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Companies Act 2006

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Companies Act 2006, Cross Heading: Liability limitation agreements is up to date with all changes known to be in force on or before 22 October 2017. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations. Help about Changes to Legislation

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  • Act amendment to earlier affecting provision S.I. 2008/373 reg. 11(1) by S.I. 2013/1971 reg. 9(a) (This amendment not applied to legislation.gov.uk. Amending Regulations revoked (1.10.2013) without ever being in force by S.I. 2013/2224, reg. 2)
  • Act amendment to earlier affecting provision S.I. 2008/373 reg. 3(4) by S.I. 2013/1971 reg. 4 (This amendment not applied to legislation.gov.uk. Amending Regulations revoked (1.10.2013) without ever being in force by S.I. 2013/2224, reg. 2)

Whole provisions yet to be inserted into this Act (including any effects on those provisions):

Liability limitation agreementsE+W+S+N.I.

534Liability limitation agreementsE+W+S+N.I.

(1)A “liability limitation agreement” is an agreement that purports to limit the amount of a liability owed to a company by its auditor in respect of any negligence, default, breach of duty or breach of trust, occurring in the course of the audit of accounts, of which the auditor may be guilty in relation to the company.

(2)Section 532 (general voidness of provisions protecting auditors from liability) does not affect the validity of a liability limitation agreement that—

(a)complies with section 535 (terms of liability limitation agreement) and of any regulations under that section, and

(b)is authorised by the members of the company (see section 536).

(3)Such an agreement—

(a)is effective to the extent provided by section 537, and

(b)is not subject—

(i)in England and Wales or Northern Ireland, to section 2(2) or 3(2)(a) of the Unfair Contract Terms Act 1977 (c. 50);

(ii)in Scotland, to section 16(1)(b) or 17(1)(a) of that Act.

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Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Modifications etc. (not altering text)

C1Ss. 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)

535Terms of liability limitation agreementE+W+S+N.I.

(1)A liability limitation agreement—

(a)must not apply in respect of acts or omissions occurring in the course of the audit of accounts for more than one financial year, and

(b)must specify the financial year in relation to which it applies.

(2)The Secretary of State may by regulations—

(a)require liability limitation agreements to contain specified provisions or provisions of a specified description;

(b)prohibit liability limitation agreements from containing specified provisions or provisions of a specified description.

“Specified” here means specified in the regulations.

(3)Without prejudice to the generality of the power conferred by subsection (2), that power may be exercised with a view to preventing adverse effects on competition.

(4)Subject to the preceding provisions of this section, it is immaterial how a liability limitation agreement is framed.

In particular, the limit on the amount of the auditor's liability need not be a sum of money, or a formula, specified in the agreement.

(5)Regulations under this section are subject to negative resolution procedure.

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Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Modifications etc. (not altering text)

C2Ss. 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

I1S. 535 wholly in force at 6.4.2008; s. 535 not in force at Royal Assent, see s. 1300; s. 535 in force for specified purposes at 20.1.2007 by S.I. 2006/3428, art. 3(3) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5); s. 535 in force at 6.4.2008 by S.I. 2007/3495, art. 3(1)(d) (with arts. 7, 12, Sch. 4 paras. 9-19)

536Authorisation of agreement by members of the companyE+W+S+N.I.

(1)A liability limitation agreement is authorised by the members of the company if it has been authorised under this section and that authorisation has not been withdrawn.

(2)A liability limitation agreement between a private company and its auditor may be authorised—

(a)by the company passing a resolution, before it enters into the agreement, waiving the need for approval,

(b)by the company passing a resolution, before it enters into the agreement, approving the agreement's principal terms, or

(c)by the company passing a resolution, after it enters into the agreement, approving the agreement.

(3)A liability limitation agreement between a public company and its auditor may be authorised—

(a)by the company passing a resolution in general meeting, before it enters into the agreement, approving the agreement's principal terms, or

(b)by the company passing a resolution in general meeting, after it enters into the agreement, approving the agreement.

(4)The “principal terms” of an agreement are terms specifying, or relevant to the determination of—

(a)the kind (or kinds) of acts or omissions covered,

(b)the financial year to which the agreement relates, or

(c)the limit to which the auditor's liability is subject.

(5)Authorisation under this section may be withdrawn by the company passing an ordinary resolution to that effect—

(a)at any time before the company enters into the agreement, or

(b)if the company has already entered into the agreement, before the beginning of the financial year to which the agreement relates.

Paragraph (b) has effect notwithstanding anything in the agreement.

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Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Modifications etc. (not altering text)

C3Ss. 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)

537Effect of liability limitation agreementE+W+S+N.I.

(1)A liability limitation agreement is not effective to limit the auditor's liability to less than such amount as is fair and reasonable in all the circumstances of the case having regard (in particular) to—

(a)the auditor's responsibilities under this Part,

(b)the nature and purpose of the auditor's contractual obligations to the company, and

(c)the professional standards expected of him.

(2)A liability limitation agreement that purports to limit the auditor's liability to less than the amount mentioned in subsection (1) shall have effect as if it limited his liability to that amount.

(3)In determining what is fair and reasonable in all the circumstances of the case no account is to be taken of—

(a)matters arising after the loss or damage in question has been incurred, or

(b)matters (whenever arising) affecting the possibility of recovering compensation from other persons liable in respect of the same loss or damage.

Annotations: Help about Annotation
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Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Modifications etc. (not altering text)

C4Ss. 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)

538Disclosure of agreement by companyE+W+S+N.I.

(1)A company which has entered into a liability limitation agreement must make such disclosure in connection with the agreement as the Secretary of State may require by regulations.

(2)The regulations may provide, in particular, that any disclosure required by the regulations shall be made—

(a)in a note to the company's annual accounts (in the case of its individual accounts) or in such manner as is specified in the regulations (in the case of group accounts), or

(b)in the directors' report.

(3)Regulations under this section are subject to negative resolution procedure.

Annotations: Help about Annotation
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Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Modifications etc. (not altering text)

C5Ss. 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

I2S. 538 wholly in force at 6.4.2008; s. 538 not in force at Royal Assent, see s. 1300; s. 538 in force for specified purposes at 20.1.2007 by S.I. 2006/3428, art. 3(3) (subject to art. 5, Sch. 1 and with arts. 6, 8, Sch. 5); s. 538 in force at 6.4.2008 by S.I. 2007/3495, art. 3(1)(d) (with arts. 7, 12, Sch. 4 paras. 9-19)

[F1 538A Meaning of “corporate governance statement” etc E+W+S+N.I.

(1) In this Part “ corporate governance statement ” means the statement required by rules 7.2.1 to 7.2.11 in the Disclosure Rules and Transparency Rules sourcebook [F2 made by the Financial Conduct Authority ] .

F3( 2 ). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3)A “separate” corporate governance statement means one that is not included in the directors' report.]

Annotations: Help about Annotation
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Annotations are used to give authority for changes and other effects on the legislation you are viewing and to convey editorial information. They appear at the foot of the relevant provision or under the associated heading. Annotations are categorised by annotation type, such as F-notes for textual amendments and I-notes for commencement information (a full list can be found in the Editorial Practice Guide). Each annotation is identified by a sequential reference number. For F-notes, M-notes and X-notes, the number also appears in bold superscript at the relevant location in the text. All annotations contain links to the affecting legislation.

Amendments (Textual)

Modifications etc. (not altering text)

C6Ss. 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)

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