COMPANIES ACT 1982 Arrangement of Sections

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1 Disclaimer: This copy of the Companies Act 1982 has been updated for the convenience of users of this website to include subsequent amendments to the Act. The Commission accepts no liability for the accuracy of the updating. The updated version of the Act is intended for guidance only and the following original legislation should be consulted for legal purposes: Companies Act 1982, Companies (Amendment) Act The Tynwald Library stocks, or can print on demand, all Acts of Tynwald, as well as most Orders, Regulations and Rules. Tynwald Library, Legislative Buildings, Finch Road, Douglas, Isle of Man IM1 3PW, British Isles Telephone: +44 (0) Fax: +44 (0) COMPANIES ACT 1982 (Chapter 2) Arrangement of Sections PART I Accounts and Audit 1. Accounting records. 2. Profit and loss account and balance sheet. 2A. Private companies: exemption from requirement to lay accounts before general meeting. 2B. Right of shareholders to require laying of accounts. 3. General provisions as to contents and form of accounts. 4. Obligation to lay group accounts before holding company. 5. Form of group accounts. 6. Contents of group accounts. 7. Financial year of holding company and subsidiary. 8. Signing of balance sheet. 9. Accounts and auditors' report to be annexed to balance sheet. 10. Directors' report to be attached to balance sheet. 10A. Actuary's certificate to be attached to balance sheet of certain insurers. 11. Right to receive copies of balance sheets and auditors' report. 12. Appointment and remuneration of auditors. 12A. Resolution not to appoint auditors. 13. Provisions as to resolutions relating to appointment and removal of auditors. 14. Disqualifications for appointment as auditor. 15. Auditors' report and right of access to books and to attend and be heard at meetings. 16. Construction of references to documents annexed to accounts. 17. Amendments. 17A. Exercise of functions in relation to insurance companies. PART II Management 18. Number of directors. 19. Secretary. 20. Statement of first directors and secretary to be delivered on application for registration of company. 21. Notification of changes in directors and secretary, etc. 22. Registered office of company. 23. Default in delivering notice of allotment. 24 to 27. Amendments. PART III Miscellaneous and General 28. Amendment Substitutions. 31. Disqualification of directors of insolvent companies. 32 to 34. Amendments.

2 35. Publication Interpretation. 38. Amendments Short title. Schedule 1 Accounts. Part I General Provisions as to Balance Sheet and Profit and Loss Account. Part II Special Provisions where the Company is a Holding or Subsidiary Company. Part III Exceptions for Special Classes of Company. Part IV Interpretation of Schedule. Schedule 2 Part I Increase of Fines. Part II Transfer of Certain Functions of the Governor. Schedule 3... GENERAL NOTE: The maximum fines in this Act are as increased by the Fines Act 1986 and by the Criminal Justice (Penalties, Etc.) Act 1993 s 1. Received Royal Assent: 10 March 1982 Passed: 6 April 1982 AN ACT to amend the law relating to companies and for connected purposes. PART I Accounts and Audit 1 Accounting records (1) Every company shall cause accounting records to be kept in accordance with the provisions of this section. (2) The accounting records shall be sufficient to show and explain the company's transactions. (3) The accounting records shall be such as to- disclose, within a reasonable time and with reasonable accuracy, the financial position of the company at any time; and enable the directors to ensure that any balance sheet or profit and loss account prepared by them complies with the requirements of section 3 (balance sheet to give a true and fair view of the company's state of affairs and profit and loss account to give a true and fair view of the company's profit or loss, etc.). (4) The accounting records shall in particular contain- entries from day to day of all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (c) (c) a record of the assets and liabilities of the company; and where the company's business involves dealing in goods, the statements mentioned in subsection (5). (5) The statements referred to in subsection (4)(c) are- statements of stock held by the company at the end of each financial year of the company; all statements of stocktakings from which any such statement as is mentioned in paragraph has been or is to be prepared; and except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased showing the goods and the buyers and sellers in sufficient detail to enable the goods and the buyers and sellers to be identified. (6) Subject to subsection (7), the accounting records shall be kept at the registered office of the company or at such other place as the directors of the company think fit and shall at all times be open to inspection by the officers of the company. (7) If accounting records are kept at a place outside the Island by a company (CAB 2009), accounts and returns with respect to the business dealt with in the accounting records so kept shall be sent to, and kept at a place in the Island and shall at all times be open to inspection by the officers of the company. [Subs (7) amended by Non-Resident Company Duty Act 1986 s 7.] (8) The accounts and returns to be sent to the Island in accordance with subsection (7) shall be such as to- disclose with reasonable accuracy the financial position of the business in question at intervals not exceeding 6 months; and

3 enable the directors to ensure that any balance sheet or profit and loss account prepared by them under section 2 complies with the requirements of section 3. (9) Subject to any direction with respect to the disposal of any records kept by a company given under any rules made under section 276 of the principal Act (winding up rules), any accounting records which a company is required by this section to keep shall be preserved by it- in the case of a private company, for 3 years from the date on which they are made; and in any other case, for 6 years from the date on which they are made. (10) If a company fails to comply with any provision of subsections (1) to (7), every officer of the company who is in default shall be guilty of an offence unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on the default was excusable; and if any officer of the company fails to take all reasonable steps for securing compliance by the company with subsection (9) or has intentionally caused any default by the company thereunder he shall be guilty of an offence. (11) Any person guilty of an offence under this section shall be liable- on conviction on information to imprisonment for a term not exceeding 2 years, or to a fine, or to both; on summary conviction, to imprisonment for a term not exceeding 6 months, or to a fine not exceeding 5,000, or to both. 2 Profit and loss account and balance sheet (1) Subject to subsection (2), the directors of every company shall at some date not later than 18 months after the incorporation of the company and subsequently once at least in every calendar year lay before the company in general meeting a profit and loss account or, in the case of a company not trading for profit, an income and expenditure account for the period, in the case of the first account, since the incorporation of the company, and, in any other case, since the preceding account, made up to a date not earlier than the date of the meeting by more than 9 months, in the case of a private company; or 6 months, in the case of a public company. (2) The Financial Supervision Commission, if for any special reason it thinks fit so to do, may- in the case of any company, extend the period of 18 months; in the case of a private company, extend the period of 9 months with respect to any year, or (c) in the case of a public company, extend the period of 6 months with respect to any year. (CAB 2009) [Subs (2) amended by Financial Supervision Commission Act 1984 s 1 and Sch 1.] (3) The directors shall cause to be made out in every calendar year, and to be laid before the company in general meeting, a balance sheet as at the date to which the profit and loss account or the income and expenditure account, as the case may be, is made up. (4) Subject to subsection (5), if any person being a director of a company fails to take all reasonable steps to comply with the provisions of this section, he shall be guilty of an offence and shall, in respect of each offence, be liable- on conviction on information, to imprisonment for a term not exceeding 2 years or to a fine, or to both; on summary conviction to imprisonment for a term not exceeding 6 months or to a fine not exceeding 5,000, or to both. (5) In any proceedings under subsection (4)- it shall be a defence to prove that the director had reasonable grounds to believe and did believe that a competent and reliable person was charged with the duty of seeing that the provisions of this section were complied with and was in a position to discharge that duty; and a person shall not be sentenced to imprisonment for such an offence unless, in the opinion of the court dealing with the case, the offence was committed wilfully. 2A Private companies: exemption from requirement to lay accounts before general meeting (1) This section shall apply to a private company which by provision in its Articles so elects. (2) The accounts and reports of a company to which this section applies need not be laid before the company in general meeting. (3) In respect of a company to which this section applies- the references in section 127(1) of the principal Act and in this Act to the laying of accounts and documents required to be annexed to the balance sheet before the company in general meeting; and the requirement in section 15(2) that the auditors report be read before the company in

4 general meeting; shall be read as references to the sending of copies of the accounts and the report to members and others under section 11(1). (4) This section applies in relation to the laying of group accounts before a holding company as it applies in relation to the laying of a company's own accounts. (5) If, by reason of the amendment of the Articles of a company, the accounts and reports of the company- cease to be required to be laid before the company in general meeting; or will be required to be so laid, the amendment shall have effect in respect of the accounts and reports for the financial year in which the amendment takes effect and subsequent financial years. [S 2A inserted by Companies Act 1992 Sch 4.] 2B Right of shareholders to require laying of accounts (1) Where section 2A applies to a company, the copies of accounts and reports sent out in accordance with section 11(1) shall be accompanied, in the case of a member of the company, by a notice informing him of his right to require the laying of the accounts and reports before a general meeting. (2) Section 11(5) (penalty for default) applies in relation to the requirement in subsection (1) as to the requirements contained in that section. (3) Before the end of the period of 28 days beginning with the day on which the accounts and reports are sent out in accordance with section 11(l), any member of the company may by notice in writing deposited at the registered office of the company require that a general meeting be held for the purpose of laying the accounts and reports before the company. (4) If the directors do not within 21 days from the date of the deposit of such a notice proceed duly to convene a meeting, the person who deposited the notice may do so himself. (5) A meeting so convened shall not be held more than 3 months from that date and shall be convened in the same manner, as nearly as possible, as that in which meetings are to be convened by directors. (6) Where the directors do not duly convene a meeting, any reasonable expenses incurred by reason of that failure by the person who deposited the notice shall be made good to him by the company, and shall be recouped by the company out of any fees, or other remuneration in respect of their services, due or to become due to such of the directors as were in default. (7) The directors shall be deemed not to have duly convened a meeting if they convene a meeting for a date more than 28 days after the date of the notice convening it. [S 2B inserted by Companies Act 1992 Sch 4.] 3 General provisions as to contents and form of accounts (1) Subject to section 3A, (CAB 2009) Every balance sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of its financial year, and every profit and loss account of a company shall give a true and fair view of the profit or loss of the company for the financial year. (2) A company's balance sheet and profit and loss account shall comply with the requirements of Schedule 1, so far as applicable thereto. (3) Save as expressly provided in this section or in Part III of Schedule 1, the requirements of subsection (2) and Schedule 1, shall be without prejudice either to the general requirements of subsection (1) or to any other requirements of this Act. (3A) If in special circumstances compliance with the provisions of subsection (2) is inconsistent with the requirement to give a true and fair view in accordance with subsection (1), the directors must depart from that provision to the extent necessary to give a true and fair view. (3B) Particulars of a departure under subsection (3A), the reasons for it and its effect must be given in a note to the accounts. (CAB 2009) (4) The court may, on the application or with the consent of a company's directors, modify in relation to that company any of the requirements of this Act as to the matters to be stated in a company's balance sheet or profit and loss account (except the requirements of subsection (1)) for the purpose of adapting them to the circumstances of the company. (5) Subsections (1) and (2) shall not apply to a company's profit and loss account if- the company has subsidiaries; and the profit and loss account is framed as a consolidated profit and loss account dealing with all or any of the company's subsidiaries as well as the company and-

5 (i) complies with the requirements of this Act relating to consolidated profit and loss accounts; and (ii) shows how much of the consolidated profit or loss for the financial year is dealt with in the accounts of the company. (6) Subject to subsection (7), if any person being a director of a company fails to take all reasonable steps to secure compliance as respects any accounts laid before the company in general meeting with the provisions of this section and with the other requirements of this Act as to the matters to be stated in accounts, he shall be guilty of an offence and shall, in respect of each offence, be liable- on conviction on information, to imprisonment for a term not exceeding 2 years or to a fine, or to both; on summary conviction to imprisonment for a term not exceeding 6 months or to a fine not exceeding 5,000 or to both. (7) In any proceedings under subsection (6)- it shall be a defence to prove that the director had reasonable grounds to believe and did believe that a competent and reliable person was charged with the duty of seeing that the said provisions or the said other requirements, as the case may be, were complied with and was in a position to discharge that duty; and a person shall not be sentenced to imprisonment for any such offence unless, in the opinion of the court dealing with the case, the offence was committed wilfully. (8) For the purposes of this section and the following provisions of this Act, except where the context otherwise requires- 3A (c) any reference to a balance sheet or profit and loss account shall include any notes thereon or document annexed thereto giving information which is required by this Act and is thereby allowed to be so given; and any reference to a profit and loss account shall be taken, in the case of a company not trading for profit, as referring to its income and expenditure account, and references to profit or to loss and, if the company has subsidiaries, references to a consolidated profit and loss account shall be construed accordingly. Additional provisions concerning presentation of accounts (1) Unless regulations made under subsection (2) require compliance with standards or the adoption of practices which are not consistent with generally accepted accounting principles or practice, in determining how amounts are presented within items within the profit and loss account (or income and expenditure account) and balance sheet the directors of a company must have regard to the substance of the reported transaction or arrangement in accordance with generally accepted accounting principles and practice. (2) The Financial Supervision Commission may make regulations which, in such circumstances and for such purposes as are prescribed, require compliance with standards or the adoption of practices recommended by a body specified in the regulations, and which may in particular require compliance with standards or the adoption of practices recommended by that body from time to time (that is, after as well as before the making of the regulations). (3) Regulations under subsection (2) shall not come into operation unless they are approved by Tynwald. the International Accounting Standards Board (International Financial Reporting Standards); (CAB 2009) the Accounting Standards Board (United Kingdom Accounting Standards) (UK GAAP); or the Financial Accounting Standards Board, the Government Accounting Standards Board or the Federal Accounting Standards Advisory Board (US GAAP). 4 Obligation to lay group accounts before holding company (1) Where at the end of its financial year a company has subsidiaries, accounts or statements (in this Act referred to as 'group accounts') dealing as hereinafter mentioned with the state of affairs and profit or loss of the company and the subsidiaries shall, subject to subsection (2), be laid before the company in general meeting when the company's own balance sheet and profit and loss account are so laid. (2) Notwithstanding anything in subsection (1)- group accounts shall not be required where the company is at the end of its financial year the wholly owned subsidiary of another body corporate incorporated in the Island; and subject to subsection (3), group accounts need not deal with a subsidiary of the company if the company's directors are of opinion that-

6 (i) it is impracticable, or would be of no real value to members of the company, in view of the insignificant amounts involved, or would involve expense or delay out of proportion to the value to members of the company; or (ii) (iii) the result would be misleading, or harmful to the business of the company or any of its subsidiaries; or the business of the holding company and that of the subsidiary are so different that they cannot reasonably be treated as a single undertaking; and, if the directors are of such an opinion about each of the company's subsidiaries, group accounts shall not be required. (3) The approval of the Financial Supervision Commission shall be required for not dealing in group accounts with a subsidiary on the ground that the result would be harmful or on the ground of the difference between the business of the holding company and that of the subsidiary. [Subs (3) amended by Financial Supervision Commission Act 1984 Sch 1.] (4) Subject to subsection (5), if any person being a director of a company fails to take all reasonable steps to secure compliance as respects the company with the provisions of this section, he shall be guilty of an offence and shall, in respect of each offence, be liable- on conviction on information, to imprisonment for a term not exceeding 2 years or to a fine or to both; on summary conviction, to imprisonment for a term not exceeding 6 months or to a fine not exceeding 5,000 or to both. (5) In any proceedings under subsection (4)- it shall be a defence to prove that the director had reasonable grounds to believe and did believe that a competent and reliable person was charged with the duty of seeing that the requirements of this section were complied with and was in a position to discharge that duty; and a person shall not be sentenced to imprisonment for an offence under this section unless, in the opinion of the court dealing with the case, the offence was committed wilfully. (6) For the purposes of this section a body corporate shall be deemed to be the wholly owned subsidiary of another if it has no members except that other and that other's wholly owned subsidiaries and its or their nominees. 5 Form of group accounts (1) Subject to subsection (2), the group accounts laid before a holding company shall be consolidated accounts comprising- a consolidated balance sheet dealing with the state of affairs of the company and all the subsidiaries to be dealt with in group accounts; a consolidated profit and loss account dealing with the profit or loss of the company and those subsidiaries. (2) If the company's directors are of opinion that it is better for the purpose- of presenting the same or equivalent information about the state of affairs and profit or loss of the company and those subsidiaries; and of so presenting it that it may be readily appreciated by the company's members; the group accounts may be prepared in a form other than that required by subsection (1), and in particular may consist of more than one set of consolidated accounts dealing respectively with the company and one group of subsidiaries and with other groups of subsidiaries or of separate accounts dealing with each of the subsidiaries, or of statements expanding the information about the subsidiaries in the company's own accounts, or any combination of those forms. (3) The group accounts may be wholly or partly incorporated in the company's own balance sheet and profit and loss account. 6 Contents of group accounts (1) The group accounts laid before a company shall give a true and fair view of the state of affairs and profit or loss of the company and the subsidiaries dealt with thereby as a whole, so far as concerns the members of the company. (2) Where the financial year of a subsidiary does not coincide with that of the holding company, the group accounts shall, unless the Financial Supervision Commission on the application or with the consent of the holding company's directors otherwise directs, deal with the subsidiaries state of affairs as at the end of its financial year ending with or last before that of the holding company, and with the

7 subsidiary's profit or loss for that financial year. [Subs (2) amended by Financial Supervision Commission Act 1984 Sch 1.] (3) Subject to subsection (4) and without prejudice to subsection (1), the group accounts, if prepared as consolidated accounts, shall comply with the requirements of Schedule 1 so far as applicable thereto, and if not so prepared shall give the same or equivalent information. (3A) If in special circumstances compliance with the provisions of subsection (3) is inconsistent wit the requirement to give a true and fair view in accordance with subsection (1), the directors must depart from that provision to the extent necessary to give a true and fair view. (3B) Particulars of a departure under subsection (3A), the reasons for it and its effect must be given in a note to the accounts. (CAB 2009) (4) The Financial Supervision Commission may, on the application or with the consent of a company's directors, modify the requirements of Schedule 1 (CAB 2009) in relation to that company for the purpose of adapting them to the circumstances of the company. (5) Section 3A applies in respect of group accounts in the same way it applies to the accounts of companies. (CAB 2009) [Subs (4) amended by Financial Supervision Commission Act 1984 Sch 1.] 7 Financial year of holding company and subsidiary (1) A holding company's directors shall secure that except where in their opinion there are good reasons against it, the financial year of each of its subsidiaries shall coincide with the company's own financial year. (2) Where it appears to the Financial Supervision Commission desirable for a holding company or a holding company's subsidiary to extend its financial year so that the subsidiary's financial year may end with that of the holding company, and for that purpose to postpone the submission of the relevant accounts to a general meeting from one calendar year to the next, the Financial Supervision Commission may on the application or with the consent of the directors of the company whose financial year is to be extended direct that, in the case of that company, the submission of accounts to a general meeting, the holding of an annual general meeting shall not be required in the earlier of the said calendar years. [Subs (2) amended by Financial Supervision Commission Act 1984 Sch 1 and by Companies Act 1992 Sch 2.] 8 Signing of balance sheet (1) Every balance sheet of a company shall be signed on behalf of the board by two of the directors of the company. (2) If any copy of a balance sheet which has not been signed as required by this section is issued, circulated or published, the company and every officer of the company who is in default shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding 2, Accounts and auditors' report to be annexed to balance sheet (1) The profit and loss account and, so far as not incorporated in the balance sheet or profit and loss account, any group accounts laid before the company in general meeting, shall be annexed to the balance sheet, and the auditors' report shall be attached thereto. (2) Any accounts so annexed shall be approved by the board of directors before the balance sheet is signed on their behalf. (3) If any copy of a balance sheet is issued, circulated or published without having annexed thereto a copy of the profit and loss account or any group accounts required by this section to be so annexed, or without having attached thereto a copy of the auditors' report, the company and every officer of the company who is in default shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding 2, Directors' report to be attached to balance sheet (1) There shall be attached to every balance sheet laid before a company in general meeting a report by the directors with respect to the state of the company's affairs, the amount, if any, which they recommend should be paid by way of dividend, and the amount, if any, which they propose to carry to reserves within the meaning of Schedule 1. (2) The said report shall deal, so far as is material for the appreciation of the state of the company's affairs by its members and will not in the directors' opinion be harmful to the business of the company or of any of its subsidiaries, with any change during the financial year in the nature of the company's business, or in the company's subsidiaries, or in the classes of business in which the company has an interest, whether as member of another company or otherwise. (3) Subject to subsection (4), if any person being a director of a company fails to take all reasonable steps to comply with the provisions of subsection (1), he shall be guilty of an offence and

8 shall, in respect of each offence, be liable- on conviction on information to imprisonment for a term not exceeding 2 years or to a fine or to both; on summary conviction to imprisonment for a term not exceeding 6 months or to a fine not exceeding 5,000 or to both. (4) In any proceedings under subsection (3)- if the proceedings are in respect of an offence under subsection (1), it shall be a defence to prove that the director had reasonable grounds to believe and did believe that a competent and reliable person was charged with the duty of seeing that the provisions of that subsection were complied with and was in a position to discharge that duty; and a person shall not be liable to be sentenced to imprisonment for such an offence unless, in the opinion of the court dealing with the case, the offence was committed wilfully. 10A Actuary's certificate to be attached to balance sheet of certain insurers (1) In the case of an insurance company which carries on long term business there shall be attached to every balance sheet laid before the company in general meeting a certificate in such form as is prescribed by regulations made by the Insurance and Pensions Authority, which is signed by the actuary to the company. [Subs (1) amended by Companies (Transfer of Functions) Act 2000 Sch 2.] (2) In this section- 'actuary to the company' means the person appointed pursuant to section 13 of the Insurance Act 1986; 'long term business' has the meaning given by section 34 of the Act of (3) Subsections (3) and (4) of section 10 shall apply to this section as they apply to that section. [S 10A inserted by Insurance Act 1986 Sch 5.] 11 Right to receive copies of balance sheets and auditors' report (1) Subject to subsections (2) and (3), a copy of every balance sheet, including every document required by law to be annexed thereto, which is to be laid before a company in general meeting, together with a copy of the auditors' report, shall, not less than 14 days before the date of the meeting, be sent to every member of the company (whether he is or is not entitled to receive notices of general meetings of the company), every holder of debentures of the company (whether he is or is not so entitled) and all persons other than members or holders of debentures of the company, being persons so entitled. [Subs (1) amended by Companies, etc. (Amendment) Act 2003 Sch 1.] (2) Subsection (1) is subject to the following provisions- in the case of a company not having a share capital, it shall not require the sending of a copy of the documents aforesaid to a member of the company who is not entitled to receive notices of general meetings of the company or to a holder of debentures of the company who is not so entitled; it shall not require a copy of those documents to be sent- (i) to a member of the company or a holder of debentures of the company, being in either case a person who is not entitled to receive notices of general meetings of the company and of whose address the company is unaware; (ii) (iii) to more than one of the joint holders of any shares or debentures none of whom are entitled to receive such notices; or in the case of joint holders of any shares or debentures some of whom are and some of whom are not entitled to receive such notices, to those who are not so entitled. (3) If the copies of the documents mentioned in subsection (1) are sent less than 14 days before the date of the meeting, they shall, notwithstanding that fact, be deemed to have been duly sent if it is so agreed by all the members entitled to attend and vote at the meeting. [Subs (3) amended by Companies, etc. (Amendment) Act 2003 Sch 1.] (4) Any member of a company, whether he is or is not entitled to have sent to him copies of the company's balance sheets, and any holder of debentures of the company, whether he is or is not so entitled, shall be entitled to be furnished on demand without charge with a copy of the last balance sheet of the company, including every document required by law to be annexed thereto, together with a copy of the auditors' report on the balance sheet. (5) If default is made in complying with subsection (1) the company and every officer of the company who is in default shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding 2,500.

9 (6) If, when any person makes a demand for any document with which he is by virtue of subsection (4) entitled to be furnished, default is made in complying with the demand within 14 days after the making thereof, the company and every officer of the company who is in default shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding 2,500. [Subs (6) amended by Companies, etc. (Amendment) Act 2003 Sch 1.] (7) It shall be a defence to any proceedings under this section, to prove that that person had already made a demand for and been furnished with a copy of the document. (8) The foregoing provisions shall not have effect in relation to a balance sheet of a private company laid before it before the commencement of this Act, and the right of any person to be furnished with a copy of any such balance sheet and the liability of the company in respect of a failure to satisfy that right shall be the same as they would have been if this Act had not passed. 12 Appointment and remuneration of auditors (1) Every company shall at each annual general meeting appoint an auditor or auditors to hold office from the conclusion of that, until the conclusion of the next, annual general meeting. (2) Subject to subsection (3), at any annual general meeting a retiring auditor, however appointed, shall be reappointed without any resolution being passed unless- he is not qualified for reappointment; or a resolution has been passed at that meeting appointing somebody instead of him or (c) providing expressly that he shall not be reappointed; or he has given the company notice in writing of his unwillingness to be reappointed. (3) Where notice is given of an intended resolution to appoint some person or persons in place of a retiring auditor, and by reason of the death, incapacity or disqualification of that person or of all those persons, as the case may be, the resolution cannot be proceeded with, the retiring auditor shall not be automatically reappointed by virtue of this subsection. (4) Where at an annual general meeting no auditors are appointed or reappointed, the Financial Supervision Commission, on the application of any person, may appoint an auditor to fill the vacancy. [Subs (4) amended by Financial Supervision Commission Act 1984 Sch 1.] (5) Subject to subsection (6), the first auditors of a company may be appointed by the directors at any time before the first annual general meeting, and auditors so appointed shall hold office until the conclusion of that meeting. (6) At the first annual general meeting- the company may remove any such auditors and appoint in their place any other persons who have been nominated for appointment by any member of the company and of whose nomination notice has been given to the members of the company not less than 14 days before the date of the meeting; and if the directors fail to exercise their powers under subsection (5) the company in general meeting may appoint the first auditors, and thereupon the said powers of the directors shall cease. (7) The directors may fill any casual vacancy in the office of auditor, but while any such vacancy continues, the surviving or continuing auditor or auditors, if any, may act. (8) The remuneration of the auditors of a companyin the case of an auditor appointed by the directors or by the Financial Supervision Commission, may be fixed by the directors or by the Financial Supervision Commission as the case may be; [Para amended by Financial Supervision Commission Act 1984 Sch 1.] subject to the foregoing paragraph, shall be fixed by the company in general meeting or in such manner as the company in general meeting may determine. (9) For the purposes of subsection (8) any sums paid by the company in respect of the auditors' expenses shall be deemed to be included in the expression 'remuneration'. [S 12 omitted by SD293/93 (as amended by SD283/94).] 12A Resolution not to appoint auditors (1) A company may by special resolution make itself exempt from the provisions of this Act relating to the audit of accounts in the following cases- if the company has been dormant from the time of its formation, by a special resolution passed before the first general meeting of the company at which annual accounts are laid; if the company has been dormant since the end of the previous financial year and is not required to prepare group accounts for that year, by a special resolution passed at a general meeting of the company at which the annual accounts for that year are laid. (2) A company may not pass such a resolution if it is-

10 a public company, a deposit taking or insurance company; or [Para substituted by Financial Services Act 2008 Sch 6.] (c) a permitted person authorised to undertake investment business or to provide services to collective investment schemes under the Financial Services Act [Para (c) substituted by Financial Services Act 2008 Sch 6.] (3) A company is 'dormant' during a period in which no significant accounting transaction occurs, that is, no transaction which is required by section 1 to be entered in the company's accounting records; and a company ceases to be dormant on the occurrence of such a transaction. For this purpose there shall be disregarded any transaction arising from the taking of shares in the company by a subscriber to the memorandum in pursuance of an undertaking of his in the memorandum. (4) Where a company is, at the end of a financial year, exempt by virtue of this section from the provisions of this Part relating to the audit of accounts- section 11 (right to receive or demand copies of accounts and reports) has effect with the omission of references to the auditors' report; and no copies of an auditors' report need be laid before the company in general meeting. (5) Where a company which is exempt by virtue of this section from the provisions of this Act relating to the audit of accounts- ceases to be dormant, or would no longer qualify (for any other reason) to make itself exempt by passing a resolution under this section, it shall thereupon cease to be so exempt. [S 12A inserted by Companies Act 1992 Sch 4 and omitted by SD293/93 (as amended by SD283/94).] 13 Provisions as to resolutions relating to appointment and removal of auditors (1) Notice of 21 days shall be required for a resolution at a company's annual general meeting appointing as auditor a person other than a retiring auditor or providing expressly that a retiring auditor shall not be reappointed. (2) On receipt of notice of such an intended resolution as aforesaid, the company shall forthwith send a copy thereof to the retiring auditor (if any). (3) Subject to subsection (4), where notice is given of such an intended resolution as aforesaid and the retiring auditor makes with respect to the intended resolution representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so- in any notice of the resolution given to members of the company, state the fact of the representations having been made; and send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company); and if a copy of the representations is not sent as aforesaid because received too late or because of the company's default, the auditor may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting. (4) Copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the court is satisfied that the rights conferred by this section are being abused to secure needless publicity for defamatory matter; and the court may order the company's costs on an application under this section to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application. (5) Subsections (3) and (4) shall apply to a resolution to remove the first auditors by virtue of section 12(6) as it applies in relation to a resolution that a retiring auditor shall not be reappointed. [S 13 omitted by SD293/93 (as amended by SD283/94).] 14 Qualifications of individual for appointment as auditor (1) An individual is qualified for appointment as auditor of a company if the individual is a member of a recognised accountancy body. (2) An individual is also qualified for appointment as auditor of a company if he or she is authorised by the Financial Supervision Commission under section 14E to be so appointed. 14A Qualifications of partnership for appointment as auditor (1) A partnership is qualified for appointment as auditor of a company if all of the partners are so qualified.

11 (2) AAA partnership is also qualified for appointment as auditor of a company if at least half in number of the partners are (i) individuals who are members of recognised accountancy bodies, or are authorised under section 14E; (ii) partnerships which are themselves qualified for appointment as auditor of a company; or (iii) bodies corporate or limited liability companies which are qualified for appointment as auditor of a company; at least 50 per cent of the voting rights in the partnership and, if it has a management body, in that body are held by persons specified in paragraph ; and (c) each of the partners who examines or reports on the accounts of the company pursuant to section 15, or who supervises the examination of or report on such accounts, is an individual who is a member of a recognised accountancy body or is authorised under section 14E. (3) A partnership is also qualified for appointment as auditor of a company if the partnership is authorised by the Financial Supervision Commission under section 14E to be so appointed. 14B Qualifications of body corporate for appointment as auditor (1) A body corporate is qualified for appointment as auditor of a company if - each of the persons who are responsible to it for examining or reporting on the accounts of the company pursuant to section 15, or for supervising the examination of or report on such accounts, is an individual who is a member of a recognised accountancy body or is authorised under section 14E; and the body corporate is controlled by persons or partnerships specified in subsection (3). (2) A body corporate is also qualified for appointment as auditor of a company if it is authorised by the Financial Supervision Commission under section 14E to be so appointed. (3) Subsection (1) refers to individuals who are members of recognised accountancy bodies, or are authorised under section 14E; partnerships which are qualified for appointment as auditors of companies, or are authorised under section 14E; and (c) bodies corporate or limited liability companies which are themselves qualified for appointment as auditors of companies, or are authorised under section 14E. (4) For the purposes of subsection (1), a body corporate is controlled by persons or partnerships specified in subsection (3) if they constitute at least half in number of the members of the body corporate; they hold at least 50 per cent of the voting rights of each class of members; (c) at least half in number of the directors are individuals specified in subsection (3); or (d) at least 50 per cent of the voting rights in the board of directors, committee or other management body of the body corporate are held by persons or partnerships specified in subsection (3). 14C. Qualifications of limited liability company for appointment as auditor (1) A limited liability company is qualified for appointment as auditor of a company if - each of the persons who are responsible to it for examining or reporting on the accounts of the company pursuant to section 15, or for supervising the examination of or report on such accounts, is an individual who is a member of a recognised accountancy body or is authorised under section 14E; and the limited liability company is controlled by persons or partnerships specified in subsection (3). (2) A limited company is also qualified for appointment as auditor of a company if it is authorised by the Financial Supervision Commission under section 14E to be so appointed. (3) Subsection (1) refers to individuals who are members or recognised accountancy bodies, or are authorised under section 14E; partnerships which are qualified for appointment as auditors of companies, or are authorised under section 14E; and (c) bodies corporate or limited liability companies which are themselves qualified for appointment as auditors of companies, or are authorised under section 14E. (4) For the purposes of subsection (1), a limited liability company is controlled by persons or partnerships specified in subsection (3) if they constitute at least half in number of the members of the limited liability company; or they hold at least 50 per cent of the voting rights of each class of members.

12 14D. Disqualification from appointment as auditor (1) This section applies notwithstanding sections 14 to 14C. (2) A person is disqualified from appointment as auditor of a company if the person is an officer, secretary or servant of the company; a partner or employee of an officer, secretary or servant of the company; (c) a person against whom a disqualification order under section 26 of the Companies Act 1992 (c.4) is in force; or (d) a person who, on any ground described in paragraph, or (c), is disqualified from appointment as auditor of any other body corporate which is (i) a subsidiary or holding company of the company; or (ii) a subsidiary of the company s holding company. or who would be so disqualified if that other body corporate were a company. (3) A partnership is disqualified from appointment as auditor of a company if any of the partners is - a person who is disqualified under subsection (2) from such an appointment; or the company whose accounts are to be audited, or a holding company or subsidiary of that company, or a subsidiary of any such holding company. (4) A body corporate is disqualified from appointment as auditor of a company if any of the individuals specified in section 14B(1) in relation to that company, or any of its shareholders or directors, is a person who is disqualified under subsection (2) from such an appointment; or the company whose accounts are to be audited, or a holding company or subsidiary of that company, or a subsidiary of any such holding company, holds shares in the body corporate. (5) A limited liability company is disqualified from appointment as auditor of a company if any of the individuals specified in section 14C(1) in relation to that company, or any of its members, is a person who is disqualified under subsection (2) from such an appointment; or the company shoe accounts are to be audited, or a holding company or subsidiary of that company, or a subsidiary of any such holding company, is a member of the limited liability company. (6) If a person or partnership has been appointed as auditor of a company; and during his or her or its term of office becomes, to his or her or its knowledge, disqualified from the appointment, that person or partnership shall thereupon vacate the office and give notice to the company that by reason of that disqualification he, she or it has done so. 14E. Authorisations by the Financial Supervision Commission (1) An applicant for authorisation under this section to be appointed as auditor of a company (including a company within the meaning of the Companies Act 2006 (c.13) as well as a company within the meaning of this Act) shall provide such information and documents in support of the application as the Financial Supervision Commission May require. (2) The Financial Supervision Commission may give or may refuse to give an authorisation under this section. (3) An authorisation under this section may be given subject to conditions. (4) Where an authorisation has been given under this section, the Financial Supervision Commission may at any time revoke or suspend the authorisation; make that authorisation subject to conditions or further conditions; or (c) vary or revoke any condition. (5) Section 32 of the Financial Services Act 2008 (appeals to the Financial Services Tribunal) shall apply in respect of a decision of the Commission under subsections (2) to (4) as it applies in respect of a decision referred to in that section. (6) A person or partnership who is authorised to be appointed as auditor of a company under this section shall, when required by the Financial Supervision Commission, provide it with such information and documents as the Financial Supervision Commission thinks necessary for the purpose of enabling or assisting it to discharge its functions under this section. (7) Failure to comply with a requirement under subsection (6) shall be sufficient grounds for the exercise of the power conferred by subsection (4).

13 14F. Power of Financial Supervision Commission to amend qualifications (1) In sections 14 to 14D, recognised accountancy body means - the Institute of Chartered Accountants in England and Wales; the Institute of Chartered Accountants in Scotland; (c) the Institute of Chartered Accountants in Ireland; (d) the Association of Chartered Certified Accountants; (e) (f) the Chartered Institute of Public Finance and Accountancy; or the Association of Authorised Public Accountants. (2) Notwithstanding sections 14 to 14D, the Financial Supervision Commission may by order- amend the definition of recognised accountancy body in subsection (1) by adding, deleting or substituting any body; provide that any individual, partnership, body corporate or limited liability company of a class described in the order shall, on such conditions as are specified in the order, be qualified for appointment as auditor of a company; or (c) amend section 14D(2), or (c) by adding, deleting or substituting persons who are disqualified from such an appointment, or by varying the circumstances in which persons described in that paragraph are disqualified from such an appointment. (3) An order under subsection (2) shall not come into operation unless it is approved by Tynwald. 14G. Register of auditors (1) The Financial Supervision Commission may by regulations (in this section referred to as register regulations ) provide for the keeping by it, in such circumstances and for such purposes as are prescribed, of registers of - persons or bodies who are (i) qualified for appointment as auditor of companies (including companies within the meaning of the Companies Act 2006 (c.13) as well as companies within the meaning of this Act); and (ii) appointed to act as auditor of such companies; and persons or bodies authorised under section 14E. (2) Register regulations may make provision in respect of any of the following matters when and by whom an application to be entered in a register referred to in subsection (1) must be made; the form, content and manner of such an application; (c) the payment of such application and periodical fees as are prescribed; (d) the circumstances in which an application for registration may be refused or have conditions attached to it; (e) the circumstances when registration may be (i) suspended; (ii) withdrawn, or (iii) made subject to conditions; and (f) provisions establishing a tribunal to hear appeals pursuant to subsection (3). (3) Where register regulations provide for the refusal, suspension or withdrawal of registration or for the imposing of conditions in respect of a registration, the regulations must make provision enabling a person who is aggrieved by a decision to refuse, suspend or withdraw registration or to impose conditions in relation to a registration to appeal, in accordance with rules made under section 8 of the Tribunals Act 2006 (c.1), to an appropriate tribunal. (4) Register regulations may require persons or bodies registered in a register referred to in subsection (1); or companies which appoint a person or body referred to in paragraph as auditor, to provide such information to the Financial Supervision Commission in such manner and at such times are the regulations prescribe. (5) Register regulations may require persons or bodies registered to comply with standards of or adopt practices recommended by a body specified in the regulations, and may in particular require compliance with standards or the adoption of practices recommended by that body from time to time (that is, as well after as before the making of the regulations). (6) Register regulations may require persons or bodies registered in a register referred to in subsection (1) to comply with the prescribed conditions requiring such persons or bodies and their employees and agents