Appointment of first auditor

Hi

Section 224 (5) of the Companies Act, 1956 contains the relevant provision for appointment of first auditor of a company.  Proviso (bO states that if the Board fails to exercise its powers the company in general meeting may appoint the first auditor. There is no penalty in this case as the authority for appointment of first auditor passes from the Board of Directors to the Members of the company. No condonation / composition required.

Other views are welcome.

Thanks. 

Hi Praveena,

Please find below the relevant provisions regarding appointment of first auditor.The above provisions are sourced from Ankur Garg Sir contributions:

Appointment of first auditors

As per section 224(5), 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. Following provisions are related to the matter:

(i) Appointment of first auditors in general meeting.—A company in general meeting may appoint the first auditor or auditors if the Board of directors fails to exercise its power of appointment of first auditors within one month of the date of incorporation of the company.

(ii) Appointment of first auditors through Memorandum and Articles of Association.—The Institute of Chartered Accountants of India has expressed its opinion vide Compendium of Opinion Volume No. 1 that the appointment of first auditors through the Memorandum and Articles of Association of the newly floated private company is not a valid appointment.

(iii) Removal of first auditors.—The company may, at a general meeting, remove first auditor(s) 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.

(iv) Tenure of office of the first auditor.—The first auditor(s) shall hold office until the conclusion of the first annual general meeting of the company and then be eligible for re-appointment.

The above provisions are applicable to both Public and Private limited company. And there is no need to file any condonation if BOD fails to appoint first auditors.

Best Regards,

Neelu Jain.

No need to go for any condonation/ composition in this regard because you have not done anything wrong. Appointment of first auditor through an EGM (on failure of board) is allowed in law itself. So just chill…