Commercial Companies Law 2001: Contents

Commercial Companies Law 2001
Commercial Companies Law
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Location: Commercial Companies Law 2001 > Commercial Companies Law > Part V — Joint-stock Company > Chapter Seven — Joint-stock Company's Management > 3 — Auditors > Article (222)
  • 3 — Auditors

    • Article (217)

      a— The company shall have an auditor or more to be appointed from those licensed to practise auditing by the ordinary general assembly, which shall determine their remuneration and term of appointment. The founders of the company may appoint an auditor to carry out auditing until the constituent general assembly is held. If more than one auditor is appointed, each of them shall exercise auditing separately. If the auditor appointed by the general assembly has not assumed his duties for any reason, the board of directors may, if necessary, appoint another auditor to replace him, provided that the matter shall be presented to the general assembly at its next meeting to resolve it.
      b— If there is more than one auditor, they shall be jointly liable for auditing.
      c— The auditor shall not be the chairman or a member of the board of directors of the company the accounts of which he is auditing, nor a managing director nor a person assuming any administrative work or supervising its accounts; nor a second-degree relative of a person supervising the company's management or accounts. He shall not also buy or sell shares in the companies the accounts of which he is auditing during his term.

      In all cases the company's auditor shall not become a member of the company's board of directors or staff before the lapse of two years from the date of discharging him of his liability.

    • Article (218)

      a— The auditor shall have at any time the right of access to the company's books, registers and documents, and of requesting any details he deems necessary. He shall also have the right to verify the company's assets and liabilities.
      b— The board of directors shall enable the auditor to carry out his duties specified in the foregoing paragraph. If the auditor is unable to exercise such rights, he shall report this in writing to the board of directors, and if the board does not facilitate his task, the board shall invite the ordinary general assembly to consider the matter.
      c— In all cases the auditor shall provide the Ministry of Commerce and Industry with copies of his reports and remarks whatsoever, whether they are financial or administrative and whether they are presented to the company's general assembly or to the board of directors.

    • Article (219)

      The Auditor shall attend the general assembly and express his opinion in all matters pertinent to his work, and in particular, the company's balance sheet. He shall read his report to the general assembly. The report shall be prepared in accordance with the international auditing principles and standards or the standards approved by the competent authority; and shall include in particular the following details:

      a— Whether the auditor obtained the information he deemed necessary for doing his work satisfactorily.
      b— Whether the balance sheet and the profit and loss account are conforming to the facts, and are prepared according to the international accounting standards or to the standards approved by the competent authority; and whether they include all what is provided for in the law and in the company's articles of association and honestly and clearly reflect the actual financial position of the company.
      c— Whether the company maintains regular accounts.
      d— Whether the stock taking undertaken by the company has been carried out in accordance with the accepted practices.
      e— Whether the data included in the report of the board of directors are in conformity with what is stated in the company's books.
      f— Whether there have been violations of the provisions of the law or the company's articles of association during the financial year in a way that affects the activity of the company or its financial position, and whether these violations are still existing to the extent of the information made available to him.

      If the company has more than one auditor and they do not submit a joint report, each of them shall prepare an independent report.

      The auditor's report shall be read at the general assembly, and each shareholder shall have the right to discuss the report and request clarifications on its contents.

    • Article (220)

      The auditor shall be responsible for the accuracy of the details included in his report in his capacity as the representative of all the shareholders, and each shareholder shall have the right to discuss, at the meeting of the general assembly, the report of the auditor and seek clarifications on its contents. The auditor shall be liable towards the company for any damages sustained by the company as a result of his mistakes. If the company has more than one auditor and they were involved in the mistake they shall become jointly liable towards the company.

      The civil liability action referred to in the foregoing paragraph shall be barred after the lapse of one year from the date of the general assembly meeting at which the auditor's report was read. If the act attributed to the auditor constitutes a crime, the civil liability action shall not lapse except with the lapse of the general action.

      The auditor shall also be liable to pay compensation for any damage that may be sustained by any bona fide shareholder or third parties as a result of his professional error or of not complying with the accounting principles and standards.

    • Article (221)

      The board of directors or a number of shareholders representing at least 25% of the capital may request the replacement of the auditor during the financial year. The board of directors shall invite the ordinary general assembly to convene to consider the request after the lapse of fifteen days from the date it is submitted. The request shall be sent during this period to the auditor to prepare his reply thereto in writing, and such reply shall be sent to the company at least five days before the general assembly meeting. The chairman of the board of directors or the board member representing him shall read the request and the reasons thereof and the auditor's reply thereto before the general assembly in order to pass a resolution thereon. Any resolution passed for replacing the auditor in breach of these procedures shall be null and void.

    • Article (222)

      The auditor may resign, at a suitable time, during the term of his appointment by submitting a written application to the board of directors. If there are matters he must bring to the notice of the company's shareholders and creditors, he shall submit a report thereon to the general assembly. The board of directors shall invite the ordinary general assembly to convene to consider the report within a period not exceeding thirty days from the date of its submission. The auditor shall be liable for any damages sustained by the company as a result thereof.

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