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Auditors appointment

16 June 2015

If the auditor has been appointed for a tenure of 5 years then for his removal before the expiry of his term is CG permission compulsory? And is ratification of shareholders in each AGM necessary?

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1 Replies

Deepak Gupta (CA Student) (15922 Points)
Replied 16 June 2015

Section 140(1) of the Companies Act 2013

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The auditor appointed under section 139 may be removed from his office before the expiry of his term only by a special resolution of the company, after obtaining the previous approval of the Central Government in that behalf in the prescribed manner:
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Provided that before taking any action under this sub-section, the auditor concerned shall be given a reasonable opportunity of being heard.
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Rule 7 of the Companies (Audit and Auditors) Rules

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(1) The application to the Central Government for removal of auditor shall be made in Form ADT-2 and shall be accompanied with fees as provided for this purpose under the Companies (Registration Offices and Fees) Rules, 2014.
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(2) The application shall be made to the Central Government within thirty days of the resolution passed by the Board.
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(3) The company shall hold the general meeting within sixty days of receipt of approval of the Central Government for passing the special resolution.
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Note: e-Form ADT-2 is not yet available. Should be filed as an attachment to General Form RD-1.

Rule 3(7) of the Companies (Audit and Auditors) Rules

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The auditor appointed in the annual general meeting shall hold office from the conclusion of that meeting till the conclusion of the sixth annual general meeting, with the meeting wherein such appointment has been made being counted as the first meeting:
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Provided that such appointment shall be subject to ratification in every annual general meeting till the sixth such meeting by way of passing of an ordinary resolution.
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Explanation.- For the purposes of this rule, it is hereby clarified that, if the appointment is not ratified by the members of the company, the Board of Directors shall appoint another individual or firm as its auditor or auditors after following the procedure laid down in this behalf under the Act.