1998/99 Legislative Session: 3rd Session, 36th Parliament
FIRST READING


The following electronic version is for informational purposes only.
The printed version remains the official version.


BILL 85 -- 1999

COMPANY ACT

... continued ...

 
Part 7 -- Audits

Division 1 -- Definition and Application

Definition

221 In this Part, "qualified person" means a person who is qualified under section 224 to be appointed as an auditor of a company.

Application of this Part

222 (1) Subject to subsections (2) and (3), a company must have an auditor.

(2) If all of the shareholders of a company, whether or not their shares otherwise carry the right to vote, unanimously waive, in writing, the appointment of an auditor, the company is not required to appoint an auditor, and the provisions of this Part, except this section, do not apply to the company unless an auditor is appointed under section 223 (5).

(3) A waiver referred to in subsection (2) may be given before or after the date on which an auditor is, under this Part, required to be appointed and is effective for one financial year only.

 
Division 2 -- Appointment and Removal of Auditors

Appointment of auditors

223 (1) The directors of a company for which an auditor is to be appointed may appoint a qualified person as the first auditor of the company to hold office until the annual reference date following the auditor's appointment.

(2) The shareholders of a company for which an auditor is to be appointed must, by ordinary resolution, appoint a qualified person as auditor to hold office until the next annual reference date.

(3) If an auditor is not appointed when required under subsection (2), the auditor in office continues as auditor until a successor is appointed.

(4) The directors may fill any vacancy in the office of auditor.

(5) If for any reason a company that is required to have an auditor under this Act does not have an auditor, the court may, on the application of a shareholder or creditor of the company,

(a) appoint a qualified person as auditor to hold office until the next annual reference date, and

(b) set the remuneration to be paid by the company to the auditor.

(6) Promptly after an auditor is appointed, the company must give written notice to the auditor of the appointment.

Qualifications of auditors

224 Subject to section 225, a person is qualified to act as an auditor of a company if

(a) the person is

(i) a member of a Provincial or Territorial Institute/Ordre of Chartered Accountants within Canada,

(ii) a member of The Certified General Accountants Association of British Columbia, or

(iii) certified, under section 240, by the Auditor Certification Board, or

(b) in the case of a company that is a reporting issuer, the person is

(i) a person referred to in paragraph (a), or

(ii) authorized under the Securities Act to perform the audit.

Independence of auditors

225 (1) A person who is not independent of a company, its affiliates or its directors and officers is not qualified to be the auditor of the company.

(2) For the purposes of this section, independence is a question of fact, but

(a) a person is not independent who is a director, officer or employee of the company or of an affiliate of the company, or who is a partner, employer, employee or member of the immediate family of such a director, officer or employee,

(b) a person is not independent if that person, a member of the immediate family of that person, a partner of that person or a member of the immediate family of a partner of that person, beneficially owns or controls, directly or indirectly, any material interest in securities of the company or of any of its affiliates, and

(c) a person is not independent who is appointed a trustee of the estate of the company under the Bankruptcy and Insolvency Act (Canada) or who is a partner, employer employee or member of the immediate family of that trustee.

(3) For the purposes of subsection (2),

(a) the immediate family of a person referred to means any of the following who resides with that person:

(i) the spouse of that person;

(ii) a parent or child of that person;

(iii) any relative of that person or of that person's spouse, and

(b) a partner of a person referred to means any person with whom that person carries on in partnership the profession of public accounting.

Remuneration of auditors

226 (1) Subject to subsection (2), the shareholders of a company must, by ordinary resolution, set the remuneration of the auditor.

(2) The directors may set the remuneration of the auditor if

(a) the shareholders so resolve by an ordinary resolution,

(b) the articles so provide, or

(c) the auditor is appointed by the directors.

Disqualification of auditors

227 (1) An auditor of a company who is not or who ceases to be qualified under section 224 or 225 to act in that capacity must, promptly after becoming aware of that disqualification,

(a) eliminate the circumstances that cause the auditor to be disqualified, or

(b) resign as auditor.

(2) An interested person may apply to the court for an order that an auditor of a company who is not qualified to act in that capacity under section 224 or 225 be removed on terms and conditions the court considers appropriate.

(3) An interested person may apply to the court for an order exempting an auditor from disqualification under section 225 and the court may, if it is satisfied that an exemption would not unfairly prejudice the shareholders, make an exemption order on the terms it considers appropriate.

(4) An order under subsection (3) may have retrospective effect.

Removal of auditors

228 (1) A company

(a) may remove its auditor before the expiration of the auditor's term of office, and

(b) must appoint, for the remainder of that term of office, a qualified person as auditor to replace the auditor removed under paragraph (a).

(2) If an auditor is to be removed under subsection (1) (a), the auditor must be removed

(a) by an ordinary resolution passed at a general meeting, or

(b) by a unanimous resolution.

(3) Before calling a general meeting for the purpose specified by subsection (2) (a), a company must send to the auditor

(a) written notice of the intention to call the meeting, specifying the date on which the notice of the meeting is proposed to be mailed, and

(b) a copy of all material proposed to be sent to shareholders in connection with the meeting.

(4) The company must send the notice required by subsection (3) (a) to the auditor at least 14 days before the date on which the notice of the meeting is proposed to be mailed.

(5) An auditor may send written representations to the company respecting that person's proposed removal as auditor and, if those written representations are received by the company at least 5 days, not including Saturdays and holidays, before the date on which the notice of the meeting is proposed to be mailed, the company, at its expense, must mail a copy of those representations with the notice of the meeting to each shareholder entitled to receive that notice.

(6) If an auditor who provided written representations under subsection (5) is replaced, the replacement auditor may provide to the directors a written response to those representations and, if such a response is provided, the directors must provide it to the shareholders promptly after receipt.

(7) If an auditor is removed from office by a unanimous resolution under subsection (2) (b), the auditor may provide the company with written representations respecting that removal, and, if those written representations are received by the company within 30 days after the auditor's removal, the company, at its expense, must provide a copy of those representations to the shareholders, on or before the first annual reference date to follow the removal of the auditor, in one of the following manners:

(a) by making those representations available to the shareholders at the annual general meeting held on that date;

(b) if no annual general meeting is held on that date, by depositing a copy of those representations in the records office of the company on or before that date.

(8) A person must not accept appointment, or consent to be appointed, as auditor of a company if the person is replacing an auditor who has resigned, who has been removed or whose term of office has expired or is about to expire until the person has requested and received from the auditor a written statement of the circumstances and the reasons why, in the auditor's opinion, the auditor was, or is to be, replaced.

(9) Despite subsection (8), a person otherwise qualified may accept appointment or consent to be appointed as auditor of a company if, within 15 days after making the request referred to in that subsection, the person does not receive a reply.

Notice of proposed change

229 (1) Any company that is required, by its articles or under the laws of British Columbia or any other jurisdiction, to send an information circular or equivalent in relation to a solicitation of proxies must not, at an annual general meeting, propose the appointment of an auditor other than the incumbent auditor unless it has given notice of its intention to do so in its information circular or equivalent, if any, sent in respect of that meeting.

(2) If an information circular or equivalent sent in anticipation of an annual general meeting contains the notice referred to in subsection (1),

(a) at least 14 days before the mailing of the notice of the meeting, the company must send to the incumbent auditor a written notice containing the following information unless that information has already been provided to the auditor under section 202 (1) (b):

(i) notification that management does not intend to recommend, at the annual general meeting, that the auditor be reappointed;

(ii) advice as to the date on which the notice of the meeting is proposed to be mailed to the shareholders, and

(b) the incumbent auditor may send written representations to the company respecting management's intention not to recommend the auditor's reappointment and, if those written representations are received by the company at least 5 days, not including Saturdays and holidays, before the date on which the notice of the meeting is proposed to be mailed, the company, at its expense, must place a copy of those representations before the annual general meeting.

 
Division 3 -- Duties and Rights of Auditors

Auditor's duty to examine and report

230 (1) Subject to subsection (3), an auditor of a company must

(a) report in the prescribed manner on the financial statements that are required by this Act to be produced and published, and

(b) make the examinations that are, in the auditor's opinion, necessary to enable the auditor to make the report required by paragraph (a).

(2) In making the report required by this section on financial statements of a company, the auditor of the company may rely on the report of an auditor of a corporation or an unincorporated business

(a) if the accounts of that corporation or business are included in whole or in part in the financial statements of the company, and

(b) whether or not the financial statements of the company reported on by the auditor are in consolidated form.

(3) An auditor need not report under this section on financial statements that relate, or on any part of financial statements that relates, to the earlier of the 2 financial periods reported on in a comparative financial statement that the company is required to produce and publish by this Act or by a provision in a part or division of its articles entitled "Statutory Reporting Company Provisions".

Qualifications on auditor's opinion

231 If an opinion given by an auditor in a report required by section 230 (1) (a) is subject to qualification, the auditor must state, in the report, the reasons for that qualification.

Auditor's attendance at general meetings

232 (1) At least 5 days before a general meeting at which the financial statements of a company are to be considered or at which the auditor of a company is to be appointed or removed, a shareholder of the company who is entitled to attend the annual general meeting of the company may give to the company written notice requiring the attendance at the meeting of the auditor holding office at that time.

(2) If a shareholder gives written notice under subsection (1), the auditor must attend the meeting and the company must pay the expenses of that attendance.

Auditor's information to be provided at general meetings

233 (1) If the auditor is present at a general meeting, the auditor must answer questions concerning

(a) the company's financial statements being presented at that meeting, and

(b) the auditor's opinion on those financial statements as expressed in the report made under section 230 (1) (a).

(2) At the request of any shareholder attending an annual general meeting, there must be read to the meeting the report of the auditor on those financial statements that, under section 202 (3), the directors are required to place before the annual general meeting.

Amendment of financial statements and report

234 (1) The officers or directors of a company must communicate to the auditor who reported on financial statements under this Part any facts that come to their attention that

(a) could reasonably have been determined before the date on which the financial statements were published, and

(b) if known before that date, would have required a material adjustment to those financial statements.

(2) The directors must promptly amend the financial statements to reflect any of the facts referred to in subsection (1) and must send the amended financial statements to the auditor.

(3) If the auditor is notified or becomes aware, otherwise than under subsection (1), of an error or misstatement in financial statements on which the auditor has reported, the auditor must, if in the auditor's opinion the error or misstatement is one referred to in subsection (1) (b), inform each director accordingly.

(4) If the auditor informs the directors of an error or misstatement under subsection (3), the directors must promptly amend the financial statements to reflect any of the facts referred to in subsection (1) and must send the amended financial statements to the auditor.

(5) If amended financial statements are provided to the auditor under subsection (2) or (4),

(a) the auditor must promptly

(i) amend the report provided under section 230 (1) (a) in respect of those financial statements so that that report complies with this Part, and

(ii) provide the amended report to the directors, and

(b) the directors must, promptly after their receipt of an amended auditor's report under paragraph (a) of this subsection, send to the shareholders a copy of the amended report and a statement explaining the effect of the amendment on the financial position and results of the operations of the company.

Access to records

235 (1) A person who is or who has been a director, officer, employee or agent of a company or of a company's subsidiary or holding corporation must, to the extent that the person is reasonably able to do so, comply with any demand of the auditor to do the following:

(a) furnish to the auditor all of the information and explanations that the auditor considers necessary for the purpose of any examination or report that the auditor is permitted or required to make under this Act;

(b) allow the auditor access to all of the company's records, all of the records of the company's subsidiaries, if any, and all of the records of its holding corporation, if any, that the auditor may require for the purpose of an examination or report referred to in paragraph (a) and furnish to the auditor copies of those records if and as required by the auditor.

(2) An oral or written statement or report made under this section has qualified privilege.

Information as to foreign subsidiaries

236 If a subsidiary referred to in section 235 is a corporation to which this Act does not apply, the holding corporation must make available to the holding corporation's auditor the records of that subsidiary and must require the directors, officers and employees of that subsidiary to make available to the auditor of the holding corporation the information, explanations and copies required by section 235.

Right and obligation of auditors to attend meetings

237 (1) Without limiting sections 202 (1) and 229 (2), the auditor of a company is entitled, in respect of a general meeting,

(a) to attend the meeting,

(b) to receive each notice and other communication relating to the meeting that a shareholder is entitled to receive, and

(c) to be heard at the meeting on any part of the business of the meeting that deals with matters with respect to which the auditor has a duty or function or has made a report.

(2) The auditor must appear at a meeting of the directors when requested to do so by the directors and after being given reasonable notice to do so.

Qualified privilege

238 An oral or written statement or report made under this Act by the auditor or former auditor of a company has qualified privilege.

 
Division 4 -- Auditor Certification Board

Auditor Certification Board

239 (1) In this Division, "board" means the Auditor Certification Board continued under this section.

(2) The Auditor Certification Board established under the Company Act, R.S.B.C. 1996, c. 62, is continued.

(3) The board is to be comprised of

(a) one individual who is a member of The Institute of Chartered Accountants of British Columbia,

(b) one individual who is a member of The Certified General Accountants Association of British Columbia,

(c) one individual who is a member of the Certified Management Accountants Society of British Columbia, and

(d) not more than 2 other individuals.

(4) The members of the board are to be appointed by the Lieutenant Governor in Council on the terms and conditions the Lieutenant Governor in Council specifies.

(5) Unless set at a higher number by the board, a quorum of the board consists of 2 members.

(6) The board may elect one of its members as chair, establish its own procedures and make the rules it considers advisable to carry out its function.

(7) The board may, with the prior approval of the Lieutenant Governor in Council and in accordance with the Public Service Act, employ the persons it considers necessary to carry out its function.

(8) Members of the board serve without remuneration, but the Lieutenant Governor in Council may set a daily allowance to be payable to each member, and each member is to be reimbursed for reasonable travelling and out of pocket expenses, as certified by the chair of the board, that are necessarily incurred by the member in discharging the member's duties.

Board function and liability

240 (1) The function of the board is to receive applications, from persons who apply to be certified as auditors, for the purposes of section 224 (a) (iii) and to certify those persons if, in the board's opinion, they have the qualifications necessary to be auditors for the purposes of this Act.

(2) The board may take into consideration the area in which an applicant carries on or intends to carry on business, and may certify an applicant subject to terms and conditions the board considers advisable.

(3) No member of the board is liable for loss or damage suffered by any person because of anything done or omitted to be done in good faith

(a) in the performance or intended performance of any duty under this section or under section 239, or

(b) in the exercise or intended exercise of any power under this section or under section 239.

 
Division 5 -- Audit Committee

Application

241 This Division applies to companies that are reporting issuers.

Appointment and procedures of audit committee

242 (1) The directors of a company must, at their first meeting following each annual reference date, elect from among their number a committee, to be known as the audit committee, to hold office until the next annual reference date.

(2) An audit committee must be composed of at least 3 directors, of whom a majority must not be officers or employees of the company or of an affiliate of the company.

(3) The quorum for a meeting of the audit committee is a majority of the members of the committee who are not officers or employees of the company or of an affiliate of the company.

(4) The members of the audit committee must elect a chair from among their number and, subject to subsection (3), may determine their own procedures.

(5) The auditor must be given reasonable notice of, and has the right to appear before and to be heard at, each meeting of the audit committee, and must appear before the audit committee when requested to do so by the committee and after being given reasonable notice to do so.

(6) On the request of the auditor, the chair of the audit committee must convene a meeting of the audit committee to consider any matter that the auditor believes should be brought to the attention of the directors or shareholders.

Duties of audit committee

243 The audit committee must, in addition to or as part of any responsibilities assigned to it by this Act and the regulations, review and report to the directors on all financial statements produced under Part 6, and on all audit reports, before they are published.

Submission of financial statements to audit committee

244 The directors must submit to the audit committee the financial statements that are produced for a financial year of the company under Part 6 in sufficient time to allow the committee to review and report on those financial statements as required under section 243.

[ . . . PREVIOUS PART | BILL CONTENTS| NEXT PART . . . ]


[ Return to: Legislative Assembly Home Page ]

Copyright © 1999: Queen's Printer, Victoria, British Columbia, Canada