Timing of Society Resolution to Opt Out of Full Audit?

I’m hoping to revive this elderly blog. Here’s the first entry for this year. It’s a query from Patrick Morrello of thirdsectoraccountancy.coop which he has agreed to let me put up here.

It’s something that will affect many co-op and community benefit societies now that the limits for opting out of a full audit have been raised  as promised in the March 2017 budget (see http://www.iansnaith.com/?p=1487). The new limits applied from 6th April 2018 as stated by the FCA in the Guidance Patrick refers to in his question below.


“We work with a large number of co-operative and community benefit societies for whom this is relevant.

Most pass a resolution in general meeting to opt out of the audit under section 84 of the Co-operative and Community Benefit Societies Act 2014 (CCBSA 2014). My question is – does this resolution have to be passed during the year which it relates to? So for example, for the year ended 31/03/18, must the resolution be passed on 31/03/18 or earlier?
The FCA seem to think it must, but section 84 does not seem to me to imply this. The FCA released this guidance on 21st March https://www.fca.org.uk/firms/registered-societies-introduction/changes-audit-requirements-registered-societies; my client was unable to organise an AGM before 31st March and now the FCA says it is too late to disapply the audit requirement as their AGM was after 31st March.”


“I’ve had a look at the section and can see a strong legal rationale for the FCA’s position.

Under section 84(4) the FCA have discretion to disapply section 84(1) (and so apply section 83 despite the existence of a resolution) “in relation to the year of account in which the notice is given”.

Under section 84(5):

“A resolution under subsection (1) has no effect if, at any time before the end of the year of account to which it relates—

(a) the society is within a paragraph of subsection (3), or

(b) the society is given a notice under subsection (4).”

If a section 84(1) resolution could be passed after the end of the year of account to which it relates, it would be impossible for the FCA to serve notice under section 84(4) to disapply it  as the year of account to which the FCA notice relates would already have ended.

I think this creates a strong presumption that the legislation should be interpreted to require a section 84(1) resolution to be passed during the year of account to which it relates.

It also seems clear to me that, since any other interpretation would create a lacuna in the FCA’s powers by preventing them from using a section 84(4) notice to reinstate the section 83 obligation to have the accounts audited, the FCA would strongly resist any other interpretation of section 84.”

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