Companies Act 2006

Independence requirement U.K.

1214 Independence requirement U.K.

(1) A person may not act as statutory auditor of an audited person if one or more of subsections (2), (3) and (4) apply to him.

(2) This subsection applies if the person is—

(a) an officer or employee of the audited person, or

(b) a partner or employee of such a person, or a partnership of which such a person is a partner.

(3) This subsection applies if the person is—

(a) an officer or employee of an associated undertaking of the audited person, or

(b) a partner or employee of such a person, or a partnership of which such a person is a partner.

(4) This subsection applies if there exists, between—

(a) the person or an associate of his, and

(b) the audited person or an associated undertaking of the audited person,

a connection of any such description as may be specified by regulations made by the Secretary of State.

(5) An auditor of an audited person is not to be regarded as an officer or employee of the person for the purposes of subsections (2) and (3).

(6) In this section “associated undertaking”, in relation to an audited person, means—

(a) a parent undertaking or subsidiary undertaking of the audited person, or

(b) a subsidiary undertaking of a parent undertaking of the audited person.

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

Modifications etc. (not altering text)

C1 S. 1214 applied (15.12.2007) by The Companies (Cross-Border Mergers) Regulations 2007 (S.I. 2007/2974), reg. 9(8)(b)

C2 S. 1214 applied (1.1.2012) by Budget Responsibility and National Audit Act 2011 (c. 4), ss. 20, 29, Sch. 2 para. 25(4); S.I. 2011/2576, art. 3(c) (with art. 4)

Commencement Information

I1 S. 1214 wholly in force at 6.4.2008; s. 1214 not in force at Royal Assent, see s. 1300; s. 1214 in force for specified purposes at 20.1.2007 by S.I. 2006/3428, art. 3(3) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5); s. 1214 in force at 6.4.2008 by S.I. 2007/3495, art. 3(1)(u) (with savings in arts. 7, 12, Sch. 4 paras. 37-42)

1215 Effect of lack of independence U.K.

(1) If at any time during his term of office a statutory auditor becomes prohibited from acting by section 1214(1), he must immediately—

(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 lack of independence.

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

(a) he acts as a statutory auditor in contravention of section 1214(1), or

(b) he fails to give the notice mentioned in paragraph (b) of subsection (1) in accordance with that subsection.

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

(a) on conviction on indictment, to a fine;

(b) on summary conviction, to a fine not exceeding the statutory maximum.

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

(a) he has been convicted of an offence under subsection (2)(a) or this subsection, and

(b) he continues to act as a statutory auditor in contravention of section 1214(1) after the conviction.

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

(a) he has been convicted of an offence under subsection (2)(b) or this subsection, and

(b) after the conviction, he continues to fail to give the notice mentioned in subsection (1)(b).

(6) A person guilty of an offence under subsection (4) or (5) is liable—

(a) on conviction on indictment, to a fine;

(b) on summary conviction, to a fine not exceeding [F1 one-tenth of the statutory maximum][F1 one-tenth of the greater of £5,000 or the amount corresponding to level 4 on the standard scale for summary offences] for each day on which the act or the failure continues.

(7) In proceedings against a person for an offence under this section it is a defence for him to show that he did not know and had no reason to believe that he was, or had become, prohibited from acting as statutory auditor of the audited person by section 1214(1).

Textual Amendments

F1 Words in s. 1215(6)(b) substituted (E.W.) (12.3.2015) by The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Fines on Summary Conviction) Regulations 2015 (S.I. 2015/664), reg. 1(1), Sch. 3 para. 9(25) (with reg. 5(1))