The Companies (Disclosure of Auditor Remuneration) Regulations 2005

Explanatory Note

(This note is not part of the Regulations)

These Regulations provide for companies to disclose fees receivable by their auditors and their auditors' associates.

Small and medium-sized companies (defined in regulation 2(2)(a) in the same way as in the Companies Act 1985) must disclose the fee paid to their auditors for the audit itself (regulation 3).

Every other company must disclose both the audit fee and all other fees paid to the auditors for services provided by them and their associates to the company, its subsidiaries (except where its control over a subsidiary is subject to severe long-term restrictions) and associated pension schemes (regulation 4(1)). Auditors' associates are defined in Schedule 1; associated pension schemes are defined in regulation 2(1). Each type of service specified in Schedule 2 and the fee paid for it must be separately disclosed (regulation 4(3)); and services to the company and its subsidiaries on the one hand and to associated pension schemes on the other must be separately disclosed (regulation 4(4)).

Consolidated group accounts (except those of small or medium-sized groups which are not ineligible) must disclose the types of services specified in Schedule 2 and the fees paid for them as if the group were a single company: but if that is done, the individual companies do not need to disclose them (regulation 5).

Auditors must supply their company’s directors with the information needed to enable the company to disclose the types of services specified in Schedule 2 and the fees paid for them (regulation 6).

Sections 233(5) and 245 to 245C of the 1985 Act are applied for the enforcement of the Regulations: directors who fail to comply commit an offence; they may voluntarily revise non-compliant accounts; and the Secretary of State and persons authorised by him may apply to court for an order requiring the preparation of revised accounts (regulation 7).

A Regulatory Impact Assessment has been prepared for these Regulations and a copy has been placed in the library of each House of Parliament. Copies of the Regulatory Impact Assessment can be obtained from the Department of Trade and Industry Corporate law and Governance Directorate, Bay 562, 1 Victoria Street, London SW1H 0ET (they are also available electronically at www.dti.gov.uk/cld).