Companies Act 2006

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.

[F1 (1A) The terms of appointment of an auditor or auditors of a private company which is also a public interest entity are subject to the additional requirement that the auditor or auditors cease to hold office on the expiry of the period for appointing auditors in respect of the first complete financial year that follows the expiry of the maximum engagement period.

(1B) But subsection (1A) does not apply to an Auditor General.

(1C) In this section—

• “the maximum engagement period” means, subject to subsection (1D) and section 487A (which makes transitional provision in relation to auditors appointed before 17th June 2016), whichever of the following periods is longest—

  (a)

  the period of ten years beginning with the first day of the first financial year 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 that period, 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;

• “the relevant ten year period” means the period of ten years beginning with the first day of the last financial year—

  (a)

  which begins within ten years of the first day of the first financial year in respect of which the auditor was appointed, and

  (b)

  in respect of which the auditor was reappointed following the carrying out of a selection procedure in accordance with the selection requirements; and

• “the selection requirements” means—

  (a)

  the requirements of section 485A(4) and (5) if the company has an audit committee, or

  (b)

  the requirements of section 485B(4) if the company does not have an audit committee.

(1D) 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 within paragraph (a) of the definition of “the maximum engagement period” 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.

(1E) An auditor is ineligible for appointment as auditor of a private company which is also a public interest entity if—

(a) within the four years preceding the start of the financial year to which that appointment relates the auditor has ceased by virtue of subsection (1A) to hold office as auditor of that company, or

(b) the auditor is a member of the same network as an auditor who within the four years preceding the start of the financial year to which that appointment relates has ceased by virtue of that subsection to hold office as auditor of that company.]

(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 [F2 or

(f) the auditor has ceased to hold office by virtue of subsection (1A).]

(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

F1 S. 487(1A)-(1E) 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. 6(2) (with reg. 1(12))

F2 S. 487(2)(f) and word 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. 6(3) (with reg. 1(12))

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

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))

C3 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)

C4 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)

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)

Commencement Information

I1 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)