Companies Act 2006 – Sections 482 and 483
Sections 482 and 483: Companies subject to public sector audit
728. These two sections, the only wholly new provisions in this Chapter, are intended to
ensure that certain non-commercial, public sector bodies constituted as companies that are
audited by a public sector auditor are not required to be audited under the Act.
729. Section 482 exempts from Companies Act audit any non-departmental public body
that is a company and is non-profit-making, if it is subject to public sector audit.
730. A UK body may be subject to public sector audit by virtue of an order under the
Government Resources and Accounts Act 2000 The body in question will then be audited by
the National Audit Office on behalf of the UK Comptroller and Auditor General. Under the
Audit and Accountability (Northern Ireland) Order 2003, an order can make a body subject to
audit by the Comptroller and Auditor General for Northern Ireland. Alternatively, a body
may be subject to audit by the Auditor General for Wales under section 96 of the Government
of Wales Act 1998, or an order under section 144 of that Act.
731. Some Scottish bodies are subject to public sector audit by the Auditor General for
Scotland (AGS) under the Public Finance and Accountability (Scotland) Act 2000.
732. The companies exempted by this section are not subject to the Fourth Company Law
Directive: the Directive is based on Article 44(2)(g) of the EC Treaty (formerly 54(3)(g) of
the EEC Treaty), and Article 48 of the Treaty excludes from the scope of Article 44
undertakings that are non-profit-making. That is why subsection (3) gives “non-profitmaking”
the same meaning as in the Treaty.
733. Subsection (2) provides that a group company can benefit from this exemption only if
every company in the group is non-profit-making. The effect of subsection (4) is that the
exemption is not available unless the balance sheet contains a statement that the company is
entitled to it.
734. Section 483 confers a new power on Scottish Ministers to provide that a company
should have its accounts audited by the Auditor General for Scotland (AGS). This is available
for companies depending on their functions or their funding. The Scottish Ministers can
designate a company under this power if its functions are public functions that are all covered
by the Scottish Parliament’s responsibilities, or if the company receives all or most of its
funding from a public body already audited by the AGS. In the latter case, the funding body
may be audited by the AGS because it is covered by the Public Finance and Accountability
(Scotland) Act 2000, or because it is itself a company that Scottish Ministers have made
auditable by the AGS by a previous order under this section.
735. If an order is made under this section providing that a company should have a public
sector audit by the AGS, and if that company is non-profit-making, then it will benefit from
the exemption from audit in the preceding section.
Section 484: General power of amendment by regulations
736. This section provides a power for the Secretary of State to amend the provisions of
this Chapter. Taken together with section 468, it broadly restates the power in section 257 of
the 1985 Act. Subsection (2) enables the regulations to make consequential changes to other
legislation. The power is subject to affirmative resolution if it is extending the requirement
for audit, or otherwise making requirements more onerous; and to negative resolution
otherwise.
CHAPTER 2: APPOINTMENT OF AUDITORS
737. This Chapter broadly restates the existing law in sections 384 to 388A of the 1985 Act
on the way in which shareholders appoint a company’s auditors, with some minor changes
(as explained below). The provisions are reorganised to deal with private and public
companies separately. The Chapter also restates the rules in sections 390A and 390B of the
1985 Act on auditors’ remuneration and the disclosure required of services provided by
auditors and introduces a new power for the Secretary of State to require disclosure of the
terms of audit appointments.
Private companies
738. Sections 485 to 488 restate the law on appointment of auditors of private companies,
providing that auditors are generally to be appointed by shareholders by ordinary resolution.
For any financial year other than the first, this will generally be done within 28 days of the
circulation to a company’s shareholders of the accounts for the previous year.
739. There are two changes: firstly, an auditor’s term of office will typically run from the
end of the 28 day period following circulation of the accounts until the end of the
corresponding period the following year. This will apply even if the auditor is appointed at a
meeting where the company’s accounts are laid. The second change is that an auditor is now
deemed to be re-appointed unless the company decides otherwise.
Section 485: Appointment of auditors of private company: general
740. This section provides for a private company’s obligation to appoint an auditor, unless
it is taking advantage of an exemption from audit. The appointment is to be made by the
shareholders by ordinary resolution, except that the directors can appoint the company’s first
auditor (or the first after a period of audit exemption), and can fill a casual vacancy.
Section 486: Appointment of auditors of private company: default power of Secretary of
State
741. This section requires a company to inform the Secretary of State if it has failed to
appoint an auditor within 28 days of circulation of its accounts. The Secretary of State has
power to appoint an auditor in those circumstances.
Section 487: Term of office of auditors of private company
742. This section provides that the end of the term of office of the auditor of a private
company is to be the end of the next period for appointing auditors. At the end of his term an
auditor will automatically be deemed to be re-appointed except in five cases:
• if he was appointed by the directors;
• if the company’s articles require actual re-appointment;
• if enough members have given notice to the company under section 488;
• if there has been a resolution that the auditor should not be reappointed; or
• if the directors decide that they do not need auditors for the following year.
743. When there is a change of auditor the term of office of the incoming auditor does not
begin before the end of the previous auditor’s term. This means that a new auditor’s term will
typically begin immediately after the end of the 28-day period for appointing auditors.
Section 488: Prevention by members of deemed re-appointment of auditor
744. This section enables members with at least 5% of the voting rights in a private
company to prevent an auditor being automatically re-appointed by giving notice to the
company. The company’s articles can enable members to do this with less than 5% of the
voting rights, but cannot increase the required percentage.
745. Subsection (3) provides that the deadline for a notice preventing the deemed
reappointment of an auditor is the end of the financial year for the accounts he is auditing.
Public companies
746. Sections 489 to 491 restate the law on appointment of auditors of public companies,
providing that auditors are generally to be appointed by shareholders by ordinary resolution
in the general meeting before which the company’s accounts are laid.
Section 489: Appointment of auditors of public company: general
747. This section restates a public company’s obligation to appoint auditors, unless it is
taking advantage of exemption from audit. This is to be done by the shareholders by ordinary
resolution, normally at the general meeting at which the accounts are laid. The directors can
appoint the company’s first auditors (or the first after a period of audit exemption), and can
fill a casual vacancy.
Section 490: Appointment of auditors of public company: default power of Secretary of
State
748. This section restates the obligation of a company to inform the Secretary of State if it
has failed to appoint an auditor at the general meeting that considers the previous year’s
accounts. The Secretary of State has power to appoint an auditor in those circumstances.