Accounts Audit

[Mat T4158]

Hi,

I would like to request that an audit is carried out under section s476 of the company act 2006.

Can someone point me to a template with the correct way of doing this. I don't want it to be refused or ignored. I believe that it will highlight failures within the company.


Thanks

 

[KAC]

What was the outcome of the meeting that you had planned with the other shareholder to resolve matters?

An audit under Section 476 is very unlikely to produce any meaningful information. The auditors would not be required to consult with you and neither would they report directly to you. They would be engaged by the directors and their audit report would be made solely to the Company's Members as a body.

If you need more than that you will need to commence litigation

 

[Mat T4158]

The meeting was productive and somethings were solved but not all. I understand that an Audit may not produce any meaningful information. On the other had it may produce something so I feel its worth asking for.

Do you have an idea where I could find a template so I can ask for one as a member? Or is it as simple as just sending a letter asking for it.

 

[Scalloway]

You can buy one from Simply Docs

https://simply-docs.co.uk/Annual-Accounts--Audit-/Shareholders’-Audit-Request-Letter

 

[Mat T4158]

Thank you

 

[KAC]

The meeting was productive and somethings were solved but not all. I understand that an Audit may not produce any meaningful information. On the other had it may produce something so I feel its worth asking for.

Do you have an idea where I could find a template so I can ask for one as a member? Or is it as simple as just sending a letter asking for it.

I am not a lawyer so can only give you a personal opinion upon which you should not rely. I would write something like this and send it both as a PDF by email and by Special Delivery letter although I believe they do not currently obtain a signature on receipt due to Covid-19.

The Directors
XYZ Limited

Dear Sirs

I refer to S476 of Companies Act 1976 and give notice as registered owner of 50% of the issued share capital in XYZ Limited that I require the directors to commission an audit of the company's accounts for the current year that commenced on DD/MM/YYYY

Please acknowledge receipt of this letter.

Yours faithfully

J.Smith

You need to bear in mind that current accountants may not be registered for audit purposes and a new accountancy firm would have to be appointed. In any case, due to Covid, filing deadline has been extended to 12 months from end of accounting period before accounts need to be filed

But have just noticed reply from @Scalloway but thought I would finish this anyway

 

[thevaliant]

The requirement to request an audit is only 10% shareholding.

However, I will tell you now:

1. The auditors will not speak to you at all, unless you are also a director.
2. The audit report will be clean (highlight no issues).

OR;

1. The company won't get an audit. There is no remedy for you if the directors ignore/refuse your request.

 

[KAC]

The requirement to request an audit is only 10% shareholding.

However, I will tell you now:

1. The auditors will not speak to you at all, unless you are also a director.
2. The audit report will be clean (highlight no issues).

OR;

1. The company won't get an audit. There is no remedy for you if the directors ignore/refuse your request.

Not totally correct.

I agree with you that the auditors should not speak to you unless authorised to do so by the directors.

You cannot say that the audit report will be clean. That depends solely upon the work carried out by the audit team and the opinion of the responsible auditor after he/she has considered the audit evidence and explanations available to him/her.

There are remedies available should the directors fail to appoint an auditor. Unfortunately the legal costs could be significant.

 

[The Resolver]

There is no remedy for you if the directors ignore/refuse your request.

As KAC points out there is indeed a remedy. Failure to carry out their duties as directors opens up a remedy whereby the shareholder can issue a claim in the name of the company (a derivative action under s260 of the Companies Act 2006)) against the directors for their clear breach of the duty on them under s174 of the Companies Act 2006 to exercise reasonable care skill and diligence. Refusing/failing to comply with their duties in law amounts to clear failure to show such reasonable care, skill and diligence.

Any damage that results can produce a judgment not just ordering them to instruct the audit but ordering the directors to pay PERSONALLY for any damage suffered by the company as a result of the delay (eg not noticing speedily enough an improper outgoing of funds).

 

[Mat T4158]

I am not a lawyer so can only give you a personal opinion upon which you should not rely. I would write something like this and send it both as a PDF by email and by Special Delivery letter although I believe they do not currently obtain a signature on receipt due to Covid-19.

The Directors
XYZ Limited

Dear Sirs

I refer to S476 of Companies Act 1976 and give notice as registered owner of 50% of the issued share capital in XYZ Limited that I require the directors to commission an audit of the company's accounts for the current year that commenced on DD/MM/YYYY

Please acknowledge receipt of this letter.

Yours faithfully

J.Smith

You need to bear in mind that current accountants may not be registered for audit purposes and a new accountancy firm would have to be appointed. In any case, due to Covid, filing deadline has been extended to 12 months from end of accounting period before accounts need to be filed

But have just noticed reply from @Scalloway but thought I would finish this anyway

Thank you, this is very helpful. Will also help out others.

 

[Urbanninja86]

Hi All,

Im in a similar situation and wondered if anyone can shed any light on estimated costs/Timeframes etc?

50/50 shareholder deadlock in England.

My audit request has been ignored and wondered if it’s worth pursuing through the courts. I suspect stealing is going on and am being starved off all income from the company trying to force my share sale. Im walking away from litigation at this stage due to covid and valuations but just interested in any info around audit being ignored and what can done? Would the directors have to pay back any court fees to me if I went down this route?

Unfortunately money is a problem for me at this stage which the other shareholder is massively leveraging their advantage for any negotiations. The company owes me money in the form of directors loan that they will not give me.

Many thanks any info appreciated.
Peter