Removal of auditor in between agm

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Querist : Anonymous

Querist : Anonymous (Querist)

29 December 2012 what is the exact procedure for removal of auditor before/after AGM. 14 days notice is enough before conducting the Gm/EGM then file the resolution to ROC or prior approval is required in the light of Sec 224(5) and 224(7).
please guide

Ajay Mishra

Ajay Mishra (Expert)
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29 December 2012 Hi

Removal of auditor(s) at a general meeting with the prior approval of the Central Government:

An auditor can be removed before expiry of his term only by the company in general meeting after obtaining the previous approval of the Central Government (Power has been delegated to the Regional Director).

Procedure for removal of auditors:

The company shall take further action as prescribed in section 225 and make an application to the concerned Regional Director in e-Form 24A as prescribed by the Notification No. GSR 56(E) dated 10th Feb., 2006 for his approval.

Person filing

Managing Director or Whole-time Director or Manager or Secretary.

Time limit:

The application has to be filed for appointment within seven days of the annual general meeting and for removal before general meeting.

Guidelines:

(i) The power of the Central Government to appoint auditors become exercisable when no auditors are appointed or re-appointed at an annual general meeting of a company.
(ii) Obligation has been cast on the company that within seven days of the Central Government power becomes exercisable; it shall give a notice of that fact to the Central Government in the prescribed e-Form 24A electronically.
(iii) The powers of the Central Government under section have been delegated to the Regional Directors of the Department of Company Affairs.
(iv) Reasons for not appointing any auditor at the annual general meeting and other relevant details should be furnished.
(v) Only the company in general meeting after obtaining the previous approval of the Central Government (Regional Director) can remove an auditor before expiry of his term.
(vi) The remuneration of auditors appointed by the Central Government may be fixed by the Central Government. But if the Central Government does not fix such remuneration then remuneration of auditors shall be fixed by the company in general meeting or in such manner as the company in general meeting may determine.
(vii) The remuneration which has been fixed for an auditor is considered to be inclusive of all expenses allowable to him and consequently, he cannot claim any amount in addition to the fixed remuneration.

Consequences:

Omission or failure to pass a special resolution at an annual general meeting for appointment of an auditor u/s 224A has under mentioned two consequences:
(i) It shall be deemed that no auditor or auditors had been appointed by the company at its annual general meeting;
(ii) The power of the Central Government under section 224(3) to appoint auditors becomes exercisable.

Querist : Anonymous

Querist : Anonymous (Querist)

29 December 2012 thankq ajit sir, but the gist of section 224(5) is reproduced here: The first auditor or auditors of a company shall be appointed by the Board of directors within one month of the date of registration of the company; and the auditor or auditors so appointed shall hold office until the conclusion of the first annual general meeting: Provided that-
(a) the company may, at a general meeting, remove any such auditor or all or any of such auditors and appoint in his or their places any other person or persons who have been nominated for appointment by any member of the company and of whose nomination notice has been given to the members of the company not less than fourteen days before the date of the meeting; and
the content of subsection 7 of 224 is Except as provided in the proviso to sub- section (5), any auditor appointed under this section may be removed from office before the expiry of his term only by the company in general meeting, after obtaining the previous approval of the Central Government in that behalf.
I am in confusion on the above two sub-sections. Some of my collegues said that 14 days prior notice is needed before general (not annual) meeting by any shareholder is enough to pass resolution, if though fit, so no need to take prior approval of RD is required under sub section 5 of 224.
please guide me

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