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Sec. 141(3) of the companies act'2013

Hitesh Agarwala (Article Assistant) (27 Points)

05 August 2015

Mr. A, a Chartered Accountant is a Director in Subsidiary Co. Can Mr. A be appointed as the Auditor of its Holding Co.?

Please reply with reasons.

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6 Replies

CA Saba Naaz (Chartered Accountant) (8487 Points)
Replied 05 August 2015

yes..he can be appointed as auditor of holding co. as he is neither officer nor employee of holding co.

Hitesh Agarwala (Article Assistant) (27 Points)
Replied 05 August 2015

Is it necessary for a director to hold shares either by himself or by relative or partner to have interest in the company?

SHINY (CA Final Student) (699 Points)
Replied 05 August 2015

As per the language of the Act, there is no such provision in Sec 141 to attract disqualification to the auditor if he is 'Director' of the Group co.

Hitesh Agarwala (Article Assistant) (27 Points)
Replied 06 August 2015

As per Section 141(3)(d): a person- who, or his relative, or his partner "is holding any securities by or interest in" the company, or its subsidiary company, or its holding company, or associate company, or a subsidiary of such holding company.

Now as he is a director in the subsidiary co. doesn't he hold interest in the co.?

SHINY (CA Final Student) (699 Points)
Replied 06 August 2015

I think its all abt the Interpretation of Law. Like we have a concept of 'Literal Interpretation' and the other one 'Purposive Interpretation'..

Now here 'Interest' is used in context with shareholding or not ?

If it is used in context of Shareholding then Mr A can be appointed as Auditor of Holding co.(as he doesn't hold any shares) whereas as per Logical Interpretation Of law Mr. A can't be appointed as auditor of Holding Co.

I think We should go with Logical Interpretation unless we take "interest in context of Directorship", If we take "Interest in context of Directorship" then as per Literal Interpretation only Mr A can't be appointed as Auditor of Holding Co., in such case there is no need to go to Purposive Interpretation.

In short, Mr A can't be appointed as Auditor of Holding Co.