Companies (Audit, Investigations and Community Enterprise) Act 2004 Explanatory Notes

Delegation of Secretary of State's functions in relation to auditors
Sections 3 to 5 - Delegation of functions by Secretary of State to new or existing body; circumstances in which Secretary of State may delegate functions to existing body; supplementary provisions about delegation orders

25.Section 46 of the Companies Act 1989 empowers the Secretary of State to establish a body corporate to exercise her powers relating to company auditors and the recognition of bodies which supervise auditors and/or provide a professional qualification; and Schedule 13 sets out a number of supplementary provisions relating to the delegation of those functions.  But section 46 does not allow the Secretary of State to delegate her functions to anyone other than a body corporate actually established by the delegation order.  The policy of the Government is that the functions should be delegated to the POBA, which has been set up within the FRC structure. To achieve this policy aim, these sections enable the powers to be delegated to a body other than one created by the delegation order.

26.Section 3 amends section 46 of the Companies Act 1989 to allow the Secretary of State to delegate her functions not only to a body created by delegation order under section 46 but also to an existing body - which can be either a body corporate or an unincorporated association -  provided certain requirements are satisfied.

27.Section 4 inserts a new section 46A into the Companies Act 1989. The new section sets out the circumstances in which the Secretary of State may delegate functions to an existing body.  New subsection (2) provides that the body to whom the functions are to be delegated must be willing and able to exercise the functions and must meet certain other conditions set out in new subsection (3).  New subsection (5) deals with the case of a body that has (non-statutory) functions relating to arrangements in which recognised supervisory bodies may participate in order to meet the new criteria for recognition introduced by sections 1 and 2. Under this subsection, such a body may also exercise the delegated functions of the Secretary of State. The aim of this provision is to ensure that the POBA (which is expected to be the body to be designated by the first delegation order, provided it fulfils the requirements for designation) is not precluded from exercising any delegated function (for example, recognition of a supervisory body) on the basis of its involvement with the monitoring, investigation or disciplinary arrangements set out in section 2.

28.Section 5 amends Schedule 13 to the Companies Act 1989 to reflect the extension of the delegation power in amended section 46.  Essentially, this section specifies which provisions in Schedule 13 apply to a body created by the delegation order and which apply to an existing body.  Subsection (5) provides that where the body is an unincorporated association (as the POBA will be), any proceedings brought in connection with the exercise of the delegated functions by the body may be brought in the name of the body corporate whose constitution provides for the establishment of the association - this would be the POBA Ltd.

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