8. After section 489 (appointment of auditors of public company: general) insert—U.K.
(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, including the following information in the proposal—
(i)the recommendation made by the audit committee in connection with the appointment, or
(ii)if the directors' proposal does not accord with that recommendation, the reasons for not following the recommendation.
(4) Before the audit committee makes a recommendation or the directors make a proposal under subsection (3), the committee or directors 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 M1.
(5) The audit committee must in its recommendation—
(a)identify its first and second choice candidates for appointment,
(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) Subsections (4) and (5) do not apply in relation to a recommendation or proposal for appointment of an auditor or auditors for a financial year (“the relevant financial year”)—
(a)if the relevant financial year begins during a transitional period mentioned in subsection (7); or
(b)if—
(i)a selection procedure mentioned in subsection (8) has been carried out in respect of the appointment of the auditor or auditors in relation to a financial year beginning less than ten years before the first day of the relevant financial year ; and
(ii)the auditor or auditors were appointed for the financial year before the relevant financial year.
(7) The transitional periods are—
(a)in the case of an auditor who was first appointed in respect of a financial year beginning before 17th June 1994 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17 June 2020;
(b)in the case of an auditor who was first appointed in respect of a financial year beginning on or after 17th June 1994 and before 17th June 2003 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17th June 2023.
(8) The selection procedures are—
(a)a selection procedure which is in accordance with subsections (4) and (5);
(b)a selection procedure which substantially meets the requirements of Article 16(2) to (5) of the Audit Regulation, having regard to the circumstances at the time (including whether the company had an audit committee), which was carried out in relation to a financial year which began before 17th June 2016.
(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, unless the company is—
(a)a small or medium sized enterprise within the meaning in Article 2(1)(f) of Directive 2003/71/EU M2; 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 recommendation or proposal for appointment of an auditor or auditors for a financial year (“the relevant financial year”)—
(a)if the relevant financial year begins during a transitional period mentioned in subsection (6); or
(b)if—
(i)a selection procedure mentioned in subsection (7) has been carried out in respect of the appointment of the auditor or auditors in relation to a financial year beginning less than ten years before the first day of the relevant financial year ; and
(ii)the auditor or auditors were appointed for the financial year before the relevant financial year.
(6) The transitional periods are—
(a)in the case of an auditor who was first appointed in respect of a financial year beginning before 17th June 1994 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17th June 2020;
(b)in the case of an auditor who was first appointed in respect of a financial year beginning on or after 17th June 1994 and before 17th June 2003 and who continues to hold office on 17th June 2016, the period which begins on 17th June 2016 and ends on the day before the first day of the first financial year of the company that begins on or after 17th June 2023.
(7) The selection procedures are—
(a)a selection procedure which is in accordance with subsection (4);
(b)a selection procedure which substantially meets the requirements of Article 16(2) to (5) of the Audit Regulation, having regard to the circumstances at the time (including whether the company had an audit committee), which was carried out in relation to a financial year which began before 17th June 2016.”.
Marginal Citations
M1Article 2(1)(t) was inserted by Directive 2010/73/EU of the European Parliament and of the Council (OJ No L 327, 11.12.2010, p1).
M2OJ No L 345, 31.12.2003, p.64-89.