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audit requirement

PostPosted: Tue Jan 17, 2017 12:42 pm
by jantra
hi All

what powers/rights do shareholders have regarding the timing of a company audit? the background is as follows:

Mr J was FD of a company until say Aug 2016 and from that point was excluded from management
Mr J controls 42% of stock
The year end was December 2016
Mr J has requested an audit
the board have agreed to an audit
Mr J is still a board member, has noted the board are delaying appointing the auditors. Mr J has reason to believe the accounts aren't in good shape from Aug 2016 onwards, and the directors who control the board do not want an audit or else this will be identified...

what can be done, if anything, to force an auditor to be appointed promptly

Re: audit requirement

PostPosted: Tue Oct 17, 2017 4:44 pm
by jantra
the company acknowledges it has to undertake an audit under s476 of the act. Its year end is Nov 2016 and the accounts are overdue. Companies House have indicated they will strike off if the accounts are not lodged.

2 directors refuse to sign the LOR from the auditors as they don't believe the accounts represent a true and fair view. The auditors will not sign off the accounts unless all directors sign the LOR. The reason the accounts don't give a true and fair view is the some directors wish to write off their own expenses totaling upwards of £100k without board approval (due to conflicts certain directors cannot vote). This write off understates profits, understates company assets (directors loan account) and understates liabilities (s455 corporation tax on directors loans). The auditors have said this is an internal company matter to resolve but some directors refuse to put this to a vote.

The other directors have convened a board meeting to approve unaudited accounts to submit to Companies House. The company has indicated it will not be able to issue audited statements despite its obligation under s476 to do so.

What remedies are available? can the shareholders seek an injunction asking the court to order the company to produce the audited accounts as this is a matter of legislation rather than any sort of dispute between the parties? As this is a loss to the company (payments from company bank account not supported by documentary evidence), how likely is it that the shareholders can make a successful derivative claim?

NB Atticus, I've spoken to my sols, just seeking other opinions.

Re: audit requirement

PostPosted: Tue Oct 17, 2017 5:52 pm
by atticus

Re: audit requirement

PostPosted: Tue Oct 17, 2017 6:00 pm
by jantra

Letter of Representation. Basically the auditors giving the directors a document to sign absolving them of any responsibility.

Re: audit requirement

PostPosted: Wed Oct 18, 2017 3:03 pm
by atticus
I've deliberately left it a while to see if anyone else wishes to contribute. Your solicitors are advising, and they have the advantage of having a great deal more information.

Heads need to be knocked together. Otherwise this company will die by one means or another and its value will be lost. No shareholder will benefit.

There are cases where I think that the following form of mediation should be tried. The solicitors lock the parties in a small room with a mobile phone. They say "we're off to the pub, call us when you've come to an agreement".

Re: audit requirement

PostPosted: Thu Oct 19, 2017 4:00 pm
by jantra

sounds like a plan