Paragraph 4 Meaning of “associate of auditor” and “distant associate”

(1)

This paragraph defines what is meant in paragraph 2 by an “associate” of the auditor.

(2)

The following are associates of the auditor—

(a)

any person controlled by the auditor or by any associate of the auditor (whether alone or through two or more persons acting together to secure or exercise control), but only if that control does not arise solely by virtue of the auditor or any associate of the auditor acting—

(i)

as an insolvency practitioner in relation to any person;

(ii)

in the capacity of a receiver, or a receiver or manager, of the property (or part of the property) of the Society of Lloyd's, a syndicate, a managing agent or other body corporate; or

(iii)

as a judicial factor on the estate of any person;

(b)

any person who, or group of persons acting together which, has control of the auditor;

(c)

any person using a trading name which is the same as or similar to a trading name used by the auditor, but only if the auditor uses that trading name with the intention of creating the impression of a connection between the auditor and that other person; or

(d)

any person who is party to an arrangement with the auditor, with or without any other person, under which costs, profits, quality control, business strategy or significant professional resources are shared.

(3)

Where the auditor is a partnership, the following shall also be regarded as associates of the auditor—

(a)

any other partnership which has a partner in common with the auditor;

(b)

any partner in the auditor;

(c)

any body corporate which is in the same group as a body corporate which is a partner in the auditor;

(d)

any body corporate which is in the same group as a body corporate which is a partner in a partnership which has a partner in common with the auditor; or

(e)

any body corporate of which a partner in the auditor is a director.

(4)

Where an auditor is a body corporate (other than one which is also a partnership as defined in sub-paragraph (6)(d)), each of the following shall also be regarded as an associate of the auditor—

(a)

any other body corporate which has a director in common with the auditor;

(b)

any director of the auditor;

(c)

any body corporate which is in the same group as a body corporate which is a director of the auditor;

(d)

any body corporate which is in the same group as a body corporate which has a director in common with the auditor;

(e)

any partnership in which a director of the auditor is a partner;

(f)

any body corporate which is in the same group as the auditor;

(g)

any partnership in which any such body corporate which is in the same group as the auditor is a partner.

(5)

A distant associate of an auditor is a person who is an associate of that auditor by reason only that that person is an associate within one or more of—

(a)

paragraph 4(2)(a) where the person in question is controlled by a distant associate of the auditor but not by the auditor or by an associate who is not a distant associate;

(b)

paragraph 4(3)(a), (d) or (e);

(c)

paragraph 4(4)(a), (d) or (e).

(6)

For the purposes of this paragraph—

(a)

“acting as an insolvency practitioner” shall be construed in accordance with section 388 of the Insolvency Act 1986 M1 or Article 3 of the Insolvency (Northern Ireland) Order 1989 M2;

(b)

“director” includes any person occupying the position of director, by whatever name called;

(c)

“partner” includes a member of a limited liability partnership;

(d)

“partnership” includes a limited liability partnership and a partnership constituted under the law of a country or a territory outside the United Kingdom;

(e)

a person able, directly or indirectly to control or materially to influence the operating and financial policy of another person shall be treated as having control of that other person; and

(f)

a body corporate is in the same group as another body corporate if one is a subsidiary of the other.

(7)

In this paragraph “subsidiary” means a subsidiary undertaking that is a body corporate.

Annotations

Marginal citations

M1: 1986 c.45; section 388 has been amended by section 4(2)(a) to (c) of the Insolvency Act 2000 (c.39), by section 11(1) of the Bankruptcy (Scotland) Act 1993 (c.6) and by S.I. 1994/2421, 2002/1240 and 2002/2708.
M2: S.I. 1989/2405 (N.I. 19); Article 3 has been amended by Article 6(1)(a) to (c) of the Insolvency (Northern Ireland) Order 2002 (S.I. 2002/3152 (N.I. 6); and by S.R. 1995/225, 2002/334 and 2003/550.

Notes on the whole SI

Textual amendments

F1: Regulations revoked (14.12.2023 for the revocation of reg. 32) by Financial Services and Markets Act 2023 (c. 29), s. 86(3), Sch. 1 Pt. 2 (with s. 1(4)); S.I. 2023/1382, reg. 2(c)(i)