7. After section 487 insert—
“487A Maximum engagement period: transitional arrangements
(1) 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 maximum engagement period” means the period ending on the day before the first day of the first financial year of the company that begins on or after 17th June 2020.
(2) 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 maximum engagement period” means the period ending on the day before the first day of the first financial year of the company that begins on or after 17th June 2023.
(3) In the case of an auditor who was first appointed in respect of a financial year beginning on or after 17th June 2003 and before 17th June 2016 and who continues to hold office on 17th June 2016, “the maximum engagement period” means whichever of the following periods is longest—
(a)the period ending on whichever is the later of—
(i)the day before the first day of the first financial year of the company that begins on or after 17th June 2016;
(ii)the last day of the period of ten years beginning with the first day of the first financial year of the company in respect of which the auditor was appointed,
(b)the period of twenty years beginning with the first day of the first financial year in respect of which the auditor was appointed, if the selection requirements are satisfied for at least one financial year which begins every ten years in the period beginning on 17th June 2007, or
(c)such other period of no more than twenty years beginning with the first day of the first financial year in respect of which the auditor was appointed and ending on the last day of the relevant ten year period.
(4) In this section—
“the relevant ten year period” means the period of ten years beginning with the first day of the last financial year—
which begins either within ten years of the first day of the first financial year in respect of which the auditor was appointed or, if later, on or before 16th June 2017, and
in respect of which the auditor was reappointed following the carrying out of a selection procedure in accordance with the selection requirements;
“the selection requirements” means—
in relation to an accounting year beginning on or after 17th June 2016—
the requirements of section 485A(4) and (5), if the company has an audit committee,
the requirements of section 485B(4) if the company does not have an audit committee,
in relation to an accounting year beginning before 17th June 2016, the requirement that the company carries out a tender process 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).
(5) The maximum engagement period may be extended by a period of up to two years with the approval of the competent authority, provided that—
(a)in a case where the period under subsection (3)(a) is being extended, the appointment of the auditor for the first complete financial year following the end of that period is made following the carrying out of a selection procedure in accordance with the selection requirements; and
(b)in all cases, the competent authority is satisfied that exceptional circumstances exist.”.