127. Application of Part 10

(1) This Part does not apply to a Company that is exempt from these Regulations under any applicable AIFC Regulations.

(2) The requirements of this Part about accounts and audit apply in relation to each financial year of a Company.

128. Waiver etc. by the Rules

(1) The Rules may extend, exclude waive or modify the application of the provisions of this Part in relation to a specific Person or class of Persons.

(2) Without limiting subsection (1), the Rules may make provision for or in relation to the following:

• (a) the inclusion in accounts of group accounts dealing with the affairs of a Company and its Subsidiaries;
• (b) the inclusion in accounts of a report by the Directors dealing with prescribed matters;
• (c) the accounting standards or principles to be applied in the preparation of accounts, including the following:

(i) the creation or adoption of 1 or more accounting standards or principles, or codes of practice;

(ii) which of, and how, prescribed accounting standards or principles may apply to particular Companies and in particular circumstances;

(iii) periods in which an accounting standard or principle may apply;

• (d) the extending or shortening of a financial year in certain circumstances, including to facilitate synchronisation of accounts;
• (e) the appointment, qualifications, remuneration, removal, resignation, rights and duties of Auditors;
• (f) the creation or adoption of auditing standards or codes of practice;
• (g) the waiver of the requirement for the preparation of accounts and examination and reporting on accounts by Auditors.

(3) The provisions of this section are subject to section 195 (Waivers and modifications of certain provisions).

129. Accounting Records of Companies

(1) Every Company must keep Accounting Records that are sufficient to show and explain its transactions so as to:

1. (a) disclose with reasonable accuracy the financial position of the Company at any time; and
2. (b) enable the Directors to ensure that any accounts prepared by the Company under this Part comply with the requirements of these Regulations and the Rules.

(2) A Company must ensure that its Accounting Records are:

1. (a) kept at the place that the Directors consider appropriate, except so far as the Rules otherwise require; and
2. (b) preserved by the Company for at least 6 years after the day they are created or, if the Rules prescribe another period, the other period; and
3. (c) open to inspection by an Officer or Auditor of the Company at all reasonable times; and
4. (d) otherwise kept and maintained as required by the Rules.

(2-1) If a Company, for whatever reason, ceases to exist or ceases to be a Company within the meaning of these Regulations, the Directors immediately before the Company ceases to exist or ceases to be a Company shall ensure that its Accounting Records are preserved for at least 6 years from the date of cessation.

(3) If a Public Company keeps its Accounting Records outside of the AIFC, the Public Company must keep in the AIFC its returns in relation to the business it conducts in or from the AIFC.

(4) Contravention of this section is punishable by a fine.

130. Financial years

(1) The first financial year of a Company starts on the day it is incorporated and lasts for a period not exceeding 18 months decided by the Directors.

(2) However, if a Foreign Company has become a Company under section 151 (Transfer of incorporation to AIFC), the first financial year of the Company under these Regulations may, at the option of the Directors, be taken to have started at the end of the previous financial year of the Company in the jurisdiction from which it was continued as a Company. If the Directors exercise that option, the first financial year of the Company under these Regulations is the period of 12 months from the date it is taken to have started.

(3) The second or any subsequent financial year of a Company starts at the end of the Company’s previous financial year and lasts for 12 months or some other period, which is within 7 days either shorter or longer than the 12 months, as may be decided by the Directors.

131. Accounts

(1) The Directors of every Company must ensure that accounts are prepared in relation to each financial year of the Company and that the accounts comply with the requirements in this section.

(2) The accounts must:

1. (a) be prepared in accordance with accounting principles or standards prescribed by the Rules or otherwise approved by the Registrar; and
2. (b) show a true and fair view of the profit or loss of the Company for the period and of the state of the Company’s affairs at the end of the period; and
3. (c) comply with any other requirements of these Regulations and the Rules.

(3) The Directors of a Company must approve the Company’s accounts and must ensure that they are signed on their behalf by at least 1 Director.

(4) The Directors of a Company must ensure that, within 6 months after the end of each financial year of the Company, the accounts for that year are:

1. (a) prepared and approved by the Directors; and
2. (b) examined and reported upon by an Auditor; and
3. (c) if the Company is a Public Company—laid before a General Meeting, together with a copy of the Auditor’s report and Directors’ report, for discussion and, if considered appropriate, approval by the Shareholders; and
4. (d) for all Companies—sent, together with (if applicable) a copy of the Auditor’s report or Directors’ report (or both), to every Shareholder, other than a Shareholder for whom the Company does not have a current postal address.

(5) A Company must file with the Registrar, within 14 days after the day subsection (4)(d) is complied with in relation to a financial year, a copy of the accounts and the Auditor’s report for the financial year and, if the Company is a Public Company, a copy of the Directors’ report prepared under section 133 (Directors’ reports for Public Companies) for the financial year.

(6) Unless otherwise provided in its Articles of Association, a Private Company and its Directors are not required to comply with subsections (4)(b) and (5) if the Company has:

1. (a) an annual turnover of not more than U.S. $5,000,000.

(7) However, the Shareholders representing not less than 10% of the nominal value of the share capital of a Private Company to which subsection (6) applies may, by Written notice given to the Company no earlier than the start of any financial year and no later than 1 month before the end of the financial year, require the Company to obtain an audit of its accounts for financial year. The Directors of the Company must ensure that the request is complied with.

(8) If a provision of this section requires the Directors of a Company to do something, each of the Directors are severally liable if the thing is not done as required by this section.

(9) Contravention of this section is punishable by a fine.

132. Provision of copy of accounts to Shareholders

(1) Any Shareholder of a Company is entitled, on Written request made by the Shareholder to the Company and without charge, to be given:

• (a) a copy of the Company’s latest accounts, if section 131(6) (Accounts) applies; or
• (b) in all other cases, the latest audited accounts and Auditor’s report.

(2) A Company must comply with a request under subsection (1) within 7 days after the day it receives the request.

(3) Contravention of subsection (2) is punishable by a fine.

133. Directors’ report for Public Companies

(1) The Directors of a Public Company must prepare a Directors’ report for each financial year of the Company.

(2) The Directors’ report for a financial year must:

• (a) state the names of the persons who, at any time during the financial year, were Directors; and
• (b) state the principal activities of the Company during the financial year; and
• (c) state the amount (if any) that the Directors recommend should be paid by way of dividend or other Distribution; and
• (d) include a business review containing:

(i) a fair view of the Company’s business; and

(ii) a description of the risks and uncertainties facing the Company; and

(iii) an analysis of the development, performance and position of the Company’s business; and

(iv) the other information necessary for an understanding of the development, performance and position of the Company’s business; and

• (e) state that the Directors are not aware of any relevant audit information of which the Company’s Auditor is not aware, and that they have taken all reasonable steps to become aware of such relevant audit information; and
• (f) include the other matters prescribed by the Rules.

(3) The Directors’ report must be signed on behalf of the Directors by a Director or the Secretary of the Company.

(4) Each Director of a Company must ensure that the requirements of this section are complied with in relation to the Company in relation to each financial year of the Company.

(5) Contravention of subsection (4) is punishable by a fine.

134. Qualification and registration of Auditors

(1) In this Part, a reference to an Auditor is a reference to a Person who is registered by the Registrar as an auditor under this Chapter.

(2) The Rules must prescribe the criteria that a Person must meet to be registered, and to maintain registration, as an auditor. The Rules may include requirements relating to the qualifications, experience and fitness and propriety of applicants.

(3) The Rules may provide for requirements referred to in subsection (2) to be varied for applicants who are, at the time of application, regulated in a jurisdiction outside the AIFC.

(4) The Registrar may:

• (a) grant or refuse to grant an application for registration as an auditor; and
• (b) impose any restrictions or conditions on granting registration.

(5) An Auditor must act within the scope of the Auditor’s registration and comply with any restrictions and conditions imposed on the registration.

(6) The Registrar may, by Written notice given to an Auditor on the Registrar’s own initiative or at the request of the Auditor:

• (a) impose restrictions or conditions on the Auditor’s registration; or
• (b) vary or withdraw any restrictions or conditions imposed on the Auditor’s registration; or
• (c) suspend or withdraw the Auditor’s registration.

(8) In making a decision under this section, the Registrar must comply with any Rules applying in relation to the making of the decision.

135. Register of Auditors

(1) The Registrar must keep and publish a register of current and past registrations of auditors under these Regulations, including any restrictions and conditions applying to registrations. The Rules may make provision for or in relation to the register.

(2) The Registrar must make a current version of the register freely available for viewing by the public during the normal business hours of the Registrar.

136. Appointment and removal of Auditors

(1) If a Company is required by these Regulations to have its accounts examined and reported on by an Auditor, the Company must appoint an Auditor to examine and report on, in accordance with these Regulations and the Rules, the accounts prepared under section 131 (Accounts).

(2) A Person who is not an Auditor must not:

1. (a) consent to be appointed as an Auditor of a Company; or
2. (b) act as an Auditor of a Company; or
3. (c) prepare any report required by these Regulations and the Rules to be prepared by an Auditor.

(3) Contravention of subsection (2) is punishable by a fine.

(4) The appointment of a firm as an Auditor of a Company is taken to be an appointment of each Person who is a partner of the firm.

(5) A Public Company must, at each Annual General Meeting at which the accounts for the previous financial year are laid, appoint an Auditor to hold office from the conclusion of that meeting to the conclusion of the next Annual General Meeting at which the accounts are laid.

(6) Subject to section 131(6) (Accounts), a Private Company must, within 6 months after the end of a financial year or, if earlier, before the day the accounts are sent to the Shareholders, appoint an Auditor to hold office from that date until the end of the next period for appointing Auditors.

(7) The appointment of an Auditor by a Private Company must be by a resolution of its Directors unless the Shareholders, at a General Meeting, have appointed an Auditor by an Ordinary Resolution.

(8) The Directors of a Public Company may, at any time before the first General Meeting at which the accounts for the previous financial year are laid, appoint an Auditor to hold office to the conclusion of the first General Meeting.

(9) The Directors of a Company may fill any casual vacancy in the office of Auditor on the terms they consider appropriate. An Auditor appointed to fill a casual vacancy holds office:

1. (a) for a Public Company—until the conclusion of the next General Meeting at which the accounts for the previous financial year are laid; or
2. (b) for a Private Company—until the end of the next period for appointing Auditors.

(10) Subject to subsection (9), the Company may, by Ordinary Resolution, fix the Auditor’s remuneration.

(11) A Company must not appoint an Auditor under this section unless:

1. (a) the Auditor has, before the appointment, consented in Writing to the Company; and
2. (b) the Company is not, on reasonable inquiry, aware of any matter that should prevent the Auditor from giving the Auditor’s consent under paragraph (a).

(12) An Auditor must not consent to an appointment as an Auditor of a Company if:

1. (a) the Auditor has, or may reasonably be perceived to have, a conflict of interest; or
2. (b) the Auditor does not have, or may reasonably be perceived not to have, a requisite degree of independence from the Company; or
3. (c) the Auditor, or any associate of the Auditor in a firm or business undertaking, has acted as an Auditor of the Company within the earlier period or frequency prescribed by the Rules.

(13) A Company may, despite anything in any agreement between it and its Auditor, remove the Auditor at any time by Resolution.

(14) The Court may, on application made by the Registrar, order the removal of the Auditor of a Company.

(15) This section does not deprive an Auditor removed under this section of compensation or damages payable to the Auditor in respect of the termination of the Auditor’s appointment.

(16) Every Company and its Officers must take reasonable efforts to provide the information and assistance required by an Auditor for the Exercise of the Auditor’s Functions under these Regulations or the Rules.

137. Auditor’s report to Company

(1) A Company’s Auditor must make a report to the Company’s Shareholders on the accounts examined by the Auditor.

(2) The Auditor’s report must state:

• (a) whether, in the Auditor’s opinion, the accounts have been properly prepared in accordance with these Regulations and the Rules; and
• (b) in particular, whether the accounts give a true and fair view of the profit or loss of the Company for the financial year and of the state of the Company’s affairs at the end of the financial year; and
• (c) any other matter or opinion required under these Regulations or the Rules.

(3) Contravention of this section is punishable by a fine.

138. Auditors’ Functions

(1) A Company’s Auditor must, in preparing a report in relation to the accounts of the Company, conduct the investigations necessary to enable the Auditor to form an opinion about the following matters:

• (a) whether proper Accounting Records have been kept by the Company and proper returns adequate for the audit have been received from branches or offices not visited by the Auditor;
• (b) whether the Company’s accounts are in agreement with the Accounting Records and returns;
• (c) whether the Company’s accounts have been prepared in compliance with any applicable accounting principles or standards.

(2) Contravention of subsection (1) is punishable by a fine.

(3) If the Auditor is of the opinion that proper Accounting Records have not been kept by the Company, that proper returns adequate for the audit have not been received from branches or offices not visited by the Auditor, that the accounts are not in agreement with the Accounting Records and returns, or that the accounts do not comply with any applicable principles or accounting standards, the Auditor must state that opinion in the report.

(4) The Auditor has a right of access, at all reasonable times, to the Company’s Records, and is entitled to require from the Company’s Officers all the information and explanations that the Auditor considers necessary for the purposes of the audit.

(5) The Auditor is entitled to receive notice of, and attend, any meeting of Shareholders and to be heard on any part of the business of the meeting that concerns the Auditor.

(6) If the Auditor does not obtain all the information and explanations that the Auditor considers, necessary for the purposes of the audit, the Auditor must state that fact in the report.

(7) Contravention of subsection (6) is punishable by a fine.

139. Resignation of Auditor

(1) An Auditor of a Company may resign from office by depositing a Written notice to that effect, together with a statement under subsection (2), at the Company’s registered office. The notice operates to bring the Auditor’s term of office to an end on the day the notice is deposited or, if a later date is stated in the notice, on that date. The Company must send a copy of the notice to the Registrar.

(2) If an Auditor of a Company ceases to hold office for any reason, the Auditor must deposit at the Company’s registered office either:

• (a) a statement to the effect that there are no circumstances connected with the Auditor ceasing to hold office that the Auditor considers should be brought to the notice of the Shareholders or Creditors of the Company; or
• (b) a statement of any circumstances mentioned in paragraph (a).

(3) If an Auditor of a Company deposits a statement under subsection (2)(b), the Company must, within 14 days after the day the Auditor deposits the statement, send a copy of the statement to every Shareholder of the Company and to every Person entitled to receive notice of General Meetings.

(4) If an Auditor of a Company ceases to hold office for any reason, the Directors of the Company must, within 30 days after the day the Auditor ceases to hold office, appoint a replacement under section 136(9) (Appointment and removal of Auditors).

(5) Contravention of this section is punishable by a fine.

140. Cooperation with Auditors

(1) A Company, or any Officer of a Company, must not, knowingly or recklessly:

• (a) make a statement, or give information, (whether orally, in a Document or any other way) to an Auditor of the Company that is false or misleading in a material particular; or
• (b) give a Document to an Auditor of the Company that is false or misleading in a material particular; or
• (c) withhold any information from an Auditor of the Company if the withholding of the information makes information given by the Company or Officer to the Auditor false or misleading in a material particular or likely to mislead or deceive the Auditor; or
• (d) conceal any information from the Auditor if the concealment is likely to mislead or deceive the Auditor.

(2) A Company, an Officer of a Company, or a Person acting under the direction or authority of a Company or Officer of a Company, must not, without reasonable excuse, engage in conduct if the Company, Office or Person knows, or ought to know, that the conduct could:

• (a) obstruct or hinder an Auditor of the Company in the Exercise of the Auditor’s Functions; or
• (b) result in the Company’s accounts or any aspect of the Auditor’s report being false or misleading in a material particular.

(3) Without limiting subsection (2), that subsection applies to the following conduct:

• (a) destroying or concealing a Document;
• (b) coercing, manipulating, misleading, or improperly influencing the Auditor;
• (c) Failing to provide access to information or Documents required by the Auditor;
• (d) Failing to give the Auditor any information or explanation that the Person is able to give;
• (e) Failing to give the Auditor any assistance in relation to the audit that the Company, Officer or Person is required and able to give.

(4) Contravention of this section is punishable by a fine.

141. Obligation of disclosure by Auditor

(1) An Auditor is subject to obligations of disclosure under section 196 (Obligation of disclosure to Registrar).

(2) Without limiting any other provision of these Regulations, the Rules or any other Legislation Administered by the Registrar, an Auditor does not Contravene any duty to which the Auditor is subject merely because the Auditor:

• (a) makes a disclosure under section 196; or
• (b) gives the Registrar any other information or opinion in relation to a matter to which the disclosure applies or any related matter.

142. Court orders

(1) This section applies if the Court is satisfied, on application of the Registrar that an Auditor:

• (a) has Contravened these Regulations; or
• (b) has Failed, whether within or outside the AIFC, to Exercise the Functions of Auditor adequately or properly; or
• (c) is otherwise not a fit and proper Person to remain registered as an Auditor.

(2) The Court may make 1 or more of the following orders:

• (a) an order that the Registrar cancel, or suspend for a specified period, the registration of the Auditor;
• (b) an order imposing conditions or restrictions on the future conduct of the Auditor;
• (c) an order requiring the Auditor to do, or not do, anything;
• (d) any other order that the Court considers appropriate.

(3) This section does not affect the powers that any Person or the Court may have apart from this section.