13 October 2010
First Auditor - Appointment First Auditor
Appointment by the Board of Directors –
Section 224(5) provides for the appointment of first Auditor of a company by the Board of Directors. The Board must appoint the first Auditor within one month from the date of registration of the Company. The date of registration for this purpose means the date mentioned in the Certificate of incorporation of the company.
Resolution -- The Board of Directors appoints the first director by a Board resolution. However, this may also be done by means of a circular resolution.
Tenure of the appointment – The first auditor appointed by the Board shall hold office until the conclusion of the first Annual General Meeting of the company.
Appointment by General Meeting –
If the Board of Directors does not appoint the first Auditors in terms of Section 224(5), the appointment may be made at a General Meeting of the company. It is worth noting here that the period of one month as provided in Section 224(5) is not applicable if the appointment is made by General Meeting.
Resolution – The General Meeting appoints the first Auditor by means of an ordinary resolution. Again it is important to mention here that even if the case is covered by Section 224A (i.e. Auditors to be appointed by means of Special Resolution) the appointment will be made by means of ordinary resolution. In other words appointment is always by means of an ordinary resolution.
Tenure of the appointment – The first auditor appointed by the General Meeting shall hold office until the conclusion of the first Annual General Meeting of the company.
Choice – Whether to appoint by Board of Directors or General Meeting
It is always advisable that in case of Public Companies the first Auditor should be appointed by the Board of Directors. The reason for the same is – the Auditor is required to certify the Statutory Report.
Compliance Process note –
Sl. No. Subject Matter Remarks, if any 01. Qualification of the person to be appointed as an Auditor Should be a Chartered Accountant.
Not Disqualified in terms of Section 226(3). 02. Obtain confirmation letter in terms of Section 224(1B) Requirement does not apply in case of a Private Company. 03. Ensure the appointment is made within the time limit. If by the Board of Directors – within 1 month from the date of Incorporation.
If General Meeting – It’s a Special Business and Explanatory Statement is required in terms of Section 173. 04. Hold the meeting on the scheduled date and pass the necessary resolution By Board of Directors – Board Resolution.
By General Meeting – Ordinary Resolution. 05. Intimation of the appointment to the Auditor Within 7 days of the Board/General Meeting. 06. Filing of e-form – 23B By the appointed auditor within 30 days of the receipt of intimation of the appointment. 07. Recording in the minutes Record the appointment in the minutes book.
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