Companies Act 2006

Private companies U.K.

485 Appointment of auditors of private company: general U.K.

(1) An auditor or auditors of a private company must be appointed for each financial year of the company, unless the directors reasonably resolve otherwise on the ground that audited accounts are unlikely to be required.

(2) For each financial year for which an auditor or auditors is or are to be appointed (other than the company's first financial year), the appointment must be made before the end of the period of 28 days beginning with—

(a) the end of the time allowed for sending out copies of the company's annual accounts and reports for the previous financial year (see section 424), or

(b) if earlier, the day on which copies of the company's annual accounts and reports for the previous financial year are sent out under section 423.

This is the “period for appointing auditors”.

(3) The directors may appoint an auditor or auditors of the company—

(a) at any time before the company's first period for appointing auditors,

(b) following a period during which the company (being exempt from audit) did not have any auditor, at any time before the company's next period for appointing auditors, or

(c) to fill a casual vacancy in the office of auditor.

(4) The members may appoint an auditor or auditors by ordinary resolution—

(a) during a period for appointing auditors,

(b) if the company should have appointed an auditor or auditors during a period for appointing auditors but failed to do so, or

(c) where the directors had power to appoint under subsection (3) but have failed to make an appointment.

(5) An auditor or auditors of a private company may only be appointed—

(a) in accordance with this section, or

(b) in accordance with section 486 [F1 or 486A] (default power of Secretary of State).

This is without prejudice to any deemed re-appointment under section 487.

Textual Amendments

F1 Words in s. 485(5)(b) inserted (with effect in accordance with reg. 2(3) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 1 para. 14 (with reg. 2(6)(7))

Modifications etc. (not altering text)

C1 Ss. 485-488 applied (with modifications) (6.4.2008) by The Bank Accounts Directive (Miscellaneous Banks) Regulations 2008 (S.I. 2008/567), reg. 4, Sch. para. 9 (with Sch. para. 11)

C2 Ss. 485-488 applied (with modifications) (1.10.2008) by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 (S.I. 2008/1911), reg. 36; (as amended: (with effect in accordance with reg. 2(5)(a) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 3 para. 11 (with reg. 2(6)(7)); and (with effect for financial years beginning on or after 6.4.2021) by The European Grouping of Territorial Cooperation and Limited Liability Partnerships etc. (Revocations and Amendments) (EU Exit) Regulations 2021 (S.I. 2021/153), regs. 1, 18)

C3 S. 485 applied (with modifications) (6.4.2008) by The Insurance Accounts Directive (Miscellaneous Insurance Undertakings) Regulations 2008 (S.I. 2008/565), reg. 6(1)(2)(4)

C4 S. 485 applied (with modifications) (6.4.2008) by The Bank Accounts Directive (Miscellaneous Banks) Regulations 2008 (S.I. 2008/567), reg. {7(1)}, Sch. para. 1 (with Sch. para. 11)

C5 Ss. 484-539 applied (with modifications) (1.10.2009) by The Unregistered Companies Regulations 2009 (S.I. 2009/2436), regs. 3-5, Sch. 1 para. 11 (with transitional provisions and savings in regs. 7, 9, Sch. 2)

C6 S. 485 applied (with modifications) by S.I. 2008/565, reg. 6(1)(1A) (as substituted (with effect in accordance with reg. 2(4) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 2 para. 6(a) (with reg. 2(6)(7)))

Commencement Information

I1 S. 485 wholly in force at 1.10.2007; s. 485 not in force at Royal Assent see s. 1300; s. 485 in force at 1.10.2007 by S.I. 2007/2194, art. 2(1)(h) (with savings in art. 12 and subject to transitional adaptations specified in Sch. 1 and with transitional provisions and savings in Sch. 3)

[F2 485A Appointment of auditors of private company: additional requirements for public interest entities with audit committees U.K.

(1) This section applies to the appointment under section 485(4) of an auditor or auditors of a private 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 F3 ...

(4) Before the audit committee makes a recommendation or the directors make a proposal under subsection (3), the committee F4 ... must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation , unless the company is a small or medium sized enterprise within the meaning in Article 2(1)(f) of Directive 2003/71/EC .

(5) The audit committee must in its recommendation—

(a) identify its first and second choice candidates for appointment, [F5 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.

[F6 (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

F2 Ss. 485A, 485B 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. 4 (with reg. 1(12))

F3 Words in s. 485A(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(2)(a)

F4 Words in s. 485A(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(2)(b)

F5 Words in s. 485A(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(2)(c)

F6 S. 485A(6)(7) substituted for s. 485A(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(2)(d)

Modifications etc. (not altering text)

C7 S. 485A applied (with modifications) by S.I. 2008/565, reg. 6(1)(1A) (as substituted (with effect in accordance with reg. 2(4) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 2 para. 6(a) (with reg. 2(6)(7)))

485B Appointment of auditors of private company: additional requirements for public interest entities without audit committees U.K.

(1) This section applies to the appointment under section 485(4) of an auditor or auditors of a private 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), they must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation , [F7 from which their proposed auditor or auditors must be drawn,] unless the company is a small or medium sized enterprise within the meaning in Article 2(1)(f) of Directive 2003/71/EC .

[F8 (5) Subsection (4) does not apply in relation to a proposal to re-appoint the company’s existing auditor or auditors.]]

Textual Amendments

F2 Ss. 485A, 485B 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. 4 (with reg. 1(12))

F7 Words in s. 485B(4) 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(3)(a)

F8 S. 485B(5) substituted for s. 485B(5)-(7) (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(3)(b)

Modifications etc. (not altering text)

C8 S. 485B applied (with modifications) by S.I. 2008/565, reg. 6(1)(1A) (as substituted (with effect in accordance with reg. 2(4) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 2 para. 6(a) (with reg. 2(6)(7)))

[F9 485C. Restriction on appointment of auditor of private company which is a public interest entity U.K.

(1) A person who has been, or will have been, auditor of a private company which is a public interest entity for every financial year comprised in the maximum engagement period (see section 494ZA) may not be appointed as auditor of the company for any financial year which begins within the period of 4 years beginning with the day after the last day of the last financial year of the maximum engagement period.

(2) A person who is a member of the same network as the auditor mentioned in subsection (1) may not be appointed as auditor of the company for any financial year which begins within the period of 4 years mentioned in that subsection.

(3) This section does not apply in relation to an Auditor General.]

Textual Amendments

F9 S. 485C 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(4)

Modifications etc. (not altering text)

C9 S. 485C applied (with modifications) by S.I. 2008/565, reg. 6(1)(1A) (as substituted (with effect in accordance with reg. 2(4) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 2 para. 6(a) (with reg. 2(6)(7)))

486 Appointment of auditors of private company: default power of Secretary of State U.K.

(1) If a private company fails to appoint an auditor or auditors in accordance with section 485F10 ... the Secretary of State may appoint one or more persons to fill the vacancy.

(2) Where subsection (2) of [F11 section 485] applies and the company fails to make the necessary appointment before the end of the period for appointing auditors, the company must within one week of the end of that period give notice to the Secretary of State of his power having become exercisable.

(3) If a company fails to give the notice required by this section, an offence is committed by—

(a) the company, and

(b) every officer of the company who is in default.

(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Textual Amendments

F10 Words in s. 486(1) omitted (with effect in accordance with reg. 2(3) of the amending S.I.) by virtue of The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 1 para. 15 (with reg. 2(6)(7))

F11 Words in s. 486(2) substituted (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(5)

Modifications etc. (not altering text)

C10 Ss. 485-488 applied (with modifications) (6.4.2008) by The Bank Accounts Directive (Miscellaneous Banks) Regulations 2008 (S.I. 2008/567), reg. 4, Sch. para. 9

C11 Ss. 485-488 applied (with modifications) (1.10.2008) by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 (S.I. 2008/1911), reg. 36; (as amended (with effect in accordance with reg. 2(5)(a) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 3 para. 11 (with reg. 2(6)(7))

C12 S. 486 applied (with modifications) (6.4.2008) by The Insurance Accounts Directive (Miscellaneous Insurance Undertakings) Regulations 2008 (S.I. 2008/565), reg. 6(1)(2)(4)

C13 S. 486 applied (with modifications) (6.4.2008) by The Bank Accounts Directive (Miscellaneous Banks) Regulations 2008 (S.I. 2008/567), reg. 7(1), Sch. para. 1 (with Sch. para. 11)

C14 Ss. 484-539 applied (with modifications) (1.10.2009) by The Unregistered Companies Regulations 2009 (S.I. 2009/2436), regs. 3-5, Sch. 1 para. 11 (with transitional provisions and savings in regs. 7, 9, Sch. 2)

C15 S. 486 applied (with modifications) by S.I. 2008/565, reg. 6(1)(1A) (as substituted (with effect in accordance with reg. 2(4) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 2 para. 6(a) (with reg. 2(6)(7)))

Commencement Information

I2 S. 486 wholly in force at 1.10.2007; s. 486 not in force at Royal Assent see s. 1300; s. 486 in force at 1.10.2007 by S.I. 2007/2194, art. 2(1)(h) (with savings in art. 12 and subject to transitional adaptations specified in Sch. 1 and with transitional provisions and savings in Sch. 3)

[F12 486A. Defective appointments: default power of Secretary of State U.K.

(1) If—

(a) a private company appoints, or purports to appoint, an auditor or auditors, and

(b) the appointment or purported appointment is made in breach of section 485A, 485B or 485C (requirements applying to appointment of auditors by public interest entities),

the Secretary of State may appoint another auditor or auditors in place of the auditor or auditors referred to in paragraph (a).

(2) The breach of section 485A, 485B or 485C does not invalidate any report made under Chapter 3 of this Part by the auditor or auditors on the company’s annual reports or accounts before the auditor or auditors are replaced under subsection (1) of this section.

(3) But where the breach in question is a breach of section 485C, sections 1248 and 1249 (Secretary of State’s power to require second audit) apply as if the auditor was not an appropriate person, or the auditors were not appropriate persons, for the period during which the audit was conducted.

(4) Within one week of becoming aware of the breach of section 485A, 485B or 485C, the company must give notice to the Secretary of State that the power under subsection (1) of this section has become exercisable.

(5) If the company fails to give the notice required by subsection (4), an offence is committed by—

(a) the company, and

(b) every officer of the company who is in default.

(6) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.]

Textual Amendments

F12 S. 486A inserted (with effect in accordance with reg. 2(3) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 1 para. 16 (with reg. 2(6)(7))

Modifications etc. (not altering text)

C16 S. 486A applied (with modifications) by S.I. 2008/565, reg. 6(1)(1A) (as substituted (with effect in accordance with reg. 2(4) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 2 para. 6(a) (with reg. 2(6)(7)))

487 Term of office of auditors of private company U.K.

(1) An auditor or auditors of a private company hold office in accordance with the terms of their appointment, subject to the requirements that—

(a) they do not take office until any previous auditor or auditors cease to hold office, and

(b) they cease to hold office at the end of the next period for appointing auditors unless re-appointed.

F13 (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F13 (1B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F13 (1C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F13 (1D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F13 (1E) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Where no auditor has been appointed by the end of the next period for appointing auditors, any auditor in office immediately before that time is deemed to be re-appointed at that time, unless—

(a) he was appointed by the directors, or

(b) the company's articles require actual re-appointment, or

(c) the deemed re-appointment is prevented by the members under section 488, or

(d) the members have resolved that he should not be re-appointed, or

(e) the directors have resolved that no auditor or auditors should be appointed for the financial year in question or

[F14 (f) the auditor’s appointment would be in breach of section 485C.]

(3) This is without prejudice to the provisions of this Part as to removal and resignation of auditors.

(4) No account shall be taken of any loss of the opportunity of deemed re-appointment under this section in ascertaining the amount of any compensation or damages payable to an auditor on his ceasing to hold office for any reason.

Textual Amendments

F13 S. 487(1A)-(1E) 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(6)(a)

F14 S. 487(2)(f) substituted (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(6)(b)

Modifications etc. (not altering text)

C17 Ss. 485-488 applied (with modifications) (6.4.2008) by The Bank Accounts Directive (Miscellaneous Banks) Regulations 2008 (S.I. 2008/567), reg. 4, Sch. para. 9

C18 Ss. 485-488 applied (with modifications) (1.10.2008) by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 (S.I. 2008/1911), reg. 36; (as amended (with effect in accordance with reg. 2(5)(a) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 3 para. 11 (with reg. 2(6)(7))

C19 S. 487 applied (with modifications) (6.4.2008) by The Insurance Accounts Directive (Miscellaneous Insurance Undertakings) Regulations 2008 (S.I. 2008/565), reg. 6(1)(2)(4)

C20 S. 487 applied (with modifications) (6.4.2008) by The Bank Accounts Directive (Miscellaneous Banks) Regulations 2008 (S.I. 2008/567), reg. 7(1), Sch. para. 1 (with Sch. para. 11)

C21 Ss. 484-539 applied (with modifications) (1.10.2009) by The Unregistered Companies Regulations 2009 (S.I. 2009/2436), regs. 3-5, Sch. 1 para. 11 (with transitional provisions and savings in regs. 7, 9, Sch. 2)

C22 S. 487 applied (with modifications) by S.I. 2008/565, reg. 6(1)(1A) (as substituted (with effect in accordance with reg. 2(4) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 2 para. 6(a) (with reg. 2(6)(7)))

Commencement Information

I3 S. 487 wholly in force at 1.10.2007; s. 487 not in force at Royal Assent see s. 1300; s. 487 in force at 1.10.2007 by S.I. 2007/2194, art. 2(1)(h) (with savings in art. 12 and subject to transitional adaptations specified in Sch. 1 and with transitional provisions and savings in Sch. 3)

F15 487A Maximum engagement period: transitional arrangements U.K.

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

Textual Amendments

F15 S. 487A 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(7)

488 Prevention by members of deemed re-appointment of auditor U.K.

(1) An auditor of a private company is not deemed to be re-appointed under section 487(2) if the company has received notices under this section from members representing at least the requisite percentage of the total voting rights of all members who would be entitled to vote on a resolution that the auditor should not be re-appointed.

(2) The “requisite percentage” is 5%, or such lower percentage as is specified for this purpose in the company's articles.

(3) A notice under this section—

(a) may be in hard copy or electronic form,

(b) must be authenticated by the person or persons giving it, and

(c) must be received by the company before the end of the accounting reference period immediately preceding the time when the deemed re-appointment would have effect.

Modifications etc. (not altering text)

C23 Ss. 485-488 applied (with modifications) (6.4.2008) by The Bank Accounts Directive (Miscellaneous Banks) Regulations 2008 (S.I. 2008/567), reg. 4, Sch. para. 9

C24 Ss. 485-488 applied (with modifications) (1.10.2008) by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 (S.I. 2008/1911), reg. 36; (as amended (with effect in accordance with reg. 2(5)(a) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 3 para. 11 (with reg. 2(6)(7))

C25 S. 488 applied (with modifications) (6.4.2008) by The Insurance Accounts Directive (Miscellaneous Insurance Undertakings) Regulations 2008 (S.I. 2008/565), reg. 6(1)(2)(4)

C26 S. 488 applied (with modifications) (6.4.2008) by The Bank Accounts Directive (Miscellaneous Banks) Regulations 2008 (S.I. 2008/567), reg. 7(1), Sch. para. 1 (with Sch. para. 11)

C27 Ss. 484-539 applied (with modifications) (1.10.2009) by The Unregistered Companies Regulations 2009 (S.I. 2009/2436), regs. 3-5, Sch. 1 para. 11 (with transitional provisions and savings in regs. 7, 9, Sch. 2)

C28 S. 488 applied (with modifications) by S.I. 2008/565, reg. 6(1)(1A) (as substituted (with effect in accordance with reg. 2(4) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 2 para. 6(a) (with reg. 2(6)(7)))

Commencement Information

I4 S. 488 wholly in force at 1.10.2007; s. 488 not in force at Royal Assent see s. 1300; s. 488 in force at 1.10.2007 by S.I. 2007/2194, art. 2(1)(h) (with savings in art. 12 and subject to transitional adaptations specified in Sch. 1 and with transitional provisions and savings in Sch. 3)