Company Law Reform Bill [HL]

Clause 818 restates Section 33 of the Companies Act 1989 and allows the Secretary of State to approve overseas qualifications. Subsection (4) implements the requirement of the eighth company directive on audit and is different from the subsection that it replaces. The directive only allows member states to approve third country auditors if there is reciprocal approval for their auditors to operate in the third country. To implement that obligation, subsection (4) therefore requires the Secretary of State to be satisfied that comparable recognition would be given to a UK auditor by the relevant third country. I hope that the noble Baroness will agree that subsection (4) provides a sensible approach to meeting our European obligations. Using the test of comparability allows our implementation of the directive’s obligations to be flexible and workable in practice. We do not consider that the directive requires identical conditions of recognition. For example, the UK could recognise the auditors of a third country with a federal structure, whereas the UK auditors will be recognised in most but not all states or provinces of that third country. There must be comparability, which implies a broad equivalence, and we believe that determination of the dividing line between broad equivalence and no equivalence needs to be considered in the circumstances of each case as part of the recognition process. The noble Baroness asked some highly specific questions, and it would be best for me to send her a letter with the answers to those questions.