the audited persons of whom the person has acted as statutory auditor.

(2) Regulations under this section may—

(a) impose such obligations as the Secretary of State thinks fit on persons eligible for appointment as a statutory auditor;

(b) require the information to be made available to the public in a specified manner.

(3) In this section “specified” means specified by regulations under this section.

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

CHAPTER4A — Equivalent Third Countries and Transitional Third Countries

Power to approve third countries as equivalent or transitional third countries

1240A

(1) The Secretary of State may by regulations grant to a third country, or make provision for the grant to a third country of—

(a) approval as an equivalent third country,

(b) provisional approval, for a period of up to seven years, as an equivalent third country, or

in relation to the comparability of the third country’s audit regulatory regime to the audit regulatory regime of the United Kingdom.

(2) Regulations under subsection (1) may (among other things)—

(a) specify the procedure for assessing the audit regulatory regime of a third country;

(b) set out the considerations which must be taken into account, or may be taken into account, by the Secretary of State when determining—

(i) whether the third country has an audit regulatory regime comparable to that of the United Kingdom,

(ii) whether to grant approval, provisional approval or transitional approval, and

(iii) the period for which provisional approval or transitional approval should be granted;

(d) set out a list of third countries that have been granted approval, provisional approval or transitional approval;

(e) make provision for the amendment, suspension or withdrawal of approval, provisional approval or transitional approval.

(3) In this section, “audit regulatory regime” in relation to a country or territory, means the system of public oversight, quality assurance, investigations and sanctions for auditors in that country or territory.

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

CHAPTER4B — Approved Third Country Competent Authorities

Power to approve third country competent authorities

1240B

(1) The Secretary of State may by regulations grant to a third country competent authority, or make provision for the grant to a third country competent authority of—

(a) approval as an approved third country competent authority, or

(b) provisional approval, for a period of up to seven years, as an approved third country competent authority,

in relation to the exchange of audit working papers and investigation reports.

(2) Regulations under subsection (1) may (among other things)—

(a) specify the procedure for assessing the adequacy of the third country competent authority, in relation to the authority’s ability to co-operate with the competent authority on the exchange of audit working papers and investigation reports;

(b) set out the considerations which must be taken into account, or may be taken into account, by the Secretary of State when determining—

(i) whether to grant approval or provisional approval, and

(ii) in relation to the granting of provisional approval, the period of the approval;

(d) set out a list of third country competent authorities that have been granted an approval or a provisional approval;

(e) make provision for the amendment, suspension or withdrawal of an approval or a provisional approval.

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

Chapter 5 — Registered third country auditors

Introductory

Meaning of “registered third country auditor” and “UK-traded third country company”

1241

(1) In this Part—

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

“registered third country auditor” means a third country auditor who is entered in the register kept in accordance with regulations under section 1239(1).

(2) In this Part “UK-traded third country company” means a body corporate—

(a) which is incorporated or formed under the law of a third country ,

(b) whose transferable securities are admitted to trading on a UK regulated market ..., and

(c) which has not been excluded, or is not of a description of bodies corporate which has been excluded, from this definition by an order made by the Secretary of State.

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

(4) An order under this section is subject to negative resolution procedure.

Duties

Duties of registered third country auditors

1242

(1) A registered third country auditor who audits the accounts of a UK-traded third country company must participate in—

(a) arrangements within paragraph 1 of Schedule 12 (arrangements for independent monitoring of audits . . . ), and

(b) arrangements within paragraph 2 of that Schedule (arrangements for independent investigation for disciplinary purposes ...).

(2) A registered third country auditor must—

(a) take such steps as may be reasonably required of it to enable its performance of audits of accounts of UK-traded third country companies to be monitored by means of inspections carried out under the arrangements mentioned in subsection (1)(a), and

(b) comply with any decision as to disciplinary action to be taken against it made under the arrangements mentioned in subsection (1)(b).

(3) Schedule 12 makes further provision with respect to the arrangements in which registered third country auditors are required to participate.

(4) The Secretary of State may direct in writing that subsections (1) to (3) are not to apply, in whole or in part, in relation to

(a) a particular registered third country auditor or class of registered third country auditors.

(b) audits of the accounts of a particular UK-traded third country company or class of UK-traded third country companies;

(c) audits by a particular registered third country auditor or class of registered third country auditors of the accounts of a particular UK-traded third country company or class of UK-traded third country companies.

Information

Matters to be notified to the Secretary of State

1243

(1) The Secretary of State may require a registered third country auditor—

(a) to notify him immediately of the occurrence of such events as he may specify in writing and to give him such information in respect of those events as is so specified;

(b) to give him, at such times or in respect of such periods as he may specify in writing, such information as is so specified.

(2) The notices and information required to be given must be such as the Secretary of State may reasonably require for the exercise of his functions under this Part.

(3) The Secretary of State may require information given under this section to be given in a specified form or verified in a specified manner.

(4) Any notice or information required to be given under this section must be given in writing unless the Secretary of State specifies or approves some other manner.

The Secretary of State's power to call for information

1244

(1) The Secretary of State may by notice in writing require a registered third country auditor to give him such information as he may reasonably require for the exercise of his functions under this Part.

(2) The Secretary of State may require that any information which he requires under this section is to be given within such reasonable time and verified in such manner as he may specify.

Enforcement

Compliance orders

1245

(1) If at any time it appears to the Secretary of State that a registered third country auditor has failed to comply with an obligation imposed on him by or by virtue of this Part, the Secretary of State may make an application to the court under this section.

(2) If on an application under this section the court decides that the auditor has failed to comply with the obligation in question, it may order the auditor to take such steps as the court directs for securing that the obligation is complied with.

(3) In this section “the court” means the High Court or, in Scotland, the Court of Session.

Removal of third country auditors from the register of auditors

1246

(1) The Secretary of State may, by regulations, confer on the person keeping the register in accordance with regulations under section 1239(1) power to remove a third country auditor from the register.

(2) Regulations under this section must require the person keeping the register, in determining whether to remove a third country auditor from the register, to have regard to the auditor's compliance with obligations imposed on him by or by virtue of this Part.

(3) Where provision is made under section 1239(4) (different parts of the register to be kept by different persons), references in this section to the person keeping the register are to the person keeping that part of the register which relates to third country auditors.

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

Grants to bodies concerned with arrangements under Schedule 12

1247

In section 16 of the Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27) (grants to bodies concerned with accounting standards etc), after subsection (2)(ka) (inserted by section 1238) insert—

(kb) establishing, maintaining or carrying out arrangements within paragraph 1 or 2 of Schedule 12 to the Companies Act 2006;

Chapter 6 — Supplementary and general

Power to require second company audit

Secretary of State's power to require second audit of a company

1248

(1) This section applies where a person appointed as statutory auditor of a company was not an appropriate person for any part of the period during which the audit was conducted.

(2) The Secretary of State may direct the company concerned to retain an appropriate person—

(a) to conduct a second audit of the relevant accounts, or

(b) to review the first audit and to report (giving his reasons) whether a second audit is needed.

(3) For the purposes of subsections (1) and (2) a person is “appropriate” if he—

(a) is eligible for appointment as a statutory auditor or, if the person is an Auditor General, for appointment as statutory auditor of the company, and

(b) is not prohibited by section 1214(1) (independence requirement) from acting as statutory auditor of the company.

(4) The Secretary of State must send a copy of a direction under subsection (2) to the registrar of companies.

(5) The company is guilty of an offence if—

(a) it fails to comply with a direction under subsection (2) within the period of 21 days beginning with the date on which it is given, or

(b) it has been convicted of a previous offence under this subsection and the failure to comply with the direction which led to the conviction continues after the conviction.

(6) The company must—

(a) send a copy of a report under subsection (2)(b) to the registrar of companies, and

(b) if the report states that a second audit is needed, take such steps as are necessary for the carrying out of that audit.

(7) The company is guilty of an offence if—

(a) it fails to send a copy of a report under subsection (2)(b) to the registrar within the period of 21 days beginning with the date on which it receives it,

(b) in a case within subsection (6)(b), it fails to take the steps mentioned immediately it receives the report, or

(c) it has been convicted of a previous offence under this subsection and the failure to send a copy of the report, or take the steps, which led to the conviction continues after the conviction.

(8) A company guilty of an offence under this section is liable on summary conviction—

(a) in a case within subsection (5)(a) or (7)(a) or (b), to a fine not exceeding level 5 on the standard scale, and

(b) in a case within subsection (5)(b) or (7)(c), to a fine not exceeding one-tenth of level 5 on the standard scaleone-tenth of the greater of £5,000 or level 4 on the standard scale for each day on which the failure continues.

(9) In this section “registrar of companies” has the meaning given by section 1060.

Supplementary provision about second audits

1249

(1) If a person accepts an appointment, or continues to act, as statutory auditor of a company at a time when he knows he is not an appropriate person, the company may recover from him any costs incurred by it in complying with the requirements of section 1248.

For this purpose “appropriate” is to be construed in accordance with subsection (3) of that section.

(2) Where a second audit is carried out under section 1248, any statutory or other provision applying in relation to the first audit applies also, in so far as practicable, in relation to the second audit.

(3) A direction under section 1248(2) is, on the application of the Secretary of State, enforceable by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988 (c. 36).

False and misleading statements

Misleading, false and deceptive statements

1250

(1) A person is guilty of an offence if—

(a) for the purposes of or in connection with any application under this Part, or

(b) in purported compliance with any requirement imposed on him by or by virtue of this Part,

he knowingly or recklessly furnishes information which is misleading, false or deceptive in a material particular.

(2) It is an offence for a person whose name does not appear on the register of auditors kept under regulations under section 1239 in an entry made under subsection (1)(a) of that section to describe himself as a registered auditor or so to hold himself out as to indicate, or be reasonably understood to indicate, that he is a registered auditor.

(3) It is an offence for a person whose name does not appear on the register of auditors kept under regulations under that section in an entry made under subsection (1)(b) of that section to describe himself as a registered third country auditor or so to hold himself out as to indicate, or be reasonably understood to indicate, that he is a registered third country auditor.

(4) It is an offence for a body which is not a recognised supervisory body or a recognised qualifying body to describe itself as so recognised or so to describe itself or hold itself out as to indicate, or be reasonably understood to indicate, that it is so recognised.

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

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine (or both);

(b) on summary conviction—

(i) in England and Wales, to imprisonment for a term not exceeding the general limit in a magistrates’ court 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).

In relation to an offence committed before 2 May 2022, for “twelve months” in paragraph (b)(i) substitute “six months”.

(6) Subject to subsection (7), a person guilty of an offence under subsection (2), (3) or (4) is liable on summary conviction—

(a) in England and Wales, to imprisonment for a term not exceeding 51 weeks or to a fine not exceeding level 5 on the standard scale (or both),

(b) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months or to a fine not exceeding level 5 on the standard scale (or both).

In relation to an offence committed before the commencement of section 281(5) of the Criminal Justice Act 2003, for “51 weeks” in paragraph (a) substitute “six months”.

(7) Where a contravention of subsection (2), (3) or (4) involves a public display of the offending description, the maximum fine that may be imposed is an amount equal to level 5 on the standard scale multiplied by the number of days for which the display has continued.

(8) It is a defence for a person charged with an offence under subsection (2), (3) or (4) to show that he took all reasonable precautions and exercised all due diligence to avoid the commission of the offence.

Fees

1251

(1) An applicant for a recognition order under this Part must pay such fee in respect of his application as the Secretary of State may by regulations prescribe; and no application is to be regarded as duly made unless this subsection is complied with.

(2) The Secretary of State may by regulations prescribe periodical fees to be paid by—

(a) every recognised supervisory body,

(b) every recognised qualifying body,

(d) every registered third country auditor.

(3) Fees received by the Secretary of State by virtue of this Part are to be paid into the Consolidated Fund.

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

Duty of Secretary of State to report on inspections

Duty of the Secretary of State to report on inspections

1251A

The Secretary of State must, at least once in every calendar year, publish a report containing a summary of the results of inspections that are delivered to him—

(a) by the Independent Supervisor under section 1229(5A);

(b) by a recognised supervisory body under paragraph 13(12) of Schedule 10.

Delegation of Secretary of State's functions

Delegation of the Secretary of State's functions

1252

(1) The Secretary of State may make an order under this section (a “delegation order”) for the purpose of enabling functions of the Secretary of State under this Part to be exercised by a body designated by the order.

(2) The body designated by a delegation order may be either—

(a) a body corporate which is established by the order, or

(b) subject to section 1253, a body (including the competent authority, and whether a body corporate or an unincorporated association) which is already in existence (“an existing body”).

(3) A delegation order has the effect of making the body designated by the order designated under section 5 of the Freedom of Information Act 2000 (c. 36) (further powers to designate public authorities).

(4) A delegation order has the effect of transferring to the body designated by it all functions of the Secretary of State under this Part—

(a) subject to such exceptions and reservations as may be specified in the order, and

(b) except—

(i) his functions in relation to the body itself, and

(ii) his functions under section 1228 (appointment of Independent Supervisor).

(5) A delegation order may confer on the body designated by it such other functions supplementary or incidental to those transferred as appear to the Secretary of State to be appropriate.

(6) Any transfer of functions under the following provisions must be subject to the reservation that the functions remain exercisable concurrently by the Secretary of State—

(a) section 1224 (power to call for information from recognised bodies etc);

(b) section 1244 (power to call for information from registered third country auditors);

(7) Any transfer of—

(a) the function of refusing to make a declaration under section 1221(1) (approval of third country qualifications) on the grounds referred to in section 1221(4) (lack of comparable treatment), or

(b) the function of withdrawing such a declaration under section 1221(7) on those grounds,

must be subject to the reservation that the function is exercisable only with the consent of the Secretary of State.

(8) A delegation order may be amended or, if it appears to the Secretary of State that it is no longer in the public interest that the order should remain in force, revoked by a further order under this section.

(9) Where functions are transferred or resumed, the Secretary of State may by order confer or, as the case may be, take away such other functions supplementary or incidental to those transferred or resumed as appear to him to be appropriate.

(10) Where a delegation order is made, Schedule 13 has effect with respect to—

(a) the status of the body designated by the order in exercising functions of the Secretary of State under this Part,

(b) the constitution and proceedings of the body where it is established by the order,

(d) other supplementary matters.

(11) An order under this section which has the effect of transferring or resuming any functions is subject to affirmative resolution procedure.

(12) Any other order under this section is subject to negative resolution procedure.

Delegation of functions to an existing body

1253

(1) The Secretary of State's power to make a delegation order under section 1252 which designates an existing body is exercisable in accordance with this section.

(2) The Secretary of State may make such a delegation order if it appears to him that—

(a) the body is able and willing to exercise the functions that would be transferred by the order, and

(b) the body has arrangements in place relating to the exercise of those functions which are such as to be likely to ensure that the conditions in subsection (3) are met.

(3) The conditions are—

(a) that the functions in question will be exercised effectively, and

(b) where the delegation order is to contain any requirements or other provisions specified under subsection (4), that those functions will be exercised in accordance with any such requirements or provisions.

(4) The delegation order may contain such requirements or other provision relating to the exercise of the functions by the designated body as appear to the Secretary of State to be appropriate.

(5) An existing body—

(a) may be designated by a delegation order under section 1252, and

(b) may accordingly exercise functions of the Secretary of State in pursuance of the order,

despite any involvement of the body in the exercise of any functions under arrangements within ... paragraph 1 or 2 of Schedule 12.

Cooperation with foreign competent authorities

Requests to foreign competent authorities

1253A

The Secretary of State may request from ... a third country competent authority such assistance, information or investigation as he may reasonably require in connection with the exercise of his functions under this Part.

Requests from approved third country competent authorities

1253B

(1) The Secretary of State must take all necessary steps to—

(a) ensure that an investigation is carried out, or

(b) provide any other assistance or information,

if requested to do so by an approved third country competent authority ....

(1A) Where the request includes a request for the transfer of audit working papers and investigation reports, the Secretary of State must act in accordance with section 1253D.

(2) Within 28 days following the date on which he receives the request, the Secretary of State must—

(a) provide the assistance or information required by the requesting authority under subsection (1)(b), or

(b) notify the requesting authority of the reasons why he has not done so.

(3) But the Secretary of State need not take steps to comply with a request under subsection (1) if—

(a) he considers that complying with the request may prejudice the sovereignty, security or public order of the United Kingdom;

(b) legal proceedings have been brought in the United Kingdom (whether continuing or not) in relation to the persons and matters to which the request relates; or

(c) disciplinary action has been taken by a recognised supervisory body in relation to the persons and matters to which the request relates.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notification to approved third country competent authorities...

1253C

(1) If the Secretary of State receives notice from a recognised supervisory body under section 1223A(1) (notification of matters relevant to approved third country competent authorities) that—

(a) a person has become eligible for appointment as a statutory auditor, or

(b) a person’s eligibility for appointment as a statutory auditor has been withdrawn,

the Secretary of State must notify the relevant approved third country competent authority.

(2) In subsection (1) “the relevant approved third country competent authority” means the approved third country competent authority which has approved the person concerned ... to carry out audits of annual accounts or consolidated accounts ....

(3) The notification under subsection (1) must include the name of the person concerned and , in a case where a person’s eligibility for appointment as a statutory auditor has been withdrawn, the reasons for the withdrawal.

(4) The Secretary of State must notify the relevant approved third country competent authority if he has reasonable grounds for suspecting that—

(a) a person has contravened the law of the United Kingdom, or any equivalent third country or transitional third country, relating to audit, and

(b) the act or omission constituting that contravention took place on the territory of an equivalent third country or transitional third country.

(5) In subsection (4) “the relevant approved third country competent authority” means the approved third country competent authority for the country or territory in which the suspected contravention took place.

(6) The notification under subsection (4) must include the name of the person concerned and the grounds for the Secretary of State's suspicion.

Transfer of papers to third countries

Restriction on transfer of audit working papers to third countries

1253D

(1) Audit working papers and investigation reports must not be transferred to a third country competent authority unless the third country competent authority is an approved third country competent authority and the transfers are made in accordance with—

(a) section 1253DA (transfer by Secretary of State),

(b) section 1253DB (transfer by statutory auditor with approval of Secretary of State), or

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) Nothing in the sections referred to in subsection (1) authorises the making of a disclosure in contravention of the data protection legislation.

Transfer by Secretary of State

1253DA

(1) The Secretary of State may transfer audit working papers and investigation reports to an approved third country competent authority if the following conditions are met (but see also section 1253DD).

(2) The first condition is that the authority has made a request to the Secretary of State for the transfer of the audit working papers and investigation reports.

(3) The second condition is that the audit working papers and investigation reports relate to audits of companies that—

(a) have issued securities in the third country in which the authority is established, or

(b) form part of a group issuing statutory consolidated accounts in that third country.

(4) The third condition is that the authority has entered into arrangements with the Secretary of State in accordance with section 1253E.

Transfer by statutory auditor with approval of Secretary of State

1253DB

(1) A statutory auditor may transfer audit working papers and investigation reports to an approved third country competent authority if the transfer is made—

(a) with the prior approval of the Secretary of State, and

(b) in accordance with rules of a recognised supervisory body meeting the requirements of paragraph 16AA of Schedule 10.

(2) The Secretary of State must not approve a transfer of audit working papers and investigation reports to an approved third country competent authority for the purposes of this section unless the following conditions are met (see also section 1253DD).

(3) The first condition is that the authority has made a request to the Secretary of State for the transfer of the audit working papers and investigation reports.

(4) The second condition is that the audit working papers and investigation reports relate to audits of companies that—

(a) have issued securities in the third country in which the authority is established, or

(b) form part of a group issuing statutory consolidated accounts in that third country.

(5) The third condition is that the authority has entered into arrangements with the Secretary of State in accordance with section 1253E.

Transfer by statutory auditor for purposes of investigation of auditor

1253DC

A statutory auditor may transfer audit working papers and investigation reports to a third country competent authority if the transfer is made—

(a) for the purposes of an investigation of an auditor or audit firm, and

(b) in accordance with rules of a recognised supervisory body meeting the requirements of paragraph 16AB of Schedule 10.

Agreement of third country competent authority

1253DD

(1) This section applies where—

(a) an approved third country competent authority makes a request to the Secretary of State for the transfer of audit working papers and investigation reports which relate to the audit of the consolidated accounts of a group, and

(b) the audit working papers and investigation reports that are the subject of the request—

(i) have been created by the auditor of a subsidiary that is located in an equivalent third country or transitional third country in relation to the audit of that subsidiary, and

(ii) are in the possession of a statutory auditor.

(2) In the case of a transfer by the Secretary of State under section 1253DA, the transfer must not take place unless the third country competent authority responsible for the auditor of the subsidiary has given its express agreement to the transfer.

(3) In the case of a transfer by a statutory auditor under section 1253DB, the Secretary of State must not approve the transfer unless the third country competent authority responsible for the auditor of the subsidiary has given its express agreement to the transfer.

Transfer by means of inspection

1253DE

(1) This section applies in the case of a transfer of audit working papers and investigation reports if—

(a) it is a transfer to an approved third country competent authority ...,

(b) it is a transfer under section 1253DA or 1253DB, and

(2) The Secretary of State must participate in the inspection.

(3) The inspection must be under the leadership of the Secretary of State unless the Secretary of State otherwise permits.

Working arrangements for transfer of papers

1253E

(1) The Secretary of State may enter into arrangements with a third country competent authority relating to the transfer of audit working papers and investigation reports—

(a) from the third country competent authority or a third country auditor regulated by that authority to the Secretary of State, and

(b) from the Secretary of State or a statutory auditor to the third country competent authority.

(2) The arrangements must provide that a request by the Secretary of State or the third country competent authority for a transfer mentioned in subsection (1) must be accompanied by a statement explaining the reasons for the request.

(3) The arrangements must—

(a) provide that the Secretary of State may not use audit working papers and investigation reports obtained from the third country competent authority or a third country auditor regulated by that authority except in connection with one or more of the functions mentioned in subsection (4), and

(b) include comparable provision in relation to audit working papers and investigation reports obtained by the third country competent authority from the Secretary of State or a statutory auditor.

(4) Those functions are—

(a) quality assurance functions which meet requirements equivalent to those of regulation 9 of the Statutory Auditors and Third Country Auditors Regulations 2016;

(b) investigation or disciplinary functions which meet requirements equivalent to those of regulations 5 to 8 and 10 of the Statutory Auditors and Third Country Auditors Regulations 2016;

(c) public oversight functions which meet requirements equivalent to those of regulation 3 of the Statutory Auditors and Third Country Auditors Regulations 2016.

(5) The arrangements must—

(a) provide that the Secretary of State, a person exercising the functions of the Secretary of State and persons employed or formerly employed in discharging those functions must be subject to obligations of confidentiality as to personal data, professional secrets and sensitive commercial information contained in audit working papers and investigation reports transferred to the Secretary of State, ...

(b) provide that the third country competent authority and persons involved in exercising its functions are subject to comparable obligations in relation to audit working papers and investigation reports transferred to the authority and

(c) ensure that the protection of the commercial interests of any audited person, including its industrial and intellectual property, is not undermined.

(6) The arrangements must—

(a) provide that the Secretary of State may refuse, or direct a statutory auditor to refuse, a request from the third country competent authority for a transfer of audit working papers and investigation reports in a case mentioned in subsection (7)(a) or (b), and

(b) provide that the third country competent authority has comparable rights in relation to a request from the Secretary of State.

(7) Those cases are—

(a) where the transfer of the papers would adversely affect the sovereignty, security or public order ...of the United Kingdom;

(b) where legal proceedings have been brought in the United Kingdom (whether continuing or not) in relation to the persons and matters to which the request relates.

(7A) The arrangements must—

(a) provide that the Secretary of State may only disclose confidential information received from the third country competent authority—

(i) with the agreement of that authority or for purposes for which that authority has given its agreement,

(ii) where disclosure is required by law, or

(iii) where disclosure is necessary in connection with legal proceedings, and

(b) provide that the third country competent authority may only disclose confidential information received from the Secretary of State—

(i) with the Secretary of State’s agreement or for purposes for which the Secretary of State has given agreement,

(ii) where disclosure is required by law, or

(iii) where disclosure is necessary in connection with legal proceedings.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Publication of working arrangements

1253F

If the Secretary of State enters into working arrangements in accordance with section 1253E, he must publish on a website without undue delay—

(a) the name of the third country competent authority with which he has entered into such arrangements, and

(b) the country or territory in which it is established.

International obligations

Directions to comply with international obligations

1254

(1) If it appears to the Secretary of State—

(a) that any action proposed to be taken by—

(i) a recognised supervisory body,

(ii) a recognised qualifying body,

(iii) a person keeping a register of auditors, or part of such a register, in accordance with regulations under section 1239(1),

(iv) a body exercising functions under arrangements within Schedule 12,

(v) the Independent Supervisor,

(vi) the competent authority, or

(vii) a body designated by order under section 1252,

would be incompatible with assimilated obligations or any other international obligations of the United Kingdom, or

(b) that any action which that body has power to take is required for the purpose of implementing any such obligations,

he may direct the body not to take or, as the case may be, to take the action in question.

(2) A direction may include such supplementary or incidental requirements as the Secretary of State thinks necessary or expedient.

(3) A direction under this section given to the Independent Supervisor , the competent authority or a body designated by order under section 1252 is enforceable on the application of the Secretary of State by injunction or, in Scotland, by an order under section 45 of the Court of Session Act 1988 (c. 36).

General provision relating to offences

Offences by bodies corporate, partnerships and unincorporated associations

1255

(1) Where an offence under this Part committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, an officer of the body, or a person purporting to act in any such capacity, he as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly.

(2) Where an offence under this Part committed by a partnership is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, a partner, he as well as the partnership is guilty of the offence and liable to be proceeded against and punished accordingly.

(3) Where an offence under this Part committed by an unincorporated association (other than a partnership) is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any officer of the association or any member of its governing body, he as well as the association is guilty of the offence and liable to be proceeded against and punished accordingly.

Time limits for prosecution of offences

1256

(1) An information relating to an offence under this Part which is triable by a magistrates' court in England and Wales may be so tried if it is laid at any time within the period of twelve months beginning with the date on which evidence sufficient in the opinion of the Director of Public Prosecutions or the Secretary of State to justify the proceedings comes to his knowledge.

(2) Proceedings in Scotland for an offence under this Part may be commenced at any time within the period of twelve months beginning with the date on which evidence sufficient in the Lord Advocate's opinion to justify proceedings came to his knowledge or, where such evidence was reported to him by the Secretary of State, within the period of twelve months beginning with the date on which it came to the knowledge of the Secretary of State.

(3) For the purposes of subsection (2) proceedings are to be deemed to be commenced on the date on which a warrant to apprehend or cite the accused is granted, if the warrant is executed without undue delay.

(4) A complaint charging an offence under this Part which is triable by a magistrates' court in Northern Ireland may be so tried if it is made at any time within the period of twelve months beginning with the date on which evidence sufficient in the opinion of the Director of Public Prosecutions for Northern Ireland or the Secretary of State to justify the proceedings comes to his knowledge.

(5) This section does not authorise—

(a) in the case of proceedings in England and Wales, the trial of an information laid,

(b) in the case of proceedings in Scotland, the commencement of proceedings, or

more than three years after the commission of the offence.

(6) For the purposes of this section a certificate of the Director of Public Prosecutions, the Lord Advocate, the Director of Public Prosecutions for Northern Ireland or the Secretary of State as to the date on which such evidence as is referred to above came to his knowledge is conclusive evidence.

(7) Nothing in this section affects proceedings within the time limits prescribed by section 127(1) of the Magistrates' Courts Act 1980 (c. 43), section 331 of the Criminal Procedure (Scotland) Act 1975 or Article 19 of the Magistrates' Courts (Northern Ireland) Order 1981 (S.I. 1981/1675 (N.I. 26)) (the usual time limits for criminal proceedings).

Jurisdiction and procedure in respect of offences

1257

(1) Summary proceedings for an offence under this Part may, without prejudice to any jurisdiction exercisable apart from this section, be taken—

(a) against a body corporate or unincorporated association at any place at which it has a place of business, and

(b) against an individual at any place where he is for the time being.

(2) Proceedings for an offence alleged to have been committed under this Part by an unincorporated association must be brought in the name of the association (and not in that of any of its members), and for the purposes of any such proceedings any rules of court relating to the service of documents apply as in relation to a body corporate.

(3) Section 33 of the Criminal Justice Act 1925 (c. 86) and Schedule 3 to the Magistrates' Courts Act 1980 (c. 43) (procedure on charge of offence against a corporation) apply in a case in which an unincorporated association is charged in England and Wales with an offence under this Part as they apply in the case of a corporation.

(4) Section 18 of the Criminal Justice Act (Northern Ireland) 1945 (c. 15 (N.I.)) and Article 166 and Schedule 4 to the Magistrates' Courts (Northern Ireland) Order 1981 (S.I. 1981/1675 (N.I. 26)) (procedure on charge of offence against a corporation) apply in a case in which an unincorporated association is charged in Northern Ireland with an offence under this Part as they apply in the case of a corporation.

(5) In relation to proceedings on indictment in Scotland for an offence alleged to have been committed under this Part by an unincorporated association, section 70 of the Criminal Procedure (Scotland) Act 1995 (proceedings on indictment against bodies corporate) applies as if the association were a body corporate.

(6) A fine imposed on an unincorporated association on its conviction of such an offence must be paid out of the funds of the association.

Notices etc

Service of notices

1258

(1) This section has effect in relation to any notice, direction or other document required or authorised by or by virtue of this Part to be given to or served on any person other than the Secretary of State.

(2) Any such document may be given to or served on the person in question—

(a) by delivering it to him,

(b) by leaving it at his proper address, or

(3) Any such document may—

(a) in the case of a body corporate, be given to or served on an officer of that body;

(b) in the case of a partnership, be given to or served on any partner;

(c) in the case of an unincorporated association other than a partnership, be given to or served on any member of the governing body of that association.

(4) For the purposes of this section and section 7 of the Interpretation Act 1978 (c. 30) (service of documents by post) in its application to this section, the proper address of any person is his last known address (whether of his residence or of a place where he carries on business or is employed) and also—

(a) in the case of a person who is eligible under the rules of a recognised supervisory body for appointment as a statutory auditor and who does not have a place of business in the United Kingdom, the address of that body;

(b) in the case of a body corporate or an officer of that body, the address of the registered or principal office of that body in the United Kingdom;

(c) in the case of an unincorporated association other than a partnership or a member of its governing body, its principal office in the United Kingdom.

Documents in electronic form

1259

(1) This section applies where—

(a) section 1258 authorises the giving or sending of a notice, direction or other document by its delivery to a particular person (“the recipient”), and

(b) the notice, direction or other document is transmitted to the recipient—

(i) by means of an electronic communications network, or

(ii) by other means but in a form that requires the use of apparatus by the recipient to render it intelligible.

(2) The transmission has effect for the purposes of this Part as a delivery of the notice, direction or other document to the recipient, but only if the recipient has indicated to the person making the transmission his willingness to receive the notice, direction or other document in the form and manner used.

(3) An indication to a person for the purposes of subsection (2)—

(a) must be given to the person in such manner as he may require,

(b) may be a general indication or an indication that is limited to notices, directions or other documents of a particular description,

(d) must be accompanied by such other information as the person requires for the making of the transmission, and

(e) may be modified or withdrawn at any time by a notice given to the person in such manner as he may require.

(4) In this section “electronic communications network” has the same meaning as in the Communications Act 2003 (c. 21).

Interpretation

Meaning of “associate”

1260

(1) In this Part “associate”, in relation to a person, is to be construed as follows.

(2) In relation to an individual, “associate” means—

(a) that individual's spouse, civil partner or minor child or step-child,

(b) any body corporate of which that individual is a director, and

(3) In relation to a body corporate, “associate” means—

(a) any body corporate of which that body is a director,

(b) any body corporate in the same group as that body, and

(4) In relation to a partnership constituted under the law of Scotland, or any other country or territory in which a partnership is a legal person, “associate” means—

(a) any body corporate of which that partnership is a director,

(b) any employee of or partner in that partnership, and

(5) In relation to a partnership constituted under the law of England and Wales or Northern Ireland, or the law of any other country or territory in which a partnership is not a legal person, “associate” means any person who is an associate of any of the partners.

(6) In subsections (2)(b), (3)(a) and (4)(a), in the case of a body corporate which is a limited liability partnership, “director” is to be read as “member”.

Minor definitions

1261

(1) In this Part, unless a contrary intention appears—

“address” means—in relation to an individual, his usual residential or business address;in relation to a firm, its registered or principal office in the United Kingdom;

“the Audit Regulation ” means Regulation 537/2014 of the European Parliament and of the Council on specific requirements regarding statutory audit of public interest entities;

“audit working papers and investigation reports” means— any documents which are or have been held by a statutory auditor ... or a third country auditor and which are related to the conduct of an audit conducted by that auditor; any report of an inspection of the conduct of an audit by a statutory auditor ... or a third country auditor, or any report of an investigation into the conduct of a statutory auditor ... or a third country auditor,

“company” means any company or other body the accounts of which must be audited in accordance with Part 16;

“the competent authority” means the Financial Reporting Council Limited

“the data protection legislation” has the same meaning as in the Data Protection Act 2018 (see section 3 of that Act);

“director”, in relation to a body corporate, includes any person occupying in relation to it the position of a director (by whatever name called) and any person in accordance with whose directions or instructions (not being advice given in a professional capacity) the directors of the body are accustomed to act;

“firm” means any entity, whether or not a legal person, which is not an individual and includes a body corporate, a corporation sole and a partnership or other unincorporated association;

“group”, in relation to a body corporate, means the body corporate, any other body corporate which is its holding company or subsidiary and any other body corporate which is a subsidiary of that holding company;

“holding company” and “subsidiary” are to be read in accordance with section 1159 and Schedule 6;

“officer”, in relation to a body corporate, includes a director, a manager, a secretary or, where the affairs of the body are managed by its members, a member;

“parent undertaking” and “subsidiary undertaking” are to be read in accordance with section 1162 and Schedule 7.

“regulated market” has the meaning given in Article 2(1)(13) of Regulation (EU) No. 600/2014 of the European Parliament and of the Council of 15 May 2014 and amending Regulation (EU) No. 648/2012;

“third country” means a country or territory other than the United Kingdom;

“ third country auditor ” means a person, other than ... a person eligible for appointment as a statutory auditor, who is eligible to conduct audits of the accounts of bodies corporate incorporated or formed under the law of a third country in accordance with the law of that country;

“third country competent authority” means a body established in a third country exercising functions related to the regulation or oversight of auditors;

“transfer”, in relation to audit working papers and investigation reports, includes physical and electronic transfer and allowing access to such papers;

“transferable securities” has the meaning given in Article 2(1)(24) of Regulation (EU) No. 600/2014 of the European Parliament and of the Council of 15 May 2014 and amending Regulation (EU) No. 648/2012;

“UK regulated market” has the meaning given in Article 2(1)(13A) of Regulation (EU) No. 600/2014 of the European Parliament and of the Council of 15 May 2014 and amending Regulation (EU) No. 648/2012;

(2) For the purposes of this Part a body is to be regarded as “established in the United Kingdom” if and only if—

(a) it is incorporated or formed under the law of the United Kingdom or a part of the United Kingdom, or

(b) its central management and control are exercised in the United Kingdom;

and any reference to a qualification “obtained in the United Kingdom” is to a qualification obtained from such a body.

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The Secretary of State may by regulations make such modifications of this Part as appear to him to be necessary or appropriate for the purposes of its application in relation to any firm, or description of firm, which is not a body corporate or a partnership.

(4) Regulations under subsection (3) are subject to negative resolution procedure.

Index of defined expressions

1262

The following Table shows provisions defining or otherwise explaining expressions used in this Part (other than provisions defining or explaining an expression used only in the same section)—

Miscellaneous and general

Power to make provision in consequence of changes affecting accountancy bodies

1263

(1) The Secretary of State may by regulations make such amendments of enactments as appear to him to be necessary or expedient in consequence of any change of name, merger or transfer of engagements affecting—

(a) a recognised supervisory body or recognised qualifying body, or

(b) a body of accountants referred to in, or approved, authorised or otherwise recognised for the purposes of, any other enactment.

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

Consequential amendments

1264

Schedule 14 contains consequential amendments relating to this Part.

Introductory

The transparency obligations directive

1265

In Part 6 of the Financial Services and Markets Act 2000 (c. 8) (which makes provision about official listing, prospectus requirements for transferable securities, etc), in section 103(1) (interpretation), at the appropriate place insert—

“the transparency obligations directive” means Directive 2004/109/EC of the European Parliament and of the Council relating to the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market;

Transparency obligations

Transparency rules

1266

(1) After section 89 of the Financial Services and Markets Act 2000 insert—

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