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Disqualification of auditors(section 141)

Others 447 views 6 replies

Shivam Jain

Student CA Final

92 Points Posted on 28 December 2016

As per Section 141(3)(d), a person who, or his relative or partner is holding any security of or interest in the company or its subsidiary, or of its holding or associate company or a subsidiary of such holding company cannot be appointed as an auditor. So, if a "firm" holds securities, then can such firm be appointed as an auditor(because firm is not mentioned in disqualification,only partner is mentioned)? Thanks in advance.

Replies (6)

P C Agrawal

Registered independent director Past Ch

8229 Points Posted on 28 December 2016

Section 3(42) of General Clauses Act 1897 defines a "person" as under:

“person” shall include any company or association or body of individuals, whether incorporated or not;

Guest

firm can't hold shares on it's own name in the company... it can only through it's partners

Shivam Jain

Student CA Final

92 Points Posted on 28 December 2016

@ Ravi - May I know the reason why a firm can't hold shares in it's own name?

Sunish

Freelance

168 Points Posted on 28 December 2016

No seperate legal entity concept for a firm I suppose.

Shivam Jain

Student CA Final

92 Points Posted on 28 December 2016

Yes. I found this landmark case : Ganesh Das Ram Gopal vs RG cotton mills Ltd, which supports the view that a firm is not a separate legal entity.

However, a firm may become a member in Section 8 companies as per section 8(3).

Sudhir Todkar

CS Professional

1021 Points Posted on 22 April 2017

The question itself in incorrect. Firm cannot hold any shares in a company expect section 8 company.

His relative can hold shares upto 1 lakh of its nominal face value. But auditor should not hold a shares of 1 rupee also..