Jersey Announces Companies Law Amendments

by Robert Lee, Tax-News.com, London

05 January 2009

The Jersey Financial Services Commission on Monday published a consultation paper on draft legislation to amend the existing set of regulations for companies operating in Jersey to take into account a recent European Union Directive and improve convergence with international accounting and auditing standards.

The amendments aim to:

• firstly, respond to the impact on Jersey auditors of European Union Directive 2006/43/EC (the Statutory Audit Directive); and
• secondly, improve Jersey’s level of compliance with an international standard issued by the International Organisation of Securities Commissions (IOSCO) relating to accounting and auditing standards.

The Statutory Audit Directive introduces harmonized provisions in all European Union (EU) Member States relating to auditor eligibility and independent oversight.

Once certain transitional provisions have expired, the Statutory Audit Directive will subject auditors of Jersey companies with securities admitted to trading on a regulated market in the EU 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 may grant a derogation from this requirement (but will not be obliged to grant such a derogation) where the auditor is subject to an EU equivalent system of public oversight, quality assurance, investigations and penalties.

The regulations would amend the Companies Law so that Jersey can establish an auditor oversight regime that should meet the equivalence requirements of the Statutory Audit Directive. The introduction of such a regime may avoid the need for a Jersey auditor:

• to apply for registration in each Member State in which it acts as an auditor to a Jersey company whose securities are admitted to trading on a regulated market (or allow it to benefit from “lighter touch” registration); and
• to be subject to the systems of oversight, quality assurance, investigation and penalties in each Member State in which it is registered,

although it will be up to each Member State to determine the extent to which it recognises the equivalence of Jersey’s regime.

The application of full Statutory Audit Directive requirements by more than one Member State would prove to be quite onerous and expensive. For example, a local auditor auditing Jersey companies 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 Member States.

The Regulations would also amend the Companies Law to enhance Jersey’s level of compliance with an international standard on accounting and auditing standards issued by IOSCO. Specifically, the Companies Law would be amended to:

• provide for statutorily prescribed accounting standards to be adopted by Jersey companies whose securities are admitted to trading on a regulated market in the EU; and
• provide a mechanism for enforcing compliance with accounting and auditing standards that apply to companies whose securities are admitted to trading on a regulated market in the EU.

The Commission is seeking comments from interested parties by March 31, 2009.

Recommended