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205B.—(1) In this section—
‘affiliate’ in relation to an auditor, means a firm, body corporate or partnership considered under section 182(2) to be an affiliate of the auditor at the relevant time;
‘amount of turnover’ and ‘balance sheet total’ have the same meanings as in
section 8
of the
Companies (Amendment) Act 1986
;
‘internal audit’ means an examination of the internal control system of a public limited company, a large private company or a relevant undertaking that is conducted within the public limited company, large private company or undertaking or otherwise at the request of its audit committee, directors or other officers;
‘internal auditor’ means a person who conducts an internal audit;
‘large private company’ means either of the following:
(a) a private company limited by shares that, in both the most recent financial year of the company and the immediately preceding financial year, meets the following criteria:
(i) the balance sheet total of that company exceeds for the year—
(A) €25,000,000, or
(B) if an amount is prescribed under
section 48
(1)(l) of the Act of 2003 for the purpose of this provision, the prescribed amount;
(ii) the amount of turnover of that company exceeds for the year—
(A) €50,000,000, or
(B) if an amount is prescribed under
section 48
(1)(l) of the Act of 2003 for the purpose of this provision, the prescribed amount;
(b) a private company limited by shares if the company and all its subsidiary undertakings together, in both the most recent financial year of that company and the immediately preceding financial year, meet the criteria in paragraph (a);
‘parent undertaking’and ‘subsidiary undertaking’ have the same meaning as in the 1992 Regulations;
‘relevant undertaking’ means either of the following:
(a) an undertaking referred to in Regulation 6 of the 1993 Regulations that, in both the most recent financial year and the immediately preceding financial year of the undertaking, meets the following criteria:
(i) the balance sheet total of that undertaking exceeds for the year—
(A) €25,000,000, or
(B) if an amount is prescribed under
section 48
(1)(l) of the Act of 2003 for the purpose of this provision, the prescribed amount;
(ii) the amount of turnover of that undertaking exceeds for the year—
(A) €50,000,000, or
(B) if an amount is prescribed under
section 48
(1)(l) of the Act of 2003 for the purpose of this provision, the prescribed amount;
(b) an undertaking referred to in Regulation 6 of the 1993 Regulations if that undertaking and all of its subsidiary undertakings together, in both the most recent financial year and the immediately preceding financial year of the parent undertaking, meet the criteria in paragraph (a).
(2) Subject to subsection (16), the board of directors of a public limited company (whether listed or unlisted) shall establish and adequately resource a committee of directors, to be known as the audit committee, with the following responsibilities:
(a) reviewing, before they are presented to the board of directors for approval—
(i) the company's annual accounts, and
(ii) if the company is a parent undertaking, the group accounts of the group of undertakings of which the company is the parent undertaking;
(b) determining whether the annual accounts so reviewed comply with section 205A(2) and whether, in the committee's opinion, they give at the end of the financial year a true and fair view of—
(i) the state of affairs of the company, and
(ii) the profit or loss of the company, even if, by virtue of
section 3
(2) of the
Companies (Amendment) Act 1986
, section 3(1) of that Act does not apply to the company's profit and loss account;
(c) determining whether the group accounts so reviewed comply with section 205A(2) and whether, in the committee's opinion, they give at the end of the financial year a true and fair view of—
(i) the state of affairs of the group of undertakings of which the company is the parent undertaking, and
(ii) the profit or loss of that group;
(d) recommending to the board of directors whether or not to approve the annual accounts and group accounts so reviewed;
(e) determining, at least annually, whether in the committee's opinion, the company has kept proper books of account in accordance with section 202;
(f) reviewing, before its approval by the board of directors, the statement required to be made under section 205E(5) and (6);
(g) determining whether, in the committee's opinion, the statement so reviewed—
(i) complies with section 205E(5) and (6), and
(ii) is fair and reasonable and is based on due and careful enquiry;
(h) recommending to the board of directors whether or not to approve a statement reviewed under paragraph (f);
(i) advising the board of directors as to the recommendation to be made by the board to the shareholders concerning the appointment of the company's auditor;
(j) monitoring the performance and quality of the auditor's work and the auditor's independence from the company;
(k) obtaining from the auditor up to date information to enable the committee to monitor the company's relationship with the auditor, including, but not limited to, information relating to the auditor's affiliates;
(l) recommending whether or not to award contracts to the auditor or an affiliate of the auditor for non-audit work;
(m) satisfying itself that the arrangements made and the resources available for internal audits are in the committee's opinion suitable;
(n) reporting, as part of the report under section 158 of the Principal Act, on the committee's activities for the year, including, but not limited to, the discharge of its responsibilities under paragraph (j);
(o) performing any additional functions prescribed by regulation under
section 48
(1)(m) of the Act of 2003;
(p) performing any other functions relating to the company's audit and financial management that are delegated to it by the board of directors.
(3) Subject to subsection (16), the board of directors of each large private company and of each relevant undertaking shall either—
(a) establish an audit committee that—
(i) has all or some of the responsibilities specified in subsection (2), and
(ii) subject to subsection (8), otherwise meets the requirements of this section,
or
(b) decide not to establish an audit committee.
(4) The board of directors of each large private company and of each relevant undertaking to which subsection (3) applies shall state in their report under section 158 of the Principal Act—
(a) whether the company or undertaking, as the case may be, has established an audit committee or decided not to do so,
(b) if the company or undertaking, as the case may be, has established an audit committee, whether it has only some of the responsibilities specified in subsection (2), and
(c) if the company or undertaking, as the case may be, has decided not to establish an audit committee, the reasons for that decision.
(5) For the purpose of applying subsection (2) to a large private company or relevant undertaking that decides under subsection (3)(a) to establish an audit committee with some or all of the responsibilities specified in subsection (2)—
(a) a reference in any applicable paragraph of subsection (2) to a public limited company or the company is to be construed as a reference to the large private company or relevant undertaking, as the case may be, and
(b) subsection (2) applies to the extent specified by the large private company or the relevant undertaking with any other modifications necessary for that purpose.
(6) The audit committee is to consist of such directors as the board of directors concerned thinks fit, provided, subject to subsection (8), both of the following requirements are met:
(a) the committee consists of not fewer than 2 members;
(b) all those appointed to the committee qualify under subsection (7).
(7) A director qualifies for appointment to the audit committee unless he or she—
(a) is, or was at any time during the 3 years preceding appointment to the committee—
(i) an employee of the company or undertaking concerned, or
(ii) an employee of any subsidiary of the company concerned or of a subsidiary undertaking of the undertaking concerned,
or
(b) is the chairperson of the board of directors.
(8) The requirements specified in paragraphs (a) and (b) of subsection (6) do not apply if—
(a) only one director on the board of directors of the company or undertaking concerned qualifies under subsection (7),
(b) that director—
(i) is appointed as the sole member of the audit committee, or
(ii) is appointed as the chairperson of an audit committee consisting of not more than 2 members (including the chairperson) and has, in the case of an equal division of votes, a second or casting vote,
(c) any conditions prescribed under
section 48
(1)(m) of the Act of 2003 are met, and
(d) the directors of the company or undertaking concerned state in their report under section 158 of the Principal Act the reasons for the company's or undertaking's exemption from those requirements.
(9) Written terms of reference concerning the audit committee's role in the audit and financial management of the company or relevant undertaking concerned shall—
(a) be prepared and approved by the board of directors,
(b) be submitted for the information of the shareholders of the company or undertaking concerned at its annual general meeting, and
(c) be reviewed each year by the board of directors.
(10) Without limiting the matters that may be included under subsection (9), the terms of reference must—
(a) specify how the audit committee will discharge its responsibilities, and
(b) provide for a programme of separate and joint meetings with the management, auditor and internal auditor of the company or undertaking concerned.
(11) Subsection (9) applies also in relation to any amendments of the audit committee's terms of reference.
(12) Where the board of directors of a public limited company to which subsection (2) applies fails to establish an audit committee that is constituted in accordance with this section, each director to whom the failure is attributable is guilty of an offence.
(13) Where a director of a large private company or relevant undertaking to which subsection (3) applies fails to take all reasonable steps to comply with the requirements of subsection (4), the director is guilty of an offence.
(14) A reference in this section to the directors of a relevant undertaking is to be construed in the case of an undertaking that does not have a board of directors as a reference to the corresponding persons appropriate to that undertaking.
(15) For the purpose of applying this section to a partnership that is referred to in Regulation 6 of the 1993 Regulations and that is a relevant undertaking—
(a) the partnership is to be treated as though it were a company formed and registered under the Companies Acts,
(b) a reference in this section to a report under section 158 of the Principal Act is to be construed as a reference to a report under Regulation 14 of the 1993 Regulations, and
(c) this section applies with any other modifications necessary for that purpose.
(16) This section does not apply to—
(a) a public limited company that is a wholly owned subsidiary undertaking of another public limited company, or
(b) any company or undertaking of a class exempted under
section 48
(1)(j) of the Act of 2003 from the application of this section.”.
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