Auditor provisions in credit agreements
The Competition Commission (CC) has been conducting a market investigation into statutory audit services and has been reviewing clauses in loan agreements relating to the appointment of auditors. The CC has now issued its final report and one of its package of remedies is a ban on provisions in loan agreements limiting auditor choice (although the CC has back-tracked somewhat from what it originally proposed). However, loan agreements in effect at the date of the relevant order (expected by 1 October 2014) will be exempt and so there is no immediate need to change credit agreements.
Following a referral from the Office of Fair Trading (OFT) in October 2011, the CC has been conducting a market investigation into statutory audit services for large UK companies and, after a period of consultation, published a provisional package of remedies in July 2013. Following a further round of consultation, the CC has now published its final report.
One area of focus of the CC has been on provisions in loan documents that prescribe who a company’s auditors may be. As a result of its investigations, the CC has concluded that restrictions on auditor choice contained in loan agreements have added ‘to the reputational barriers mid-tier [audit] firms face in expanding within or entering the FTSE 350 statutory audit market’. In effect, they give the Big 4 audit firms an unfair advantage. Accordingly, as part of a wider package of remedies, the CC has decided to impose restrictions on such provisions. However, the CC has pulled back from the blanket ban it proposed in its July provisional decision on remedies…
If you are registered and logged in to the site, click on the link below to read the rest of the Allen & Overy briefing. If not, please register or sign in with your details below.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.
News from The Lawyer
Analysis from The Lawyer
Which firms are cutting it in this era of slimline rosters, and who are the GC new brooms making clean sweeps? The Lawyer can reveal all
At the time of its launch Accutrainee was described as a revolutionary change to the training model. Has it proved to be so? Not really.