Appointment of auditor
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
23 October 2013
Dear All.,
Auditor of a private company expressed his unwillingness for reappt before the AGM but after signing the audit report for the year.
what is the procedure should the company follow to appoint another auditor other than retiring one?
is special notice required?
Explain me the contest considering the section 225 and 224.
Auditor of a private company expressed his unwillingness for reappt before the AGM but after signing the audit report for the year.
what is the procedure should the company follow to appoint another auditor other than retiring one?
is special notice required?
Explain me the contest considering the section 225 and 224.
24 October 2013
The provision of section 225 of the Companies Act, 1956 will apply in this case and you will issue special notice.
24 October 2013
APPOINTMENT OF OTHER THAN A RETIRING AUDITOR
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 fourteen days before the date of the meeting. The period of fourteen days is exclusive of both the day of meeting and the day of notice. Moreover, special notice has to be given fourteen 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.
The Department's Circular No. 5 of 1972, dated 21-2-1972 inter alia states that in view of section 225 special notice shall be required for a resolution appointing as an auditor a person other than the retiring
auditor. 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.
APPOINTMENT OF OTHER THAN A RETIRING AUDITOR
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 fourteen days before the date of the meeting. The period of fourteen days is exclusive of both the day of meeting and the day of notice. Moreover, special notice has to be given fourteen 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.
The Department's Circular No. 5 of 1972, dated 21-2-1972 inter alia states that in view of section 225 special notice shall be required for a resolution appointing as an auditor a person other than the retiring
auditor. 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.
24 October 2013
Intimation shall be given by the company to all members on receipt of notice or draft of resolution:
The company shall on receipt of a notice or draft resolution from a member give intimation of the same to all the members immediately and where it is not possible to do so then the company shall give notice to
the members by advertisement in the newspaper circulating in the place of its registered office, not less than seven days before the meeting.
Intimation shall be given by the company to all members on receipt of notice or draft of resolution:
The company shall on receipt of a notice or draft resolution from a member give intimation of the same to all the members immediately and where it is not possible to do so then the company shall give notice to
the members by advertisement in the newspaper circulating in the place of its registered office, not less than seven days before the meeting.
24 October 2013
Intimation shall be given by the company to the retiring auditor:
On receipt of notice under section 225(1) of the Act, for the removal of a retiring auditor the company shall send a copy of the notice to the retiring auditor forthwith. The Department's Circular No. 2/81, dated 17-10-1981 states that in order to appoint a person other than the retiring auditor or to provide that the retiring auditor shall not be re-appointed; a special notice has to be given proposing that such a resolution would be moved at the next annual general meeting. On receipt of the special notice, the company should send a copy thereof to the retiring auditor. It is advisable to send the same by registered post with acknowledgement due.
Intimation shall be given by the company to the retiring auditor:
On receipt of notice under section 225(1) of the Act, for the removal of a retiring auditor the company shall send a copy of the notice to the retiring auditor forthwith. The Department's Circular No. 2/81, dated 17-10-1981 states that in order to appoint a person other than the retiring auditor or to provide that the retiring auditor shall not be re-appointed; a special notice has to be given proposing that such a resolution would be moved at the next annual general meeting. On receipt of the special notice, the company should send a copy thereof to the retiring auditor. It is advisable to send the same by registered post with acknowledgement due.
24 October 2013
Circulation of the retiring auditors' representation to all the members:
Where the retiring auditor makes a representation on the notice or resolution for their removal, the company shall circulate the same to all the members of the company, if it is possible to do so before the meeting. If it is not possible to circulate the representation to the members, the auditor may require the
same to be read at the meeting, unless the Central Governmenton an application by the company or an aggrieved person orders that copies of the representation need not be sent to members nor read at the meeting.
Following are the other relevant provisions in this regard:—
(i) In case where the retiring auditor makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the
company, the company shall do the following:—
(a) the company shall state the fact of the representations having been made, in any notice of the
resolution given to members of the company;
(b) the company shall send a copy of the representations to every member of the company to whom notice of the meeting is sent, whether before or after the receipt of the representations by the company;
(c) the company is not bound to send the copy of representations to members, if the
representations are received by it too late to do so;
(d) if a copy of the representations is not sent as aforesaid because they were received too late or because of the company's default, the auditor may require that the representations shall be read out at the meeting. This right is in addition to the right of auditor to be heard orally at the meeting.
(ii) Section 225 applies to all companies, whether public or private.
(iii) Department's clarifications on the wording of the resolution:
Circular No. 22 of 1976, dated 26-6-1976 provides that a point has been raised as to whether the words 'other than a retiring auditor' occurring in section 225(1) of the Companies Act, 1956,
(iv) Any resolution requiring special notice must comply with the requirements of section 190.
Contravention of the provision of section 225 would attract penalty to the company under section 629A.
(v) Acceptance of the position as auditor previously held by a retiring auditor without first
communicating to the existing auditor shall be deemed to be guilty of professional misconduct as contemplated by clause (8) of the First Schedule to the Chartered Accountants Act, 1949.
Where the retiring auditor makes a representation on the notice or resolution for their removal, the company shall circulate the same to all the members of the company, if it is possible to do so before the meeting. If it is not possible to circulate the representation to the members, the auditor may require the
same to be read at the meeting, unless the Central Governmenton an application by the company or an aggrieved person orders that copies of the representation need not be sent to members nor read at the meeting.
Following are the other relevant provisions in this regard:—
(i) In case where the retiring auditor makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the
company, the company shall do the following:—
(a) the company shall state the fact of the representations having been made, in any notice of the
resolution given to members of the company;
(b) the company shall send a copy of the representations to every member of the company to whom notice of the meeting is sent, whether before or after the receipt of the representations by the company;
(c) the company is not bound to send the copy of representations to members, if the
representations are received by it too late to do so;
(d) if a copy of the representations is not sent as aforesaid because they were received too late or because of the company's default, the auditor may require that the representations shall be read out at the meeting. This right is in addition to the right of auditor to be heard orally at the meeting.
(ii) Section 225 applies to all companies, whether public or private.
(iii) Department's clarifications on the wording of the resolution:
Circular No. 22 of 1976, dated 26-6-1976 provides that a point has been raised as to whether the words 'other than a retiring auditor' occurring in section 225(1) of the Companies Act, 1956,
(iv) Any resolution requiring special notice must comply with the requirements of section 190.
Contravention of the provision of section 225 would attract penalty to the company under section 629A.
(v) Acceptance of the position as auditor previously held by a retiring auditor without first
communicating to the existing auditor shall be deemed to be guilty of professional misconduct as contemplated by clause (8) of the First Schedule to the Chartered Accountants Act, 1949.
24 October 2013
Specimen of Letter for eligibility u/s 224(1B) of the Companies Act
To
The Board of directors
AFA Ltd.
Address:
Dear Sir,
In reference to the discussion had with Shri AB, a member of the company, we would like to inform
that pursuant to the provisions of section 224(1B) of the Companies Act, 1956, if the appointment made by
the members at the annual meeting of the company, it shall be within the ceiling prescribed under the
Companies Act, 1956.
Thanking you
Yours faithfully
For, ........ & ASSOCIATES
CHARTERED ACCOUNTANTS
Mr.....
PARTNER
Specimen of Letter for eligibility u/s 224(1B) of the Companies Act
To
The Board of directors
AFA Ltd.
Address:
Dear Sir,
In reference to the discussion had with Shri AB, a member of the company, we would like to inform
that pursuant to the provisions of section 224(1B) of the Companies Act, 1956, if the appointment made by
the members at the annual meeting of the company, it shall be within the ceiling prescribed under the
Companies Act, 1956.
Thanking you
Yours faithfully
For, ........ & ASSOCIATES
CHARTERED ACCOUNTANTS
Mr.....
PARTNER
24 October 2013
Specimen of special notice for appointment of auditors other than the retiring auditors
From …………. (Member) Dated 7th September, 2012
To
The Board of directors
AFA Ltd.
Address:
Sub: Notice under section 225(1) of the Companies Act, 1956 for appointment of auditors M/s.
N.V.N. & Co., Chartered Accountants, in place of M/s S.M.J. & Co.
Dear Sir/s
This has in reference to your notice, dated 2nd September, 2012 for the 11th Annual General Meeting of the Company to be held on 29th September, 2012.
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. N.V.N. & Co., Chartered Accountants of Ratlam be appointed in place of M/s. S.M.J. & 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 29th September, 2012.
You are requested to please do the needful as per provisions of the Companies Act, 1956.
Thanking you
Yours faithfully
(……………..)
Members, L.F. No. ………
Encl.: 1. Draft of the resolution
2. Eligibility letter given by M/s. N.V.N. & Co., Chartered Accountants.
From …………. (Member) Dated 7th September, 2012
To
The Board of directors
AFA Ltd.
Address:
Sub: Notice under section 225(1) of the Companies Act, 1956 for appointment of auditors M/s.
N.V.N. & Co., Chartered Accountants, in place of M/s S.M.J. & Co.
Dear Sir/s
This has in reference to your notice, dated 2nd September, 2012 for the 11th Annual General Meeting of the Company to be held on 29th September, 2012.
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. N.V.N. & Co., Chartered Accountants of Ratlam be appointed in place of M/s. S.M.J. & 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 29th September, 2012.
You are requested to please do the needful as per provisions of the Companies Act, 1956.
Thanking you
Yours faithfully
(……………..)
Members, L.F. No. ………
Encl.: 1. Draft of the resolution
2. Eligibility letter given by M/s. N.V.N. & Co., Chartered Accountants.
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