Investors in Sanctuary Group are on course for a major clash with the board,
after it emerged that they could block the appointment of a new auditor.
The rare sight of investors clashing publicly with executives will reignite
the debate on how open auditors should be about their clients’ financial
The music group has said that it will put its audit contract out to tender,
after a high profile row with auditor Baker Tilly, which qualified its accounts
Sources close to Sanctuary said the appointment of a new auditor remained up
in the air, but Patrick Yau, an analyst at Bridgewell Securities, said it could
be voted down. ‘Generally, these things aren’t opposed, but in this case that
He added that the mooted change in auditor was ‘another one of those things
that cast doubt over the direction of the business’.
The company, which has clients including stars like Beyonce and Joss Stone,
has struggled for the past six months with accounting difficulties. Last month,
Baker Tilly said that the accounting treatment used by the group had understated
losses by £15.9m.
Baker Tilly and a Big Four firm have already crossed swords over the
accounts, with the larger firm said to be prepared to give the accounts a clean
bill of health.
Any new auditor chosen by the executive would have to be approved at an AGM,
the date for which has yet to be finalised. It would also require Baker Tilly to
David Somerlinck of corporate governance specialists PIRC said: ‘When
auditors resign, then we would like to see them making more use of the Companies
Act to give information to shareholders.’
A Sanctuary spokesman said: ‘As part of our £110m fundraising, and following
consultation with major shareholders, the company has undertaken to change the
board structure and review the appointment of auditors.’
Investors, including Fidelity and Talpa, the investment vehicle of Endemol
founder John de Mol’s, declined to comment.
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