Companies Act 2006

[F1 489A Appointment of auditors of public company: additional requirements for public interest entities with audit committees 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 F2 ...

(4) Before the audit committee makes a recommendation or the directors make a proposal under subsection (3), the committee F3 ... 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, [F4 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.

[F5 (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.]]

Textual Amendments

F1 Ss. 489A 489B inserted (17.6.2016) by The Statutory Auditors and Third Country Auditors Regulations 2016 (S.I. 2016/649), reg. 1(1)(a), Sch. 3 para. 8 (with reg. 1(12))

F2 Words in s. 489A(3)(b) omitted (with effect in accordance with reg. 1(6)(8) of the amending S.I.) by virtue of The Statutory Auditors and Third Country Auditors Regulations 2017 (S.I. 2017/516), regs. 1(2), 12(8)(a)

F3 Words in s. 489A(4) omitted (with effect in accordance with reg. 1(6)(8) of the amending S.I.) by virtue of The Statutory Auditors and Third Country Auditors Regulations 2017 (S.I. 2017/516), regs. 1(2), 12(8)(b)

F4 Words in s. 489A(5)(a) inserted (with effect in accordance with reg. 1(6)(8) of the amending S.I.) by The Statutory Auditors and Third Country Auditors Regulations 2017 (S.I. 2017/516), regs. 1(2), 12(8)(c)

F5 S. 489A(6)(7) substituted for s. 489A(6)-(8) (with effect in accordance with reg. 1(6)(8) of the amending S.I.) by The Statutory Auditors and Third Country Auditors Regulations 2017 (S.I. 2017/516), regs. 1(2), 12(8)(d)