Late CA Sampat Jain
( Expert )
20 January 2008
APPOINTMENT OF STATUTORY AUDITORS OTHER
THAN RETIRING AUDITORS*
181.1 Background note
A company is free to appoint another auditor in place of the retiring auditor and
provide expressly that the retiring auditor shall not be re-appointed. The
proposal for appointment of some other auditor may emanate from the board
or from the shareholder(s). In the case of Nidhi Companies the term of office
is restricted to 5 years and a person other than retiring auditor shall be
181.2 Special Notice
A special notice is required to be given to the company for a resolution
appointing a person other than the retiring auditor as the auditor or for
providing expressly that the retiring auditor shall not be re-appointed.
181.3 Intimation to auditor
On receipt of the special notice, a copy thereof should be sent to the auditor. The
copy of the notice should be sent to the retiring auditors by the registered A.D.
post — Circular No. 2/81(1/1/81-CL-V) and 8/20 (225)/81-CL-V, dated 17-10-
181.3-1 Effect of failure to forward the notice to retiring auditors
The effect of non-forwarding of notice to the retiring auditors will make the
resolution for appointing or removing auditors illegal and ineffective —
Circular No. 35/6/68-CL-III, dated 18-11-1969.
*RELEVANT PROVISION :
u Companies Act, 1956 : Section 225, Standard Listing Agreement.
APPLICABILITY : ALL COMPANIES OTHER THAN GOVERNMENT COMPANIES AND DEEMED
181.4 Circulation of representation made by auditor
In case the concerned auditor makes any representation in writing (not
exceeding a reasonable length) and requests the company to notify the same to
the members of the company, the fact of receiving the representation should
be stated in the notice of the meeting and a copy should be circulated to all the
members. If it is received too late for inclusion in the notice or if there is an
omission by the company, the representation should be read out at the meeting.
181.4-1 Exemption from circulation
The company or the person who is likely to be affected may make an application
to the Company Law Board1 seeking exemption from circulating or reading out
the representations if the rights are sought to be abused to secure needless
publicity for defamatory matter. The Company Law Board may make an order
for exemption from reading out or circulating the same. Refer Chapter 186.
181.5 Obtaining written certificate
Before appointing a new auditor, a written certificate must be obtained from
the proposed appointee to the effect that the appointment if made, will be in
accordance with the limits specified in Para 179.4-1.
181.6 General Meeting Resolution
The General Meeting should accordingly be held and the resolution (Annex
181.1) appointing a person other than the retiring auditor as the auditor or for
providing expressly that the retiring auditor shall not be re-appointed should be
181.7 Intimation regarding appointment
Within 7 days of appointment, an intimation () should be sent to the
(new) auditor regarding his appointment.
181.7-1 Return of appointment
Within 30 days of the receipt of intimation regarding appointment, the auditor
should file a return in e-Form No. 23B () with the Registrar of
Companies indicating that he has accepted/refused to accept the appointment.
181.8 Special provisions relating to listed companies
In the case of a listed public company, the following requirements should be
1. The powers of Company Law Board in this regard shall stand transferred to Central
Government when Companies (Second Amendment) Act, 2002 is brought into force.
181.8-1 Forwarding of minutes to stock exchange(s)
A copy of the proceedings of the general meeting should be sent to each of the
stock exchange(s) in which the securities of the company are enlisted.
181.8-2 Forwarding of minutes to stock exchange(s)
A copy of the proceedings of the general meeting should be sent to each of
the stock exchange(s) in which the securities of the company are enlisted.
181.8-3 Intimation to stock exchange(s)
An intimation regarding change of auditors should be sent to each of the stock
exchange(s) in which the securities of the company are enlisted.
(Refer Para 181.6)
AGM RESOLUTION FOR APPOINTMENT OF STATUTORY AUDITOR
OTHER THAN RETIRING AUDITOR
RESOLVED that Messrs......, Chartered Accountants, be and are hereby appointed
Auditors of the Company in place of retiring auditors, Messrs.....to hold office until the
conclusion of the next Annual General Meeting at a remuneration of Rs......[plus out-ofpocket
expenses for actual travelling and other expenses in connection with Company’s
Background note :
u No explanatory statement is required as this being an ordinary business as per
u The following note, not amounting to explanatory statement, should accompany
the notice :
“A special notice in terms of section 190 of the Companies Act, 1956, has been
received under section 225(1) from a member proposing the appointment of
Messrs......, Chartered Accountants, as Auditors of the Company in place of
Messrs......, the retiring auditors of the Company. The retiring auditors have
informed the Company that they have no representation to make for notification
to the members of the Company relating to special notice. The retiring auditors,
being eligible, have offered themselves for re-appointment.”