Appointment of Auditor in Casual Vacancy due to resignation of Auditor under Companies Act 2013 (Including REQUIRED DRAFTS)

The term Casual Vacancy (not defined in Companies Act) means any Vacancy caused due to death, resignation, and disqualification of Auditor.

Different situations for Casual Vacancy of Auditors

The Casual Vacancy situation can be categorized in to two situations:

1. Auditor’s Resignation

2. Other Casual Vacancy e.g. Death, Disqualification etc.

This article discusses how to fill up the casual vacancy arises due to resignation under the Companies Act 2013.

Casual Vacancy

How to fill Casual Vacancy arising due to Resignation of Auditors

Auditor Resignation

a) If Auditor is appointed by CAG

  • Resignation Letter mentioning reasons for such resignation to be given to CAG
  • CAG will appoint New Auditor within 30 days.
  • If CAG does not appoint within 30 days then Board of Directors will appoint New Auditor within next 30 days.

b) If Auditor is not appointed by CAG

Following steps need to be taken:-

A) From the Perspective of Resigning Auditor:

a) Applicable Provisions: Sec 140(2) & (3) of Companies Act 2013

1. The auditor who has resigned shall file within 30 days from the date of resignation form ADT-3 with the Company and the Registrar.

2. The auditor shall indicate the reasons and other facts as may be relevant with regard to his resignation, in the statement.

3. If the auditor does not comply with provisions of Sec 140(2), he or she shall be liable to penalty of Rs. 50,000/- which may extend to Rs. 5,00,000/-. – 

b) Procedure:

Resigning auditor must do the following:

1. Draft the resignation letter with mentioning the reasons for such resignation and date of resignation.

2. Intimation of his resignation to the Company within 30 days of resignation.

3. File e-form ADT-3 with registrar of Companies within 30 days of resignation.

Note:-

Attachment for e-form ADT -3 is the Resignation Letter.

Draft of Resignation Letter is given below.

B) From the Perspective of the Company

a) Applicable Provisions –   Sec 139(8) of Companies Act,2013.

  • According to Section 139(8)(i) of the Companies Act, 2013, any casual vacancy in the office of  an auditor shall in the case of a company other than a company whose accounts are subject to audit by CAG, be filled by the Board of Directors within 30 days,
  • but if such casual vacancy is as a result of the resignation of an auditor, such appointment shall also be approved by the company at a general meeting convened within three months of the recommendation of the Board and he shall hold the office till the conclusion of the next annual general meeting.

 b) Procedures:

Once a casual vacancy of Auditor due to resignation takes place, following steps needs to be complied.

1. Step 1:Obtain Form ADT-3 from the resigning Auditor duly filed with the Registrar.

2. Step 2:Obtain consent letter from the proposed auditor confirming his eligibility to be appointed.

3. Step 3:The Company shall issue letter of intention to add new Auditor for his appointment in the company.

4. Step 4:Proposed Auditor shall obtain NOC from the resigning Auditor.

5. Step 5:Company shall convene a board meeting within 30 days from arising of such casual vacancy after giving notice to all directors and pass a resolution for appointment of new Auditor.

6. Step 6:Inform the auditor so appointed with a copy of board resolution

7. Step 7:Issue notice for conduct of Extra Ordinary General Meeting (EOGM) within 3 months from the date of recommendation of the Board.

8. Step 8 : Hold EOGM and pass ordinary resolution to confirm the appointment of the proposed Auditor.

9. Step 9:File Form ADT-1 with the ROC within 15 days from the date of appointment in the EOGM.

Note:

1. Attachment of e-form ADT-1 are:

  • Copy of Intimation sent by the Company.
  • Consent & Certificate of the Auditor.
  • EGM Resolution.
  • Drafts of the above are given below.

C) From the perspective of New Auditor

a) Applicable Provisions: Sec 139(1), 141 of the Companies Act read with Rule 3 and Rule 4.

b) Procedure:

  • Obtain intimation letter from the Company.
  • Obtain NOC from Resigned Auditor.
  • Send Consent & Certificate for the appointment as per the Companies Act, 2013 to the Company.
  • Ensure that the Company has filed Form ADT-1 within time limit.

Draft Formats

RESIGNATION LETTER

Date:

To

The Board of Directors

[Name of the Company]

[Address of the Company] 

Sub:    Resignation from Auditorship 

Dear Sir,

This is to inform you that due to our pre-occupation in other assignments, we are not in a position to devote our time to the affairs of the Company. Accordingly, we are submitting our resignation as Statutory Auditors of the company with effect from ___________

We therefore, request you to treat this letter as our resignation from the Statutory Auditors of the Company.

Thanking You

Yours Faithfully,

For _________________

Chartered Accountants

Firm Registration No: ____________

_______________

Proprietor/Partner

Membership No:_______________

 

INTIMATION LETTER

Date:___________

To

M/s. _____________________

Chartered Accountants

Add.:___________________

Sub.: Appointment as Statutory Auditors of the Company for financial year _________.

Dear Sir,

This is with reference to above subject, We are glad to inform you that the members of the Company in Extra Ordinary General Meeting held on ____________ at the registered office of the Company, has appointed your firm as the Statutory Auditor of the Company from the conclusion of Extra Ordinary General Meeting held on _____________ till the conclusion of ensuing Annual General Meeting to be held in ____ at a remuneration that may be decided by the Board of Directors of the Company in consultation with you.

You are requested to comply with all legal and procedural formalities in this regard and intimate the Company accordingly.

Thanking you,

Yours faithfully,

For __________________________________ PRIVATE LIMITED

_________________

(Director)

DIN: ____________

Add.: __________________

AUDITORS CONSENT AND CERTIFICATE

[Pursuant to the provisions of Section 139 of Chapter X of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014]

Date :

To

The Board of Directors

[Name of the Company]

[Address of the Company] 

Dear Sir(s),

Ref: Consent & Certificate for appointment as auditor under the Companies Act, 2013

We, ___________________., Chartered Accountants, are in receipt of your communication inquiring as to our consent and eligibility for being appointed as statutory auditors of ___________________(Company Name) for the financial year _______.

We hereby give our consent for being appointed as statutory auditor of the Company under Section 139 of the Companies Act, 2013 for the financial year ________.

We hereby declare that the appointment, if made shall be in accordance with the conditions as prescribed under Rule 4(1) of the Companies (Audit and Auditors) Rules, 2014 and as provided in Section 141 of Companies Act 2013. We certify that:

1) we are eligible for appointment and is not disqualified for appointment under the Companies Act, 2013 and the Chartered Accountants Act, 1949 and rules or regulations made there under;

2) the proposed appointment is as per the terms provided under the Act;

3) the proposed appointment is within the limits laid down by or under the authority of the Act;

4) there are no proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.

Thanking You

Yours Faithfully,

For _________________

Chartered Accountants

Firm Registration No: ____________

 

_______________

Proprietor/Partner

Membership No:_______________

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE is hereby given that an Extra-ordinary General Meeting of the Members of _________________________ (NAME OF COMPANY) will be held on _________, the ___th day of ________, _____ at ____ A.M./P.M. at the registered office of the company at _____________________________________________________ to transact the following business:

AS A SPECIAL BUSINESS:

APPOINTMENT OF STATUTORY AUDITORS TO FILL CASUAL VACANCY:

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

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), as recommended by the Board of Directors of the company, M/s. ___________________, (New Auditor) Chartered Accountants (FRN.: _______________), _____________ be and are hereby appointed as Statutory Auditors of the Company to fill the casual vacancy caused by the resignation of M/s. _______________________, (old Auditor) Chartered Accountants (FRN.: ____________), _______________.

RESOLVED FURTHER THAT M/s. _________________________, Chartered Accountants, ____________, be and are hereby appointed as Statutory Auditors of the Company from this Extra-ordinary 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, _______on such remuneration as may be fixed by the Board of Directors in consultation with them.”

RESOLVED FURTHER THAT any of the Board of Directors, be and is, hereby empowered and authorised to take such steps, in relation to the above and to do all such acts, deeds, matters and things as may be necessary, proper, expedient or incidental for giving effect to this resolution and to file necessary E-Forms with Registrar of Companies.”

By Order of the Board

For ________________________ Private Limited

 Place:                  

Date:                    

___________________

(Director)

(DIN:  ____________)

(Add:  _________________________)

NOTES:

1. The Explanatory Statement pursuant to Section 102 of the Companies Act, 2013, with regard to the Special Business is appended.

2. A member entitled to attend and vote at the meeting is entitled to appoint proxy/proxies to attend and vote instead of himself/herself, such proxy/proxies need not to be a member of the company. A person can act as proxy on behalf of members not exceeding (50) and holding in the aggregate not more than ten percent of the total share capital of the Company. In case a proxy is proposed to be appointed by a Member holding more than 10% of the total share capital of the Company carrying voting rights, then such proxy shall not act as a proxy for any other person or shareholder. The instrument of Proxy in order to be effective, should be deposited at the registered office of the Company, duly completed and signed, not less than 48 hours before the commencement of the meeting. A Proxy form is sent herewith. Proxies submitted on behalf of the companies, societies, etc., must be supported by an appropriate resolution authority, as applicable.

3. Corporate Members are requested to send a duly certified copy of the Board Resolution/Power of Attorney/Letter of Representation authorizing its representative to attend and vote on their behalf at an Extra Ordinary General Meeting.

4. Members/Proxies attending the meeting are requested to bring the Attendance Slip (duly completed and signed) to the Meeting.

ANNEXURE TO THE NOTICE

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

 

ITEM No. I

M/s. __________________, (Old Auditor) Chartered Accountants, ____________ 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. __________, (New Auditor) Chartered Accountants, _____________, be appointed as the Statutory Auditors of the Company to fill the casual vacancy caused by the resignation of M/s. _____________, (Old Auditor) Chartered Accountants, __________.

M/s. __________________, (New Auditor) Chartered Accountants, ______________, 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.

By Order of the Board

For __________________ Private Limited

Place: ___________

Date: ___________

__________________

(Director)

(DIN:  ___________)

(Add:  ________________________)

Author Bio

One Comment

  1. vishal2601 says:

    Dear Ms. Priyanka,

    Very well prepared article with pointwise clarification and from the perspective of al three persons engaged in the procedure.
    However, please clarify step 2, 3 and 6 of the procedure for a company, as the draft letter of intimation by a Company to the New auditor (shared by you above) pertains to which step. Are you available on cell please? if yes, please share on my mail id – vish_2601@rediffmail.com.
    Thanks,
    Vishal Jaiswal
    9435565235

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