In a listed Co., if the present auditors are unwilling to be re-appointed in AGM, whats th procedure for appointing new auditors? is a spl notice required? or is an ordinary resolution enough to serve the purpose?
Company Secretary and Compliance Officer
[ Scorecard : 99941]
Posted On 23 November 2009 at 13:29
Read the text below:
APPOINTMENT OTHER THAN A RETIRING AUDITOR [Section 225]
As per section 225 a special notice of a resolution to be moved at an annual general meeting for appointing an auditor other than the retiring auditor or removing of an existing auditor is given to the company in the manner as prescribed under the Act.
Requirement of special notice to the company
Section 225(1) provides that special notice shall be to be given by a member and such special notice must comply with the requirements of section 190. Following two types of resolutions or notice may be given under section 225 of the Act:—
(a) resolution at an annual general meeting for appointment of a person other than a retiring auditor as auditor; and
(b) resolution at an annual general meeting providing expressly that retiring auditor shall not be reappointed. Special notice has to be given to the company at least 14 days before the date of the meeting. The period of 14 days is exclusive of both the day of meeting and the day of notice. Moreover, special notice has to be given 14 days before the date of the original meeting and not adjourned meeting.
Thus, special notice received after the adjournment of original meeting cannot be taken and acted upon by a company.
In the case of Santosh Mani v New Delhi YMCA (1995) 19 CLA 178 (Del), it was held that even though the resolution moved by a shareholder not to re-appoint a retiring auditor failed to comply with requirement of section 188, yet since it was passed in annual general meeting when notice of resolution was given by company to all members and was carried by a majority, the same could be implemented.
As per Department's Circular No. 5 of 1972, dated 21-2-1972 special notice shall be required for such resolution. Any non-compliance with the provisions of the said section would render such a resolution illegal and ineffective. Section 190 which provide a resolution requiring special notice applies to special notice under section 225.
Section 190 which provide a resolution requiring special notice applies to special notice under section 225.
Company Secretary and Compliance Officer
[ Scorecard : 99941]
Posted On 23 November 2009 at 13:33
Find below all the desired documentation:
SPECIMEN OF SPECIAL NOTICE FOR APPOINTMENT OF AUDITORS OTHER THAN THE RETIRING AUDITORS
From …………. (Member) Dated 17th May, 2008
The Board of directors
Sub: Notice under section 225(1) of the Companies Act, 1956 for appointment of auditors M/s Subash & Co., Chartered Accountants, in place of M/s Agarwal & Co. Chartered Accountants.
This has in reference to your notice, dated 12th May, 2008 for the 17th Annual General Meeting of the Company to be held on 9th June, 2008.
I, would like to inform that I have …….. Equity Shares of the company constituting …… % of the
total paid up capital of the company and in reference to the provisions of section 225(1) read with the provisions of section 190 of the Companies Act, 1956, I hereby give a notice that M/s Subash & Co., Chartered Accountants of Kanpur be appointed in place of M/s Agarwal & Co. Chartered Accountants, the retiring auditors of the company.
I hereby submit a draft of the resolution for approval at the annual general meeting to be held on 9th June, 2008.
You are requested to please do the needful as per provisions of the Companies Act, 1956.
Member, Folio No……..
Encl.: 1. Draft of the resolution
2. Eligibility letter given by M/s Subash & Co., Chartered Accountants.
SPECIMEN OF THE RESOLUTION TO BE SUBMITTED BY MEMBER'S ALONGWITH THE NOTICE
“RESOLVED THAT M/s Subash & Co., Chartered Accountants of Kanpur be and is hereby appointed as the auditors of the company in place of the retiring auditors M/s Agarwal & Co., Chartered Accountants to hold the office of the auditors till the conclusion of the next annual general meeting on such remuneration as may be determined by the Board of directors of the company.”
SPECIMEN OF LETTER FOR NOTICE TO THE RETIRING AUDITOR BY THE COMPANY
20th May, 2008
M/s Agarwal & Co.,
Sub: Notice under section 225(1) of the Companies Act, 1956 received from a member for appointment of auditors M/s Subash & Co., Chartered Accountants, Kanpur in place of retiring auditors.
Kindly find enclosed a copy of the notice received from ………. a member of the company under
section 225(1) read with the provisions of section 190 of the Companies Act, 1956 regarding notice for appointment of M/s Subash & Co., Chartered Accountants of Kanpur in place of retiring auditors.
In terms of the provisions of section 225(2) of the Companies Act, 1956, we hereby submit a copy of the notice for your kind information.
Kindly acknowledge the receipt of letter for our reference and record.
With due regards to Mr.Ankur, I would like to draw attention to the question raised.
The Question clearly indicates that the present auditors are not willing to be reappointed.
Before going through Section 225, pause a second at 224. The First Provisio to Section 224(1) says that the Company has to get in writing from the auditor that if appointed he will be within the limits prescribed under 224(1B), that is maximum limits.
If at this stage, the present auditor says, "Yes, I would like to be appointed", then 225 comes into picture. Only if the present auditor accepts the appointment and then the Shareholders are not interested in such auditor only then 225 will apply.
If you carefully see 225, it says, the notice has to be sent by the shareholder to the Company, that I don't want this person as my auditor. When the auditor himself as refused to be reappointed where is the question of Shareholder wish of a different auditor.
Also, if you observe, it is said that the present auditor should be heard before appointing somebody else. What is the point in giving an opportunity to the retiring auditor if he has already expressed his unwillingness to be reappointed?.
So, to Come to Sec 225, first 224 hurdle (accepting to be reappointed) is to be crossed. So, when the retiring auditor expresses his unwillingness to be reappointed, there is no scope of 225 there.
If you ask me, the Cos Act does not cover this situation.(I may be wrong). Hence, the Board should take the iniative and propose a name as auditor.
Please do take these points into consideration. For want of repetition I again say that, I may be wrong. Do take stock of things and decide.
Further, you cannot follow 225 method due to following technical reasons.
Sec 190 defines or deals with Special Notice. It says, it has to be given 14 days before the Meeting. How does the Shareholder know the Date of the Meeting??
For him to know the Date of the meeting, the company should have issued the regular AGM notice. Agreed?
If such regular notice has to be issued, then, are we not required to state the reappointment of auditor as an item. So, in this case to go via 225, even though the retiring auditor has expressed his unwillingness, still we have to issue a notice and say, he is to be reappointed without getting the confirmation from him as state in 224(1) proviso??
So are we trying to say here we have to give a notice to shareholders that AGM will be conducted and retiring auditor is willing to be reappointed just for the sake that we can go to 225 and appoint somebody else.???
To consider and if thought fit, to pass, with or without modification, the following resolution, as
an ORDINARY RESOLUTION:
“RESOLVED that pursuant to the provisions of Sections 224 and other applicable provisions,
if any, of the Companies Act, 1956, M/s. "X" & Co., Chartered Accountants, be appointed as
Statutory Auditors of the Company, in place of retiring auditors, M/s. "A" & Co., Chartered
Accountants, to hold office from the conclusion of this Meeting until the conclusion of the next
Annual General Meeting, on a remuneration to be determined by the Board of Directors of the
Company, based on the recommendations of the Audit Committee.”