Environmental and social transparency under the ... - ClientEarth

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106 | Environmental and social transparency under the Companies Act 2006Annex 3: EU law on company environmental and social accounting and reporting | 107and about the company’s attitude towards the environment and the enterprise’senvironmental performance to the extent that they may have consequences onthe financial health of the company.”Current legal requirements, and the regulatory framework established inUK law to ensure compliance with them, are inadequate to address theproblems that the Commission identified here.A.3.4The Transparency Directive (Directive 2004/109/EC)The Transparency Directive was introduced with the aim of creating acommon framework across Europe for information disclosure by companiestraded on stock exchanges in the EU. It was part of the FinancialServices Action Plan (FSAP), an even broader European project, whichwas designed to create a single European capital market. The TransparencyDirective works alongside other pieces of FSAP legislation, in particularthe Market Abuse Directive. 288N.B.In the Transparency Directive’s recitals, 289 the Council comments on thenature of the appropriate body to supervise compliance with accountingand reporting obligations, stating that [emphasis added]:‘whereas:… (28) A single competent authority should be designated in eachMember State to assume final responsibility for supervising compliance withthe provisions adopted pursuant to this Directive, as well as for internationalcooperation. Such an authority should be of an administrative nature, and itsindependence from economic players should be ensured in order to avoidconflicts of interest. Member States may however designate another competentauthority for examining that information referred to in this Directive is drawnup in accordance with the relevant reporting framework and taking appropriatemeasures in case of discovered infringements; such an authority need not be ofan administrative nature.’This is of obvious relevance to the appropriate constitution of the UKauthority, the FRRP (see Proposal 2 above).DIRECTIVE 2004/109/EC OF THE EUROPEAN PARLIAMENT AND OF THECOUNCIL of 15 December 2004 on the harmonisation of transparency requirementsin relation to information about issuers whose securities are admitted totrading on a regulated market and amending Directive 2001/34/ECChapter II: PERIODIC INFORMATIONArticle 4Annual financial reports2. The annual financial report shall comprise:(a) the audited financial statements;(b) the management report5. The management report shall be drawn up in accordance with Article 46 of Directive78/660/EEC and, if the issuer is required to prepare consolidated accounts,in accordance with Article 36 of Directive 83/349/EEC.The Directive includes an obligation on companies to produce (as part ofits annual financial reports) a ‘management report’, in accordance withArticle 46 of Directive 78/660/EEC, which now includes certain (limited)environmental and social requirements as a result of the amendments ofDirective 2003/51/EC (the Accounts Modernisation Directive).The Transparency Directive’s requirements for environmental and socialreporting at EU level are incorporated at UK level in both the CompaniesAct 2006 and the FSA Disclosure Rules and Transparency Rules.
108 | Environmental and social transparency under the Companies Act 2006Annex 4: Auditing of company environmental and social accounting and reporting | 109Annex 4:Auditing of company environmental andsocial accounting and reportingA.4.1 Auditing under the Companies Act 2006 109A.4.1.1A.4.1.2A.4.1.3Appointment of auditorsAuditors’ powersRequirements for the auditor’s reportA.4.2 Assurance 116A.4.2.1A.4.2.2A.4.2.3Voluntary take-up of external assurance for voluntaryenvironmental and social reportingTypes of assurance providerInternational assurance standards for non-financial reportingA.4.1 Auditing under the Companies Act 2006The annual accounts and reports of UK companies must be subjected toan audit process whereby independent auditors are appointed, given certainrights of access to information, and charged with a duty to prepare an‘auditors’ report’. 290 The purpose of this process is to verify the accuracy,reliability and quality of the accounts and report. The process is laid outin statute by the Companies Act 2006.A.4.1.1Appointment of auditorsCompanies Act 2006s489 Appointment of auditors of public company: general(1) An auditor or auditors of a public company must be appointed for each financialyear of the company, unless the directors reasonably resolve otherwise on theground that audited accounts are unlikely to be required.(2) For each financial year for which an auditor or auditors is or are to be appointed(other than the company’s first financial year), the appointment must be madebefore the end of the accounts meeting of the company at which the company’sannual accounts and reports for the previous financial year are laid.(3) The directors may appoint an auditor or auditors of the company—(a) at any time before the company’s first accounts meeting;(b) following a period during which the company (being exempt from audit)did not have any auditor, at any time before the company’s next accounts
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About this bookSince the Companies
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ClientEarthBen Bundock | Tim Malloc
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