The Companies Act 2006 (Recognition of Third Country Qualifications and Practical Training) (Amendment) Regulations 2025

Explanatory Note

(This note is not part of the Regulations)

These Regulations revoke and replace provisions in section 1221 of and paragraph 9(4) and (5) of Schedule 11 to the Companies Act 2006 (c. 46) which relate to the approval of a third country audit qualification and the requirement for a minimum level of practical training for recognition of a professional qualification.

Subsections (1A) and (7A) of section 1221 and the relevant parts of paragraph 9(4) of Schedule 11 are secondary assimilated EU law within the meaning of section 12(2)(b) of the Retained EU Law (Revocation and Reform) Act 2023 (c.28).

Regulation 2(2) revokes and replaces paragraphs (a) and (b) of section 1221(1A) to clarify that the third county qualification must cover subjects and skills which are the same or substantially the same as the subjects and skills which are covered by a recognised professional qualification and for which knowledge is essential for the pursuit of the profession of statutory auditor. The third country qualification must also demonstrate the knowledge of those subjects and skills to the same or substantially the same standard as that demonstrated by a recognised professional qualification. This will bring these provisions into line with words used in section 1(2)(b) of the Professional Qualifications Act 2022 (c. 20).

Regulation 2(2)(c) replaces paragraph (a) of subsection (7A) to state that an aptitude test must test the person’s knowledge of required subjects and skills.

Regulation 2(2)(d) inserts new subsection (7AA) which provides that a required subject or skill is a subject or skill that is covered by a recognised professional qualification and knowledge of which is essential for the pursuit of the profession of statutory auditor. However, this is only where the subject or skill is not the same or substantially the same as a subject or skill covered by the professional qualification already held by the person or where the existing qualification held by the person does not demonstrate knowledge of that subject or skill to the same or substantially the same standard as that demonstrated by the recognised professional qualification.

Regulation 2(3) revokes and replaces parts of paragraph 9(4)(b) of Schedule 11 in order to remove a restriction on the provision of practical training. Regulation 2(3)(a) revokes and replaces the references to “an EEA State” in order to broaden the category of persons able to become providers of mandatory practical training. Paragraph 9(4)(b), as amended, provides that practical training can be given by any person eligible for a corresponding appointment as an auditor under the law of a country or territory outside of the United Kingdom who meets the conditions set out in new sub-paragraph (4A).

Regulation 2(3)(b) inserts new sub-paragraph (4A) which provides that the first condition is that the Secretary of State has determined under sub-paragraph (2) that the law and practice of the country or territory with respect to the audit of accounts is similar to that in the United Kingdom. The Financial Reporting Council (FRC) has been delegated powers under section 1252 of the Companies Act 2006 to make this determination. New sub-paragraph (4A) also provides the second and third conditions that a person eligible for the corresponding appointment must be approved by the body or organisation which is responsible for approving a person as being eligible under the law of that country or territory for appointment as an auditor. The approval by that body or organisation must correspond to the approval of a person as being eligible for appointment as a statutory auditor in the United Kingdom.

Regulation 2(3)(c) revokes paragraph 9(5) of Schedule 11.

Regulation 3 makes transitional provision in relation to persons granted approval to provide practical training under paragraph 9(3) of Schedule 11 prior to the commencement of these Regulations.

A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sector is foreseen.