Section 224a
This query is : Resolved
19 August 2011
Do provisions of section 224A- (Appointment of auditor by special resolution) applies on appointment of first auditor also?
19 August 2011
Appointment of first auditor's is governed by section 224(5) of the Companies Act,1956 for which section 224A do not apply.
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19 August 2011
I agree with the expert
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19 August 2011
Does it mean that if at the time of appointment of first auditor subscribers mentioned U/s 224A holds 25% or more of subscribed share capital then first auditor will be appointed by ordinary resolution if BOD fails to appoint the auditor within 30 days of incorporation?
23 July 2025
Yes, you're right to point out that Section 224A does not apply to the appointment of the first auditor of a company. Let's break it down:
Appointment of First Auditor:
As per Section 224(5) of the Companies Act, 1956, the first auditor of a company is appointed by the Board of Directors (BOD) within 30 days from the date of incorporation of the company.
If the BOD fails to do so, the members (shareholders) of the company can appoint the first auditor by ordinary resolution at a general meeting.
Applicability of Section 224A:
Section 224A of the Companies Act, 1956, deals with the appointment or reappointment of auditors in cases where the company is a public company and the subscribers to the company's share capital (or other persons holding 25% or more of the shares) are interested in the appointment of the auditor.
This section requires that a company appoint or reappoint its auditors by special resolution if 25% or more of the company's share capital is held by subscribers (or any other related parties).
Your Query:
"Does it mean that if at the time of appointment of first auditor, subscribers mentioned under Section 224A hold 25% or more of subscribed share capital, then the first auditor will be appointed by ordinary resolution if the BOD fails to appoint the auditor within 30 days of incorporation?"
Yes, that’s correct. If the subscribers (or any other related parties) hold 25% or more of the subscribed share capital, the first auditor will be appointed by ordinary resolution at a general meeting, if the BOD fails to appoint the first auditor within 30 days of incorporation.
However, Section 224A doesn't require the appointment of the first auditor to be made by a special resolution. It only governs the reappointment or appointment of auditors after the first auditor has been appointed.
Summary:
Section 224A does not apply to the appointment of the first auditor.
The first auditor is appointed by the Board of Directors (BOD) within 30 days of incorporation.
If the BOD fails to do so, the first auditor can be appointed by ordinary resolution by the shareholders.
Section 224A comes into play only when the company has existing auditors, and subscribers or related parties hold 25% or more of the share capital in the company, making it necessary to appoint/reappoint auditors by special resolution.
Appointment of First Auditor:
As per Section 224(5) of the Companies Act, 1956, the first auditor of a company is appointed by the Board of Directors (BOD) within 30 days from the date of incorporation of the company.
If the BOD fails to do so, the members (shareholders) of the company can appoint the first auditor by ordinary resolution at a general meeting.
Applicability of Section 224A:
Section 224A of the Companies Act, 1956, deals with the appointment or reappointment of auditors in cases where the company is a public company and the subscribers to the company's share capital (or other persons holding 25% or more of the shares) are interested in the appointment of the auditor.
This section requires that a company appoint or reappoint its auditors by special resolution if 25% or more of the company's share capital is held by subscribers (or any other related parties).
Your Query:
"Does it mean that if at the time of appointment of first auditor, subscribers mentioned under Section 224A hold 25% or more of subscribed share capital, then the first auditor will be appointed by ordinary resolution if the BOD fails to appoint the auditor within 30 days of incorporation?"
Yes, that’s correct. If the subscribers (or any other related parties) hold 25% or more of the subscribed share capital, the first auditor will be appointed by ordinary resolution at a general meeting, if the BOD fails to appoint the first auditor within 30 days of incorporation.
However, Section 224A doesn't require the appointment of the first auditor to be made by a special resolution. It only governs the reappointment or appointment of auditors after the first auditor has been appointed.
Summary:
Section 224A does not apply to the appointment of the first auditor.
The first auditor is appointed by the Board of Directors (BOD) within 30 days of incorporation.
If the BOD fails to do so, the first auditor can be appointed by ordinary resolution by the shareholders.
Section 224A comes into play only when the company has existing auditors, and subscribers or related parties hold 25% or more of the share capital in the company, making it necessary to appoint/reappoint auditors by special resolution.
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