Appointment of Auditors
Section 485 of the Companies Act 2006 states that private companies must appoint an auditor for each financial year unless the directors reasonably resolve not to appoint them on the ground that audited accounts are unlikely to be required.
The directors may appoint an auditor at any time before the company's first period for appointing auditors or, where a company has not had an auditor for a period, at any time before the next period for appointing auditors or to fill a casual vacancy.
The "period for appointing auditors" ends 28 days after the expiry of the time allowed for sending out copies of the company's annual accounts and reports for the previous financial year, or 28 days after copies of the company's annual accounts and reports for the previous financial year are sent out.
The shareholders may appoint an auditor by passing an ordinary resolution during a period for appointing auditors, or if the company should have appointed an auditor or auditors during a period for appointing auditors but failed to do so, or where the directors had power to appoint an auditor but have failed to make an appointment.
Where no auditor has been appointed by the end of the next period for appointing auditors, any auditor in office is automatically re-appointed at that time, unless:
- He was appointed by the directors, or
- The company's Articles of Association require actual re-appointment, or
- The company receives a notice preventing the automatic re-appointment, from shareholders representing at least 5% of the total voting rights of all shareholders entitled to vote on a resolution that the auditor should not be reappointed (unless the Articles of Association specify a lower percentage), or
- The shareholders have passed a resolution that he should not be re-appointed, or
- The directors have passed a board resolution that no auditor should be appointed for the financial year in question.
Statement by Auditor to be deposited with company
Where an auditor of an unquoted company ceases for any reason to hold office, he must deposit at the company's registered office a statement of the circumstances connected with his ceasing to hold office, unless he considers that there are no circumstances in connection with his ceasing to hold office that need to be brought to the attention of members or creditors of the company.
If he considers that there are no circumstances in connection with his ceasing to hold office that need to be brought to the attention of members or creditors of the company, he must deposit at the company's registered office a statement to that effect.
Where an auditor of a quoted company ceases for any reason to hold office, he must deposit at the company's registered office a statement of the circumstances connected with his ceasing to hold office.
The statement required by this section must be deposited -
- In the case of resignation, along with the notice of resignation;
- In the case of failure to seek re-appointment, not less than 14 days before the end of the time allowed for next appointing an auditor;
- in any other case, not later than the end of the period of 14 days beginning with the date on which he ceases to hold office.