RESIGNATION OF AUDITORS (Hansard, 19 October 1976)

§ Mr. Arthur Davidson

I beg to move Amendment No. 37, in page 19, line 17, after '(b)', insert 'if the notice contains a statement under sub section (2)(b) above'. The amendment relieves companies of the unnecessary burden of circulating to all members an auditor's resignation notice accompanied by a statement to the effect that there are no circumstances which the auditor considers should be brought to their attention.

As drafted, the clause requires all notices to be circulated. Under the amendment, only those accompanied by a statement of circumstances to be brought to the attention of members and creditors would have to be circulated.

It has been suggested to us in course of consultations with representative bodies that Clause 15(3) would cause an unnecessary waste of time and expense for companies. That is the reason for the amendment.

§ Mr. Arthur Davidson

I beg to move Amendment No. 38, in page 19, leave out lines 20 to 32 and insert— '(4) The company or any person who claims to be aggrieved may, within fourteen days of the receipt by the company of a notice containing a statement under subsection (2)(b) above, apply to the court for an order under subsection (4A) below. (4A) If the court, on an application under subsection (4) above, is satisfied that the auditor is using the notice to secure needless publicity for defamatory matter, it may by order direct that copies of the notice need not be sent out; and the court may further order the company's costs on the application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application. (5) The company shall, within fourteen days of the court's decision, send to the persons mentioned in subsection (3) above—

(a) if the court makes an order under subsection (4A) above, a statement setting out the effect of the order;
(b) if the court does not make an order under that subsection, a copy of the notice containing the statement under subsection (2)(b) above.'.

The amendment alters the operation of the penalty provision in Clause 15 as it 1370 applies to a company which has applied to the court under subsection (4) for an order directing that the auditor's notice of resignation need not be circulated on the grounds that the auditor is allegedly using the notice to secure needless publicity for defamatory matter.

At present, the clause provides that a company is subject to a penalty if it fails to circulate an auditor's notice of resignation within 14 days of receipt—irrespective of whether it has applied to the court. This seemed to us, on reflection, to be unduly harsh. The court might easily not give a decision until more than 14 days after the company had received the auditor's notice and a fine would be particularly inapproprate if the company's application were eventually to be upheld by the court.

The amendment therefore provides that a company which applies to the court for an order directing that the auditor's resignation notice need not be circulated, but has its application turned down, has 14 days from the date of the court's decision in which to circulate the notice before a penalty is incurred. I am sure that this will meet with the approval of the House.