11/13/2021

CONTENTS

1. The Company Secretary

2. The Company Auditor

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The company secretary

Every public company must have a company secretary, who is one of the officers of a
company and may be a director.
SECRETARY
COMPANY

Private companies are not required to have a secretary.

In this case the roles normally done by the company secretary may be done by one of
the directors, or an approved person.

The secretary of state may require a public company to appoint a secretary where it has
failed to do so.

Appointment of a company secretary

To be appointed as a company secretary to a plc, the directors must ensure that the
candidate should be qualified by virtue of:
SECRETARY
COMPANY

• Employment as a plc's secretary for three out of the five years preceding
appointment
• Membership of one of a list of qualifying bodies: the ACCA, CIMA, ICAEW, ICAS, ICAI
or CIPFA
• Qualification as a solicitor, barrister or advocate within the UK
• Employment in a position or membership of a professional body that, in the opinion
of the directors, appears to qualify that person to act as company secretary

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They should also have the 'necessary knowledge and experience' as deemed by the
directors.
SECRETARY
COMPANY

A sole director of a private company cannot also be the company secretary, but a
company can have two or more joint secretaries.

A corporation can fulfil the role of company secretary.

A register of secretaries must be kept.

Under UK Corporate Governance guidelines the appointment of the company secretary

is a matter for the board as a whole.

Duties of a company secretary

The specific duties of each company secretary are determined by the directors of the
company.
SECRETARY
COMPANY

As a company officer, the company secretary is responsible for ensuring that the
company complies with its statutory obligations:
• Establishing and maintaining the company's statutory registers
• Filing accurate returns with the Registrar on time
• Organising and minuting company and board meetings
• Ensuring that accounting records meet statutory requirements
• Ensuring that annual accounts are prepared and filed in accordance with statutory
requirements
• Monitoring statutory requirements of the company
• Signing company documents as may be required by law

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Under UK Corporate Governance guidelines the company secretary should:

• Ensure good information flows within the board and its committees
SECRETARY
COMPANY

• Facilitate induction of board members and assist with professional development

• Advise the chairman and the board on all governance issues

Powers and authority of a company secretary

The powers of the company secretary have historically been very limited. However, the
common law increasingly recognises that they may be able to act as agents to exercise
SECRETARY
COMPANY

apparent or ostensible authority, therefore, they may enter the company into contracts
connected with the administrative side of the company.

Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd 1971

The facts: B, the secretary of a company, ordered cars from a car hire firm, representing
that they were required to meet the company's customers at London Airport. Instead
he used the cars for his own purposes. The bill was not paid, so the car hire firm
claimed payment from B's company.

Decision: B's company was liable, for he had apparent authority to make contracts such
as the present one, which were concerned with the administrative side of its business.
The decision recognises the general nature of a company secretary's duties.

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The company auditor

COMPANY AUDITOR

An audit is a check on the stewardship of the directors.

Every company (except a dormant private company and certain small companies) must
appoint auditors for each financial year.

Appointment
The first auditors may be appointed by the directors, to hold office until the first
general meeting at which their appointment is considered.

Subsequent auditors may not take office until the previous auditor has ceased to hold
office.

They will hold office until the end of the next financial period (private companies) or
the next accounts meeting (public companies) unless reappointed.
COMPANY AUDITOR

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Eligibility as auditor
COMPANY AUDITOR

Membership of a recognised supervisory body is the main prerequisite for eligibility as

an auditor.

An audit firm may be either a body corporate, a partnership or a sole practitioner.

The Act requires an auditor to hold an 'appropriate qualification’.

A person holds an 'appropriate qualification' if they:

• Have satisfied existing criteria for appointment as an auditor

• Hold a recognised qualification obtained in the UK
• Hold an approved overseas qualification

Ineligibility as auditor
COMPANY AUDITOR

Under the Companies Act 2006, a person may be ineligible on the grounds of 'lack of
independence’.

A person is ineligible for appointment as a company auditor if they are:

• An officer or employee of the company being audited

• A partner or employee of such a person

• A partnership in which such a person is a partner

• Ineligible by virtue of the above for appointment as auditor of any parent or

subsidiary undertaking where there exists a connection of any description as may be
specified in regulations laid down by Secretary of State

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Effect of lack of independence or ineligibility

COMPANY AUDITOR

No person may act as auditor if they lack independence or become ineligible.

If, during their term of office, an auditor loses their independence or eligibility they
must resign with immediate effect, and notify their client of their resignation giving the
reason.

A person continuing to act as auditor despite losing their independence or becoming

ineligible is liable to a fine.

However, it is a defence if they can prove they were not aware that they lost
independence or became ineligible.
COMPANY AUDITOR

The legislation does not disqualify the following from being an auditor of a limited
company:

• A shareholder of the company

• A debtor or creditor of the company

• A close relative of an officer or employee of the company

However, the regulations of the accountancy bodies applying to their own members
are stricter than statute in this respect.

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Reappointing an auditor of a private company

COMPANY AUDITOR

The rules on appointment make reference to a meeting where the accounts are laid.

This is not always relevant for private companies as under the Act they are not required
to hold an AGM or lay the accounts before the members.
COMPANY AUDITOR

Therefore auditors of private companies are deemed automatically reappointed

unless one of the following circumstances apply.

• The auditor was appointed by the directors (most likely when the first auditor was
appointed).

• The articles require formal reappointment.

• Members holding 5% of the voting rights serve notice that the auditor should not be
reappointed.

• A resolution (written or otherwise) has been passed that prevents reappointment.

• The directors have resolved that auditors should not be appointed for the
forthcoming year as the company is likely to be exempt from audit.

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Auditor remuneration
COMPANY AUDITOR

Whoever appoints the auditors has power to fix their remuneration for the period of
their appointment.

It is usual when the auditors are appointed by the general meeting to leave it to the
directors to fix their remuneration (by agreement at a later stage).

The auditors' remuneration must be disclosed in a note to the accounts.

Exemption from audit

COMPANY AUDITOR

Certain companies are exempt from audit, provided the following conditions are
fulfilled.

(a) A company is exempt from the annual audit requirement in a financial year if it
meets the criteria for being a small company (two from, turnover being less than
£10.2 million, balance sheet total not more than £5.1 million and having 50 or
fewer employees).

(b) The exemptions do not apply to public companies, banking or insurance companies
or those subject to a statute-based regulatory regime.

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COMPANY AUDITOR

c) The company is a non-commercial, non-profit-making public sector body, which is

subject to audit by a public sector auditor.

d) Members holding 10% or more of the capital of any company can veto the
exemption.

e) Dormant companies which qualify for exemption from an audit as a dormant

company.

Duties of auditors
COMPANY AUDITOR

The statutory duty of auditors is to report to the members whether the accounts give a
true and fair view and have been properly prepared in accordance with the Companies
Act.

They must also:

• State whether or not the directors' report is consistent with the accounts.

• For quoted companies, report to the members on the auditable part of the
directors’ remuneration report including whether or not it has been properly
prepared in accordance with the Act.

• Be signed by the auditor, stating their name, and date. Where the auditor is a firm,
the senior auditor must sign in their own name for, and on behalf, of the auditor.

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COMPANY AUDITOR

To fulfil their statutory duties, the auditors must carry out such investigations as are
necessary to form an opinion as to whether:
(a) Proper accounting records have been kept and proper returns adequate for the
audit have been received from branches.
(b) The accounts are in agreement with the accounting records.
(c) The information in the directors' remuneration report is consistent with the
accounts.

The auditors' report must be read before any general meeting at which the accounts
are considered and must be open to inspection by members. Auditors have to make
disclosure of other services rendered to the company and the remuneration received.
Where an auditor knowingly or recklessly causes their report to be materially
misleading, false or deceptive, they commit a criminal offence and may be liable to a
fine.

Rights of auditors
COMPANY AUDITOR

The Companies Act provides statutory rights for auditors to enable them to carry out
their duties.

The principal rights of auditors, excepting those dealing with resignation or removal,
are set out below, and the following are notes on more detailed points.

Access to records
A right of access at all times to the books, accounts and vouchers of the company.

Information and explanations

A right to require from the company's officers, employees or any other relevant person,
such information and explanations as they think necessary for the performance of their
duties as auditors.

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Attendance at/notices of general meetings

COMPANY AUDITOR

A right to attend any general meetings of the company and to receive all notices of and
communications relating to such meetings which any member of the company is
entitled to receive.

Right to speak at general meetings

A right to be heard at general meetings which they attend on any part of the business
that concerns them as auditors.

Rights in relation to written resolutions

A right to receive a copy of any written resolution proposed.
COMPANY AUDITOR

If auditors have not received all the information and explanations they consider
necessary, they should state this fact in their audit report.

The Act makes it an offence for a company's officer knowingly or recklessly to make a
statement in any form to an auditor which:

• Conveys or purports to convey any information or explanation required by the

auditor and
• Is materially misleading, false or deceptive

The penalty is a maximum of two years' imprisonment, a fine or both.

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Auditors' liability
COMPANY AUDITOR

Under the Companies Act any agreement between an auditor and a company that
seeks to indemnify the auditor for their own negligence, default, or breach of duty or
trust is void.

However, an agreement can be made which limits the auditor's liability to the
company.

Such liability limitation agreements can only stand for one financial year and must
therefore be replaced annually.

Liability can only be limited to what is fair and reasonable having regard to the
auditor's responsibilities, their contractual obligations and the professional standards
expected of them.
Such agreements must be approved by the members and publicly disclosed in the
accounts or directors’ report.

Termination of auditors' appointment

COMPANY AUDITOR

Auditors may leave office in the following ways: resignation; removal from office by an
ordinary resolution with special notice passed before the end of their term; failing to
offer themselves for reelection; and not being re-elected at the general meeting at
which their term expires.

Departure of auditors from office can occur in the following ways.

a) Auditors may resign their appointment by giving notice in writing to the company
delivered to the registered office.
b) Auditors may decline reappointment.
c) Auditors may be removed from office before the expiry of their appointment by the
passing of an ordinary resolution in general meeting. Special notice is required and
members and auditors must be notified. Private companies cannot remove an
auditor by written resolution; a meeting must be held.

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COMPANY AUDITOR

d) Auditors do not have to be reappointed when their term of office expires, although
in most cases they are. Special notice must be given of any resolution to appoint
auditors who were not appointed on the last occasion of the resolution, and the
members and auditor must be notified.

Where a private company resolves to appoint a replacement auditor by written

resolution, copies of the resolution must be sent to the proposed and outgoing auditor.

The outgoing auditor may circulate a statement of reasonable length to the members if
they notify the company within 14 days of receiving the copy of the written resolution.

Resignation of auditors
COMPANY AUDITOR

However auditors leave office they must either: state there are no circumstances which
should be brought to members' and creditors' attention; or list those circumstances.

Auditors who are resigning can also:

circulate a statement about their resignation to members; requisition a general
meeting; or speak at a general meeting.

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Procedures for resignation of auditors

COMPANY AUDITOR

Statement of circumstances
Auditors must deposit a statement at the registered office with their resignation stating:

• For quoted companies – the circumstances around their departure.

• For non-quoted public companies and all private companies – there are no
circumstances that the auditor believes should be brought to the attention of the
members or creditors.

• If there are such circumstances the statement should describe them.

• Statements should also be submitted to the appropriate audit authority.

Company action
COMPANY AUDITOR

• The company must send notice of the resignation to the Registrar.

• The company must send a copy of the statement of circumstances to every person
entitled to receive a copy of the accounts.

Auditor rights
If the auditors have deposited a statement of circumstances, they may:

• Circulate a statement of reasonable length to the members

• Requisition a general meeting to explain their reasons
• Attend and speak at any meeting where appointment of successors is to be
discussed.

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COMPANY AUDITOR

If the auditors decline to seek reappointment at an AGM, they must nevertheless fulfil
the requirements of a statement of the circumstances just as if they had resigned.

The reason for this provision is to prevent auditors who are unhappy with the
company's affairs keeping their suspicions secret.

The statement must be deposited not less than 14 days before the time allowed for
next appointing auditors.

Removal of the auditor from office

COMPANY AUDITOR

Procedures for removal from office

Auditor representations
If a resolution is proposed either to:
• Remove the auditors before their term of office expires or
• Change the auditors when their term of office is complete, the auditors have the
right to make representations of reasonable length to the company

Company action
The company must:
• Notify members in the notice of the meeting of the representations
• Send a copy of the representations in the notice
• If it is not sent out, the auditors can require it is read at the meeting

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Attendance at meeting
COMPANY AUDITOR

Auditors removed before expiry of their office may:

• Attend the meeting at which their office would have expired
• Attend any meeting at which the appointment of their successors is discussed

Statement of circumstances

If auditors are removed at a general meeting they must:

• Make a statement of circumstances for members and creditors

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