Source: http://www.legislation.gov.uk/ukpga/2006/46/part/16/chapter/6
Timestamp: 2018-03-21 03:48:00
Document Index: 637408497

Matched Legal Cases: ['art. 3', 'art. 5', 'art. 3', 'art. 3', 'art. 5', 'art. 3', 'art. 1', 'art. 1']

Chapter 6E+W+S+N.I.Auditors' liability
Voidness of provisions protecting auditors from liabilityE+W+S+N.I.
532Voidness of provisions protecting auditors from liabilityE+W+S+N.I.
(3)This section applies to any provision, whether contained in a company's articles or in any contract with the company or otherwise.
Indemnity for costs of defending proceedingsE+W+S+N.I.
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.
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)
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.
(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.
(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.
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)
I2S. 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.
(b)by the company passing a resolution, before it enters into the agreement, approving the agreement's principal terms, or
(a)by the company passing a resolution in general meeting, before it enters into the agreement, approving the agreement's principal terms, or
(c)the limit to which the auditor's liability is subject.
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.
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)
C7Ss. 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)
I3S. 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.
F1S. 538A inserted (27.6.2009) by The Companies Act 2006 (Accounts, Reports and Audit) Regulations 2009 (S.I. 2009/1581), reg. 8 (with application as stated in reg. 1(3))
F2Words in s. 538A(1) substituted (1.4.2013) by The Financial Services Act 2012 (Consequential Amendments) Order 2013 (S.I. 2013/636), art. 1(2), Sch. para. 9(5)(a)
F3S. 538A(2) omitted (1.4.2013) by virtue of The Financial Services Act 2012 (Consequential Amendments) Order 2013 (S.I. 2013/636), art. 1(2), Sch. para. 9(5)(b)