The Companies Act 2006 (Recognition of Third Country Qualifications and Practical Training) (Amendment) Regulations 2025 amend the Companies Act 2006 to clarify the recognition of third-country audit qualifications and relax restrictions on practical training providers.
The amendments aim to improve clarity, streamline processes, promote international standards, and increase the flexibility of the regulatory framework by aligning with current best practices and the Professional Qualifications Act 2022.
Specific changes include substituting subsections within Section 1221 and Schedule 11 to enhance the criteria for qualification recognition and practical training provisions.
Arguments For
Improved Clarity and Alignment: The amendments clarify the requirements for recognizing third-country qualifications for statutory auditors, aligning them with the Professional Qualifications Act 2022 and ensuring consistency in standards.
Enhanced Flexibility: Modifications to practical training provisions broaden the eligibility of training providers, potentially increasing access and availability for aspiring auditors from various backgrounds.
Streamlined Processes: The changes aim to simplify the approval process for third-country qualifications, reducing administrative burden on both applicants and regulatory bodies.
International Harmonization: By clarifying requirements and removing outdated restrictions, the regulations foster better collaboration and recognition of qualifications across national borders, promoting international standards in auditing.
Legal Basis: The regulations are made under the Retained EU Law (Revocation and Reform) Act 2023, providing a clear legal foundation for the changes.
Arguments Against
Potential for Increased Complexity: The introduction of new subsections and amendments could lead to unintended complexities in the interpretation and application of the Companies Act 2006, causing confusion for stakeholders.
Implementation Challenges: Effective implementation may require updated guidance and training for those involved in the approval and recognition of qualifications, which may take time and resources.
Unintended Consequences: Broadening eligibility criteria for practical training could potentially lead to inconsistencies in training quality or oversight, requiring robust monitoring mechanisms.
Limited Scope: The amendments primarily address auditing qualifications and practical training. Other areas requiring updates or reform in the Companies Act 2006 related to international recognition remain unaddressed.
Impact Assessment Concerns: The explanatory note indicates a lack of a full impact assessment. Whilst a lack of significant impact is anticipated, a future evaluation may show otherwise.
The Secretary of State makes these Regulations in exercise of the powers conferred by sections 14(2), 14(4)(b), 14(7) and 20(1)(b) of the of the Retained EU Law (Revocation and Reform) Act 2023 (“the 2023 Act”)1.
The Secretary of State is a relevant national authority for the purposes of section 14(2) of the 2023 Act2.
The requirements of paragraph 6(2) of Schedule 5 to the 2023 Act (relating to the appropriate Parliamentary procedure for these Regulations) have been satisfied.
This introductory section explains the legal basis for these regulations.
The Secretary of State is authorized to create these regulations by sections of the Retained EU Law (Revocation and Reform) Act 2023.
Additionally, it confirms that the necessary parliamentary procedures were followed.
These Regulations may be cited as the Companies Act 2006 (Recognition of Third Country Qualifications and Practical Training) (Amendment) Regulations 2025.
These Regulations come into force 40 days after the day on which they are made.
These Regulations extend to England and Wales, Scotland and Northern Ireland.
This section details the title, effective date, and geographical scope of the regulations.
The regulations will be known by the given title and will come into force 40 days after their creation.
These regulations apply across the entire UK.
Part 42 of the Companies Act 2006 (statutory auditors)3 is amended as follows.
In section 1221 (approval of third country qualifications)4—
(a) for subsection (1A)(a) substitute—
(a) already holds a professional qualification which—
(i) covers subjects and skills which are the same or substantially the same as the subjects and skills that are covered by a recognised professional qualification, where the knowledge of those subjects and skills is essential for the pursuit of the profession of statutory auditor, and
(ii) demonstrates knowledge of those subjects and skills to the same or substantially the same standard as that demonstrated by the recognised professional qualification, or;
(b) for subsection (1A)(b) substitute—
(b) holds a professional qualification which does not comply with paragraph (a) and has met whichever of the requirements of subsection (1B) as is specified in the declaration;
(c) in subsection (7A), for paragraph (a) substitute—
(a) must test the person’s knowledge of required subjects and skills;
(d) after subsection (7A) insert—
(7AA) For the purposes of subsection (7A), a subject or skill is a required subject or skill if it is covered by a recognised professional qualification and knowledge of it is essential for the pursuit of the profession of statutory auditor, but—
(a) the professional qualification already held by the person (“the existing qualification”) does not cover the same or substantially the same subject or skill, or
(b) the existing qualification does not demonstrate knowledge of that subject or skill to the same or substantially the same standard as that demonstrated by the recognised professional qualification.
This section outlines amendments to Section 1221 of the Companies Act 2006, which governs the approval of third-country qualifications for statutory auditors.
Changes clarify the required equivalence between third-country qualifications and UK recognized qualifications in terms of subjects, skills and knowledge standards.
It adds a new subsection (7AA) to define "required subject or skill" for aptitude testing purposes.
In paragraph 9 (practical training) of Schedule 11 (requirements for recognition of a professional qualification)5—
(a) in sub-paragraph (4)(b) for “an EEA State, or part of an EEA State” substitute “a country or territory outside the United Kingdom, where the conditions in sub-paragraph (4A) are met in relation to that person.”;
(b) after sub-paragraph (4) insert—
(4A) Those conditions are that—
(a) the Secretary of State has determined for the purposes of sub-paragraph (2) that the law and practice with respect to the audit of accounts in the country or territory outside the United Kingdom is similar to that in the United Kingdom,
(b) the body offering the qualification is satisfied that the person has been approved by the body or organisation responsible for approving a person as being eligible under the law of the country or territory outside of the United Kingdom for appointment as an auditor of accounts, and
(c) the body offering the qualification is satisfied that the approval corresponds to the approval of a person as being eligible for appointment as a statutory auditor in the United Kingdom;
(c) omit sub-paragraph (5).
This section details amendments to paragraph 9 of Schedule 11 of the Companies Act 2006 which concerns practical training requirements for qualification recognition.
The amendments broaden eligibility for practical training providers to include those from countries outside the UK. New conditions ensure that the country’s laws and practices are similar to the UK’s and that the provider has appropriate approval.
The amendments made by regulation 2(3) do not affect the validity of any approval to provide practical training granted to a person under paragraph 9(3) of Schedule 11 to the Companies Act 2006 before the commencement of these Regulations.
This transitional provision ensures that any approvals for practical training given before these regulations take effect remain valid.
Justin Madders
Parliamentary Under-Secretary of State
at 11.00 a.m. on 3rd April 2025
Department for Business and Trade
This section shows the signatory and their position within the Department of Business and Trade, along with the date of signing.