Companies (Amendment No. 4) (Jersey) Regulations 2009 (Appointed Day) Act 2010

Information about the publication of Ministerial Decisions

A formal published “Ministerial Decision” is required as a record of the decision of a Minister (or an Assistant Minister where they have delegated authority) as they exercise their responsibilities and powers.

Ministers are elected by the States Assembly and have legal responsibilities and powers as “corporation sole” under the States of Jersey Law 2005 by virtue of their office and in their areas of responsibility, including entering into agreements, and under any legislation conferring on them powers.

An accurate record of “Ministerial Decisions” is vital to effective governance, including:

demonstrating that good governance, and clear lines of accountability and authority, are in place around decisions-making – including the reasons and basis on which a decision is made, and the action required to implement a decision
providing a record of decisions and actions that will be available for examination by States Members, and Panels and Committees of the States Assembly; the public, organisations, and the media; and as a historical record and point of reference for the conduct of public affairs

Ministers are individually accountable to the States Assembly, including for the actions of the departments and agencies which discharge their responsibilities.

The Freedom of Information Law (Jersey) Law 2011 is used as a guide when determining what information is be published. While there is a presumption toward publication to support of transparency and accountability, detailed information may not be published if, for example, it would constitute a breach of data protection, or disclosure would prejudice commercial interest.

A decision made on 2 March 2010 to approve the Companies (Amendment No. 4) (Jersey) Regulations 2009 (Appointed Day) Act 2010

Decision Reference: MD-E-2010-0039
Decision Summary Title :	Companies (Amendment No. 4) (Jersey) Regulations 2009 (Appointed Day) Act 2010		Date of Decision Summary:	1 March 2010
Decision Summary Author:	Director, Finance Industry Development		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	n/a
Written Report Title :	Companies (Amendment No. 4) (Jersey) Regulations 2009 (Appointed Day) Act 2010		Date of Written Report:	1 March 2010
Written Report Author:	Director, Finance Industry Development		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Approval of the Companies (Amendment No. 4) (Jersey) Regulations 2009 (Appointed Day) Act 2010 (“the Appointed Day Act”).
Decision(s): The Minister approved the Appointed Day Act for bringing into force the main provisions of the Companies (Amendment No. 4) (Jersey) Regulations 2009 on 5 April 2010.
Reason(s) for Decision: The Companies (Amendment No. 4) (Jersey) Regulations 2009 were approved by the States on 3 December 2009. The draft Regulations will enable Jersey to establish an ‘EU equivalent’ system of auditor oversight, quality assurance, investigations and penalties and will also improve Jersey’s compliance with international standards relating to accounting and auditing matters. The Crown Dependencies are aiming for a common start date of 5 April 2010 for the auditor oversight regimes in each island.
Resource Implications: There are no financial or manpower implications for the States.
Action required: The Appointed Day Act to be lodged au Greffe for debate by the States on 23rd March 2010.
Signature: Senator A.J.H.Maclean		Position: Minister for Economic Development
Date Signed:		Date of Decision (If different from Date Signed):

Companies (Amendment No. 4) (Jersey) Regulations 2009 (Appointed Day) Act 2010

MINISTER FOR ECONOMIC DEVELOPMENT (“The Minister”)

Companies (Amendment No. 4) (Jersey) Regulations 2009

(Appointed Day) Act 2010

ISSUE AND RECOMMENDATION

The Companies (Amendment No. 4) (Jersey) Regulations 2009 (“the Regulations”) were approved by the States on 3 December 2009. This Appointed Day Act will bring into force the main provisions of the Regulations on 5 April 2010.

The Regulations will enable Jersey to establish an ‘EU equivalent’ system of auditor oversight, quality assurance, investigations and penalties and will also improve Jersey’s compliance with international standards relating to accounting and auditing matters. The Crown Dependencies are aiming for a common start date of 5 April 2010 for the auditor oversight regimes in each island.

There are no financial or manpower implications for the States.

It is recommended that the Minister approves the Appointed Day Act and that it is lodged au Greffe for debate by the States at the earliest opportunity.

BACKGROUND

The Companies (Amendment No. 4) (Jersey) Regulations 2009 (“the Regulations”) were approved by the States on 3 December 2009.

The Regulations have undergone appropriate consultation. In January 2009, the Jersey Financial Services Commission (“JFSC”) carried out a 3 month public consultation seeking comments on the Regulations. The consultation process included consulting the ‘Big 4’ audit firms, the Jersey Society of Chartered and Certified Accountants (“JSCCA”) and Jersey Finance, all of whom are content with the Regulations being put forwards.

Statutory Audit Directive

The Statutory Audit Directive (Directive 2006/43/EC) (“the Directive”) aims to harmonise the registration and oversight of auditors in all European Union Member States. The Directive will require the auditors of all ‘third country’ companies (i.e. countries registered outside of the EU) with securities admitted to trading on an EU stock exchange to be subjected to the auditor registration and oversight provisions in the relevant Member State where the company’s securities are admitted to trading.

However, an EU Member State will be able to waive this requirement of the Directive where the third country auditor is subject to an EU equivalent system of public oversight, quality assurance, investigations and penalties. Each Member State will have the power to determine the extent to which it recognises the equivalence of third country regimes.

The Regulations will insert a new Part 16 (Accounts and Audit) into the Companies (Jersey) Law 1991 (“the Companies Law”) that will enable Jersey to establish an auditor oversight regime that will meet the equivalence requirements of the Directive. Whilst many aspects of the existing Part 16 are not being changed by the Regulations, due to the nature of the amendments being made it is more practical to substitute the whole of Part 16. References to Articles below are references to Articles of the proposed new Part 16 unless otherwise stated.

The introduction of an equivalent auditor oversight regime will assist Jersey auditors by avoiding the need for them to:

apply for registration in each Member State when they act as an auditor in respect of a Jersey company whose securities are admitted to trading on a regulated market in that Member State; and

be subject to the systems of oversight, quality assurance, investigation and penalties in each Member State in which the securities are registered.

11. If the amendments are not made to Part 16 of the Companies Law, Jersey auditors will be subjected to onerous and expensive requirements. For example, a Jersey audit firm auditing a Jersey company with securities admitted to trading on stock exchanges in London, Frankfurt, Dublin and Luxembourg, would be required to register with, and follow rules set by, the competent authorities in four different Member States. It is understood that the ‘Big 4’ Jersey audit firms currently audit approximately 70 such market traded companies.

12. In order to introduce an auditor oversight regime that will meet the equivalence requirements of the Directive, the Regulations will provide that the auditor of a Jersey company whose securities are admitted to trading on a regulated market in the EU (“a market traded company”) will:

Need to be entered on a Register of Recognized Auditors (“the Register”) (and once entered on the Register an auditor will be defined under the Companies Law as a “recognized auditor”) (see proposed Article 111);

Need to meet certain criteria before being entered on the Register (see definition of ‘auditor’ in proposed Article 102 and the provisions of Article 111(2));

Have to comply with rules (“Audit Rules”) issued by a recognized professional body (e.g. the Institute of Chartered Accountants in England and Wales) governing the conduct of the audit of market traded companies (see proposed Article 112(1)(a)); and

Be monitored for compliance with those Audit Rules by the recognized professional body that issued them and be liable to disciplinary action where breaches occur (see proposed Article 113M(2)(a)). The auditor monitoring work of a recognized professional body will itself be subject to oversight by an independent body (see proposed Article 113M).

The JFSC has worked in partnership with bodies in Guernsey and the Isle of Man 1 (collectively, “the CD agencies”) with a view to implementing a common form of auditor oversight regime in the Crown Dependencies commencing 5 April 2010.

The CD agencies agreed that, on practical and economic grounds, it would be preferable to use the expertise and infrastructure of the existing United Kingdom bodies rather than attempt to set up new agencies in each of the Crown Dependencies. Consequently, the CD agencies have come to a 5 way agreement with the existing UK bodies that will see:

the Institute of Chartered Accountants in England and Wales (“ICAEW”) issue the Audit Rules referred to above, monitor the compliance of recognized auditors with them, and, if breaches occur, take disciplinary action when necessary; and

the Professional Oversight Body (“POB”) (part of the Financial Reporting Council) fulfil the role of the independent body overseeing the monitoring work of the ICAEW, as it does in the UK’s auditor oversight regime.

Should either the ICAEW or the POB (or both) be unwilling or unable at any time in the future to undertake their intended roles in the oversight regime (which is thought unlikely), there is a fall-back position that would enable the JFSC to take their place.

The costs of running the auditor oversight regime will be borne by those firms that register as recognized auditors.

IOSCO Principle 16

Principle 16 of International Organisation of Securities Commissions (“IOSCO”) states that a jurisdiction should apply accounting and auditing standards that are of a high and internationally acceptable quality. Principle 16 applies to issuers that make “public offerings” of securities and issuers whose securities are “publicly traded”.

To enhance Jersey’s level of compliance with IOSCO Principle 16 the Regulations will amend the Companies Law to:

provide for statutorily prescribed accounting standards to be adopted by market traded companies (rather than “generally accepted accounting principles”) (see proposed Article 105(2)(a)); and

provide a mechanism for enforcing compliance with accounting standards and auditing standards that will apply to market traded companies (see proposed Article 113Q).

RECOMMENDATION

It is recommended that the Minister approves the Appointed Day Act and that it is lodged au Greffe for debate by the States at the earliest opportunity.

DIRECTOR, FINANCE INDUSTRY DEVELOPMENT

1 March 2010

1 the States of Guernsey Commerce and Employment Department and the Isle of Man Financial Supervision Commission, respectively