§ 158 — Auditing

158.—(1) Despite the provisions of the Companies Act 1967, a licensee —(a)

must, on an annual basis and at its own expense, appoint an auditor; and

(b)

if for any reason its auditor ceases to be its auditor, must appoint another auditor as soon as practicable after such cessation.

(2) The Authority may appoint an auditor for a licensee —(a)

if the licensee fails to appoint an auditor; or

(b)

if the Authority considers it desirable that another auditor should act with the auditor appointed under subsection (1).

(3) The Authority may at any time fix the remuneration to be paid by a licensee to an auditor appointed by the Authority under subsection (2) for the licensee.

(4) The duties of an auditor appointed under subsection (1) or (2) are as follows:(a)

to carry out an audit of the transactions in relation to the digital token services provided by the licensee, in particular, in respect of the licensee’s observance of the provisions of this Act and any of the requirements imposed under any other written law administered by the Authority;

(b)

to submit a report of such audit to the Authority in such form as may be prescribed and within such time as the Authority may allow.

(5) The Authority may, by written notice to an auditor, impose all or any of the following duties on the auditor in addition to those provided under subsection (4), and the auditor must carry out the duties so imposed:(a)

a duty to submit such additional information in relation to the audit as the Authority considers necessary;

(b)

a duty to enlarge or extend the scope of the audit of the licensee’s business and affairs;

(c)

a duty to carry out any other examination, or establish any procedure, in relation to the audit in any particular case;

(d)

a duty to submit a report on any of the matters mentioned in paragraphs (b) and (c).

(6) The licensee must remunerate the auditor in respect of —(a)

any remuneration the Authority has fixed under subsection (3); and

(b)

the discharge of all or any of the additional duties of the auditor imposed under subsection (5).

(7) Despite any other provision of this Part or the provisions of the Companies Act 1967, the Authority may, if the Authority is not satisfied with the performance of any duty by the auditor of a licensee, at any time direct the licensee to —(a)

remove the auditor; and

(b)

appoint another auditor.

(8) A copy of any report under subsection (5)(d) must be submitted in writing to the Authority.

(9) If an auditor, in the course of performing the auditor’s duties, is satisfied that any of the following matters has occurred, the auditor must immediately report that matter to the Authority:(a)

there has been a serious breach or non‑observance of the provisions of this Act or any of the requirements imposed under any other written law administered by the Authority;

(b)

a criminal offence involving fraud or dishonesty has been committed;

(c)

in the case of a licensee that is a corporation, losses have been incurred that reduce the capital of the licensee by at least 50%;

(d)

there is any irregularity that has or may have a material effect on the accounts of the licensee, including any irregularity that had caused a major disruption to the provision of any type of digital token service to the customers of the licensee;

(e)

the auditor is unable to confirm that the claims of creditors of the licensee are still covered by the assets of the licensee.

(10) Where an auditor or employee of the auditor discloses in good faith to the Authority —(a)

the auditor’s or employee’s knowledge or suspicion of any of the matters mentioned in subsection (9); or

(b)

any information or other matter on which that knowledge or suspicion is based,

the disclosure is not a breach of any restriction upon the disclosure imposed by any law, contract or rules of professional conduct, and the auditor or employee is not liable for any loss arising out of the disclosure or any act or omission in consequence of the disclosure.

(11) A licensee that contravenes subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 and, in the case of a continuing offence, to a further fine not exceeding $10,000 for every day or part of a day during which the offence continues after conviction.

(12) An auditor that contravenes subsection (5) or (9) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 and, in the case of a continuing offence, to a further fine not exceeding $10,000 for every day or part of a day during which the offence continues after conviction.

(13) In this section —“capital”, in relation to a corporation, means the sum of —(a)

all of the following items in the latest accounts of the corporation:(i)

paid up ordinary share capital;

(ii)

paid up irredeemable and non‑cumulative preference share capital; and

(b)

any unappropriated profit or loss in the latest audited accounts of the corporation,

less —

(c)

any interim loss in the latest accounts of the corporation; and

(d)

any dividend that has been declared since the latest audited accounts of the corporation;

“irredeemable and non-cumulative preference share capital”, in relation to the capital of a corporation, means share capital consisting of preference shares that satisfy all of the following requirements:(a)

the principal of each share of the corporation is perpetual;

(b)

the shares of the corporation are not callable at the initiative of the corporation or the shareholders, and the principal of the shares cannot be repaid outside of liquidation of the corporation, except in the case of a repurchase or other manner of reduction of share capital that is initiated by the corporation and permitted under written law;

(c)

the corporation has full discretion to cancel dividend payments, and —(i)

the cancellation of dividend payments is not an event of default of the corporation under any agreement;

(ii)

the corporation has full access to cancelled dividend payments to meet its obligations as they fall due; and

(iii)

the cancellation of dividend payments does not result in any restriction being imposed on the corporation under any agreement, except in relation to dividend payments to ordinary shareholders of the corporation.

—(1) Despite the provisions of the Companies Act 1967, a licensee —(a)

must, on an annual basis and at its own expense, appoint an auditor; and

(b)

if for any reason its auditor ceases to be its auditor, must appoint another auditor as soon as practicable after such cessation.

(2) The Authority may appoint an auditor for a licensee —(a)

if the licensee fails to appoint an auditor; or

(b)

if the Authority considers it desirable that another auditor should act with the auditor appointed under subsection (1).

(3) The Authority may at any time fix the remuneration to be paid by a licensee to an auditor appointed by the Authority under subsection (2) for the licensee.

(4) The duties of an auditor appointed under subsection (1) or (2) are as follows:(a)

to carry out an audit of the transactions in relation to the digital token services provided by the licensee, in particular, in respect of the licensee’s observance of the provisions of this Act and any of the requirements imposed under any other written law administered by the Authority;

(b)

to submit a report of such audit to the Authority in such form as may be prescribed and within such time as the Authority may allow.

(5) The Authority may, by written notice to an auditor, impose all or any of the following duties on the auditor in addition to those provided under subsection (4), and the auditor must carry out the duties so imposed:(a)

a duty to submit such additional information in relation to the audit as the Authority considers necessary;

(b)

a duty to enlarge or extend the scope of the audit of the licensee’s business and affairs;

(c)

a duty to carry out any other examination, or establish any procedure, in relation to the audit in any particular case;

(d)

a duty to submit a report on any of the matters mentioned in paragraphs (b) and (c).

(6) The licensee must remunerate the auditor in respect of —(a)

any remuneration the Authority has fixed under subsection (3); and

(b)

the discharge of all or any of the additional duties of the auditor imposed under subsection (5).

(7) Despite any other provision of this Part or the provisions of the Companies Act 1967, the Authority may, if the Authority is not satisfied with the performance of any duty by the auditor of a licensee, at any time direct the licensee to —(a)

remove the auditor; and

(b)

appoint another auditor.

(8) A copy of any report under subsection (5)(d) must be submitted in writing to the Authority.

(9) If an auditor, in the course of performing the auditor’s duties, is satisfied that any of the following matters has occurred, the auditor must immediately report that matter to the Authority:(a)

there has been a serious breach or non‑observance of the provisions of this Act or any of the requirements imposed under any other written law administered by the Authority;

(b)

a criminal offence involving fraud or dishonesty has been committed;

(c)

in the case of a licensee that is a corporation, losses have been incurred that reduce the capital of the licensee by at least 50%;

(d)

there is any irregularity that has or may have a material effect on the accounts of the licensee, including any irregularity that had caused a major disruption to the provision of any type of digital token service to the customers of the licensee;

(e)

the auditor is unable to confirm that the claims of creditors of the licensee are still covered by the assets of the licensee.

(10) Where an auditor or employee of the auditor discloses in good faith to the Authority —(a)

the auditor’s or employee’s knowledge or suspicion of any of the matters mentioned in subsection (9); or

(b)

any information or other matter on which that knowledge or suspicion is based,

the disclosure is not a breach of any restriction upon the disclosure imposed by any law, contract or rules of professional conduct, and the auditor or employee is not liable for any loss arising out of the disclosure or any act or omission in consequence of the disclosure.

(11) A licensee that contravenes subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 and, in the case of a continuing offence, to a further fine not exceeding $10,000 for every day or part of a day during which the offence continues after conviction.

(12) An auditor that contravenes subsection (5) or (9) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 and, in the case of a continuing offence, to a further fine not exceeding $10,000 for every day or part of a day during which the offence continues after conviction.

(13) In this section —“capital”, in relation to a corporation, means the sum of —(a)

all of the following items in the latest accounts of the corporation:(i)

paid up ordinary share capital;

(ii)

paid up irredeemable and non‑cumulative preference share capital; and

(b)

any unappropriated profit or loss in the latest audited accounts of the corporation,

less —

(c)

any interim loss in the latest accounts of the corporation; and

(d)

any dividend that has been declared since the latest audited accounts of the corporation;

“irredeemable and non-cumulative preference share capital”, in relation to the capital of a corporation, means share capital consisting of preference shares that satisfy all of the following requirements:(a)

the principal of each share of the corporation is perpetual;

(b)

the shares of the corporation are not callable at the initiative of the corporation or the shareholders, and the principal of the shares cannot be repaid outside of liquidation of the corporation, except in the case of a repurchase or other manner of reduction of share capital that is initiated by the corporation and permitted under written law;

(c)

the corporation has full discretion to cancel dividend payments, and —(i)

the cancellation of dividend payments is not an event of default of the corporation under any agreement;

(ii)

the corporation has full access to cancelled dividend payments to meet its obligations as they fall due; and

(iii)

the cancellation of dividend payments does not result in any restriction being imposed on the corporation under any agreement, except in relation to dividend payments to ordinary shareholders of the corporation.