Companies Act 1989

123 Statement by person ceasing to hold office as auditor

(1) The following section is inserted in Chapter V of Part XI of the [1985 c. 6.] Companies Act 1985 (auditors)—

“394 Statement by person ceasing to hold office as auditor

(1) Where an auditor ceases for any reason to hold office, he shall deposit at the company’s registered office a statement of any circumstances connected with his ceasing to hold office which he considers should be brought to the attention of the members or creditors of the company or, if he considers that there are no such circumstances, a statement that there are none.

(2) In the case of resignation, the statement shall be deposited along with the notice of resignation; in the case of failure to seek re-appointment, the statement shall be deposited not less than 14 days before the end of the time allowed for next appointing auditors; in any other case, the statement shall be deposited not later than the end of the period of 14 days beginning with the date on which he ceases to hold office.

(3) If the statement is of circumstances which the auditor considers should be brought to the attention of the members or creditors of the company, the company shall within 14 days of the deposit of the statement either—

(a) send a copy of it to every person who under section 238 is entitled to be sent copies of the accounts, or

(b) apply to the court.

(4) The company shall if it applies to the court notify the auditor of the application.

(5) Unless the auditor receives notice of such an application before the end of the period of 21 days beginning with the day on which he deposited the statement, he shall within a further seven days send a copy of the statement to the registrar.

(6) If the court is satisfied that the auditor is using the statement to secure needless publicity for defamatory matter—

(a) it shall direct that copies of the statement need not be sent out, and

(b) it may further order the company’s costs on the application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application;

and the company shall within 14 days of the court’s decision send to the persons mentioned in subsection (3)(a) a statement setting out the effect of the order.

(7) If the court is not so satisfied, the company shall within 14 days of the court’s decision—

(a) send copies of the statement to the persons mentioned in subsection (3)(a), and

(b) notify the auditor of the court’s decision;

and the auditor shall within seven days of receiving such notice send a copy of the statement to the registrar.

394A Offences of failing to comply with s.394

(1) If a person ceasing to hold office as auditor fails to comply with section 394 he is guilty of an offence and liable to a fine.

(2) In proceedings for an offence under subsection (1) it is a defence for the person charged to show that he took all reasonable steps and exercised all due diligence to avoid the commission of the offence.

(3) Sections 733 (liability of individuals for corporate default) and 734 (criminal proceedings against unincorporated bodies) apply to an offence under subsection (1).

(4) If a company makes default in complying with section 394, the company and every officer of it who is in default is guilty of an offence and liable to a fine and, for continued contravention, to a daily default fine.”.

(2) In Schedule 24 to the [1985 c. 65.] Companies Act 1985 (punishment of offences), at the appropriate place insert—

“394A(1)	Person ceasing to hold office as auditor failing to deposit statement as to circumstances.	1. On indictment. 2. Summary.	A fine. The statutory maximum.
394A(4)	Company failing to comply with requirements as to statement of person ceasing to hold office as auditor.	1. On indictment. 2. Summary.	A fine. The statutory maximum.	One-tenth of the statutory maximum.”

(3) In section 733 of the [1985 c. 6.] Companies Act 1985 (liability of individuals for corporate default), in subsection (1) (offences in relation to which provisions apply) after “216(3)” insert “, 394A(1)”.

(4) In section 734 of the [1985 c. 6.] Companies Act 1985 (criminal proceedings against unincorporated bodies), in subsection (1) (offences in relation to which the provisions apply), after “under” insert “section 394A(1) or”.

(5) In Schedule 22 to the [1985 c. 6.] Companies Act 1985 (unregistered companies), in the entry for sections 384 to 393, for “393” substitute “394A”.