CS Divesh Goyal

RE-APPOINTMENT/CASUAL VACANCY OF AUDITOR

PROCESS TO APPOINTMENT OF AUDITOR UNDER COMPANY ACT-2013

REAPPOINTMENT OF RETIRING AUDITOR:-

Subject to the maximum tenure of appointment, a retiring auditor can be re-appointed at an annual general meeting [Sec- 139(9)] if—

  • He is not disqualified for re-appointment;
  • He has not given the company a notice in writing of his unwillingness to be re-appointed; and
  • A special resolution has not been passed at that meeting appointing some other auditor or providing expressly that he shall not be re-appointed.

Where at any annual general meeting, no auditor is appointed or re-appointed, the existing auditor shall continue to be the auditor of the company.

Example: ABC is appointed as an auditor of ———— Ltd in AGM of Sep 2015 for 5 years. Company in AGM of Sept 2018 appointed XYZ as auditor by passing a special resolution. Can ABC continue as auditor of company?

Answer: As per sec 139(9), A retiring auditor may be re-appointed at an annual general meeting, if a special resolution has not been passed at that meeting appointing some other auditor.  In the above case, as special resolution has been passed appointing XYZ as auditor, hence, ABC cannot continue.

*RESOLUTION FOR APPOINTMENT OF AUDITOR:

To consider, and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary

Resolution:

RESOLVED THAT pursuant to the provisions of Section 139 and other applicable provisions, if any, of the Companies Act, 2013, read with rules made there under, M/s. ABC & Co., Chartered Accountants, (FRN No. ———–), retiring auditor of the Company be and are hereby re-appointed as Statutory Auditors of the Company, to hold office from the conclusion of Thirtieth (30th) Annual General Meeting until the conclusion of the Thirty Fourth (34th) Annual General Meeting of the Company, subject to ratification of the appointment by the Members of the Company at every Annual General Meeting as per the provisions of the Companies Act, 2013, at such remuneration plus service tax, out-of-pocket, travelling and living expenses, etc., as may be mutually agreed between the Board of Directors of the Company and the Auditors

EXPLANATORY STATEMENT:

Appointment of Statutory Auditors of the Company – In terms of Section 139 (1) of the Companies Act, 2013, every Company shall, at the first AGM, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth Annual General Meeting and thereafter till the conclusion of every sixth meeting. M/s. ABC, Chartered Accountants Chartered Accountant who was appointed as Statutory Auditors of the Company for the financial year i.e. 2013-14 hold the office upto the conclusion of this Annual General Meeting. Thus, the appointment of Statutory Auditors for a period of four consecutive years has been put up for the approval of members at item no. — of the Notice.

APPOINTMENT OF AUDITOR WHEN RESIGNATION IS GIVEN BY EXISTING AUDITOR: This situation is called CASUAL VACANCY:

Casual Vacancy (CV):

  • CV caused because of resignation : In case of Casual vacancy because of resignation by auditor then appointment of auditor on his place by BOD within 30 days but the same should be approved by the company within 3 months of recommendation and shall hold office till conclusion of next AGM
  • CV caused because of other reasons (disqualifications as per 141) : By BOD within 30 days, No approval.

SPECIAL BUSINESS:

Appointment of Statutory Auditors to fill casual vacancy

To consider and, if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution:

Resolved that pursuant to the provisions of Section 139(8) and other applicable provisions, if any, of the Companies Act, 2013 as amended from time to time or any other law for the time being in force (including any statutory modification or amendment thereto or re-enactment thereof for the time being in force), M/s. ——-., Chartered Accountants, New Delhi be and are hereby appointed as Statutory Auditors of the Company to fill the casual vacancy caused by the resignation of ——————., Chartered Accountants, ————.

Resolved further that M/s. ——————-., Chartered Accountants, New Delhi be and are hereby appointed as Statutory Auditors of the Company from this Extraordinary General Meeting and that they shall hold the office of the Statutory Auditors of the Company from the conclusion of this meeting until the conclusion of the ensuing Annual General Meeting and that they shall conduct the Statutory Audit for the period ended 31st March, 2014 on such remuneration as may be fixed by the Board of Directors in consultation with them.”

Explanatory Statement under Section 102(1) of the Companies Act, 2013:

M/s. ———–., Chartered Accountants, Ludhiana have tendered their resignation from the position of Statutory Auditors due to unavoidable circumstances, resulting into a casual vacancy in the office of Statutory Auditors of the company as envisaged by section 139(8) of the Companies Act, 2013 (“Act”). Casual vacancy caused by the resignation of auditors can only be filled up by the Company in general meeting. Board proposes that M/s. ——————-., Chartered Accountants, New Delhi, be appointed as the Statutory Auditors of the Company to fill the casual vacancy caused by the resignation of M———-., Chartered Accountants. M/s. ———., Chartered Accountants, New Delhi, have conveyed their consent to be appointed as the Statutory Auditors of the Company along with a confirmation that, their appointment, if made by the members, would be within the limits prescribed under the Companies Act, 2013.

Accordingly, Ordinary Resolution is submitted to the meeting for the consideration and approval of members.

None of the Directors, Key Managerial Persons or their relatives, in any way, concerned or interested in the said resolution.

APPOINTMENT OF AUDITOR IN PLACE OF RETIRING AUDITOR BY SPECIAL NOTICE:-

As per provisions of sub-section (4), special notice is required from members proposing to move a resolution at the next annual general meeting to appoint a person other than the retiring auditor or to provide that the retiring auditor shall not be re-appointed.

Such special notice shall not be required in case where the retiring auditor has completed a consecutive tenure of five years or, as the case may be, ten years, as provided under sub-section (2) of section 139.

Following points are relevant for the purpose of special notice and need to be complied with:

a)      Company, on receipt of such special notice for removing auditor, should forthwith send a copy of the same to the concerned auditor.

{As per provisions of sub-section (4), company is required to send a copy of the special notice of the resolution to remove auditor to the retiring auditor. }

b)      Auditors representation: Sub-section (4) (iii) gives Right To The Retiring Auditor To Make A Representation to the company in writing (not exceeding a reasonable length).

  • Auditor can request its notification to members of the company.
  • In case auditor does not request the company to notify the representation made by him to the members, the company is not bound to do so.
  • If the company receives the representation within reasonable time, and if requested by the auditor, the company will have to state in the notice to the members that such a representation has been made and send a copy of the representation to the members.
  • In case representation cannot be circulated because it was received too late or due to default of the company, the auditor may require that the representation be read out at the meeting and can also claim to be heard orally at the general meeting as provided in sub-section  (1) of Section 140.
  • Proviso to sub-section (4) provides that in case copy of representation Is Not Sent Due To Late Receipt or Default Of The Company, A COPY THEREOF SHALL BE FILED WITH THE REGISTRAR. However, no time has been prescribed. (This Copy shall be filled in form GNL_2)

Note: It should be noted that if auditor is found to be abusing the right of representation, the company or any other aggrieved person shall make an application to the Tribunal and if Tribunal is satisfied with the application, then, the copy of the representation may not be send and the representation need not be read out at the meeting. It is to be noted that the requirement of intimating the members about the representation having been made in the notice sent to members and right of auditor of being heard orally at the meeting cannot be dispensed with.

Crux: If the auditor makes a representation in writing to the company and requests for its notification to the members, the company shall;

(i)      State the fact of representation in any notice of resolution, and

(ii)     Send copy of representation to members to whom notice of meeting is sent, whether before  or after the receipt of representation by the company.

(iii)     If the copy of representation is not so sent, copy thereof should be filed with the Registrar.

c)       Such representation should be of a reasonable length and not too long.

Rights of a retiring auditor (Notes): A retiring auditor shall have the following rights –

  •   Right to receive a copy of special notice.
  •   Right to make representation in writing and request its notification to members.
  •   Unless the representation received is too late by company, the right to get it circulated among members.
  •   Right to get his representation read out at the meeting, if not circulated by the company.
  •   Right to be heard orally at the meeting.

Forms Require filing with ROC:

1. e-form- MGT-14 (Attachment- Special Notice, Notice of GM, Resolution of General Meeting).

2. e-form GNL-2 (Attachment- ADT-1(consent of new auditor).

The above mention is process relating to Appointment of Subsequent Auditors of Company. For Appointment of first auditor under Companies Act 2013 Kindly refer my earlier Article.

(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com )

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Tags : Audit (420) Companies Act (1815) Companies Act 2013 (1589) Divesh Goyal (246) Statutory Audit (106)

12 responses to “Process for Re-Appointment of Auditor and for appointment due to casual vacancy”

  1. Deepak jsohi says:

    Is it mandatory to obtain NOC from existing Statutory Auditor , while appointing another in his place? Appointment of another person, follows because fees are not paid to existing auditors and he is not ready to issue NOC in favour of new incoming Stat. Auditor.

  2. RISHI says:

    Dear Sir,
    Please confirm that in case of filing of casual vacancy of auditor in EGM, we need to file MGT 14 with ADT 1 or not if yes for MGT 14 then why?

  3. Achiah says:

    We are appointed auditor in Oct 2015 on the resignation of the first auditor of the company in Oct 2015 before the completion of the audit for the year 2014-15. We have provided business analytics services in the year 2014 -15. Can you please clarify if we can accept the audit for 2014 -15 based on the casual vacancy. Is there any restriction on accepting the audit as we had provided business analytics services.

  4. Sumit says:

    Dear Sir,

    We would like your assistance in one of the case in which a client is stuck up, the facts are as under:

    No auditor is appointed or reappointed in AGM. Existing auditor neither want to resign nor the company wants him to continue.

    Please let us know how to proceed.

  5. CA. Suraj Prasad says:

    My query is that if the auditor has given a notice of his unwillingness to be reappointed as an auditor for the coming period even though rotation of 5 year has not been completed then which form is required to be filed with ROC and the documents needed to be filed…Please clarify sir…?

  6. yuva says:

    Sir, my question is regarding the tenure and the cooling period of an auditor who has been removed or resigned from the office before completion of 5 years who was appointed after the new Companies Act. What is the cooling period in the following case :
    Date of Appointment : 24th November 2014
    Date of Resignation/Removal: 31st December 2014

  7. Lalit Sharma says:

    Dear Professional colleague,
    can you please provide resolution for ratification of appointment of auditors,who was appointed in previous AGM for 5 years.

  8. CA VIVEK BANSAL says:

    ONE OF MY COMPANY CLIENT WANTS TO APPOINT US AS A AUDITOR FOR ONE YEAR
    ONLY.WHETHER IT WILL BE AS PER LAW

    CA VIVEK BANSAL
    MOBILE:9891395465

  9. Anshu Maheshwari says:

    In case of normal retirement by rotation on expiry of 5 years or 10 years as the case may be, is any other form required to be filed by retiring auditor or the company apart from GNL-2/ADT-1

  10. Rachna says:

    Reg.Appointment of Auditor due to Casual Vacancy:

    Dear Sir,

    My Question is whether it is necessary to call an EGM for getting approval from the members of the company for the appointment of Auditor who has already been appointed by the board of directors in the Board Meeting held when the Auditor had resigned from his office in month of july or else we should confirm the appointment of new auditor in the AGM itself that is going to be held in the month of September.

    plz take this matter as urgent necessity.
    Thank you.

  11. DARPAN ANCHALIA says:

    Reg: Appointment of Auditor due to casual vacancy on account of resignation:

    To my understanding, as per Sec 139 and 140 of Companies Act 2013 along with the relevant rules, the resigning Auditor needs to submit Form ADT-3 to the Company along with his resignation letter, which the Company would file with the ROC in Form GNL-2.

    Another Form GNL-2 along with Form ADT-1 for appointment of Auditor needs to be filed with ROC/MCA.

    To my further understanding, I do not find any provision which specifically requires us to file MGT-14 for the EGM held for the above purpose, in the new Companies Act 2013 (as unlike the case of Companies Act 1956).

    Experts may correct me if I am wrong.

    Thanks,
    Darpan Anchalia

  12. Jagadish Aradhy says:

    Dear Sir,

    The Article was informative. Thanks for the same.

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