CS Neha R. Gupta

Neha Gupta

The term casual vacancy has not been defined in the Companies Act, 2013. Generally, it means a vacancy caused due to death, disqualification and resignation of an auditor.

Through this article, we are going to discuss casual vacancy arises due to resignation of Auditor in a Company under the Companies Act, 2013.

Let us discuss one by one, the applicable provisions of the Companies Act, 2013 and procedures of casual vacancy arise due to resignation of Auditor from the perspective of resigning auditor, company and the new Auditor:

1) FROM THE PERSPECTIVE OF RESIGNING AUDITOR

A. Applicable Provision

As per the provisions of Section 140(2) & (3) of the Companies Act, 2013 read with Rule 8: resignation of Auditor under the Companies (Audit and Auditors) Rules, 2014 which are as under for your ready reference:

According to Section 140(2) of the Companies Act, 2013, the auditor who has resigned from the company shall file within a period of thirty days from the date of resignation, a statement in the prescribed form with the company and the Registrar, and in case of companies referred to in sub-section (5) of Section 139 the auditor shall also file such statement with the Comptroller and Auditor-General of India, indicating the reasons and other facts as may be relevant with regard to his resignation.

And as per Section 140(3) of the Companies Act, 2013, if the auditor does not comply with sub-section (2), he or it shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

Rule 8: Resignation of Auditor

For the purposes of sub-section (2) of section 140, when an auditor has resigned from the company, he shall file a statement in Form ADT-3.

B. Procedure: Resigning Auditor should do the following:

i. Draft the resignation letter along with mention the reason of resigning and the date of resigning.

ii. Intimate of his resignation to the Company within 30 days of resignation.

iii. File an e-form ADT-3 along with detailed resignation letter with the Registrar of Company within 30 days of his resignation.

NOTE:

a) An attachment to e-form-ADT-3 is resignation letter.

b) Draft format of resignation letter is given under

2) FROM THE PERSPECTIVE OF COMPANY:

A. Applicable Provisions

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 an auditor appointed by the Comptroller and Auditor-General of India, be filled by the Board of Directors within thirty 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.

Followings provisions are also applicable:

1) Section 139(1), 141 of the Companies Act 2013 read with Rule 3: Manner and Procedure of Selection and Appointment of Auditors and Rule 4: Conditions for Appointment and Notice to Registrar under the Companies (Audit and Auditors) Rules, 2014.

2) Secretarial Standard (SS-1) on meetings of the Board of Director and Secretarial Standard (SS-2) on General Meetings.

B. Procedure : The Company should do the following steps:

i. Obtain the Resignation Letter along with Form ADT-3 from the resigning Auditor.

ii. After giving notice of Board meeting, call a board meeting for acceptance of resignation of Auditor. (follow SS-1 on meetings of the Board of Directors)

iii. Send letter to new auditor seeking consent and certificate from new auditor for being eligible for appointment of auditor as per Companies Act 2013.

iv. Obtain consent letter and certification under section 139 and 141 of the Companies Act, 2013 read with Rules 3 and 4 of the Companies (Audit and Auditors) Rules 2014 from the proposed New Auditor for being eligible for appointment as an Auditor.

v. After giving notice of the Board meeting, Call a Board Meeting for filing the Casual Vacancy and approve the notice for EGM within 90 days of the appointment by the Board of Directors.(follow SS-1 on meetings of the Board of Directors)

vi. Hold an Extra Ordinary General Meeting and pass Ordinary Resolution for approval of Auditor Appointment.(follow SS-2 on General Meetings)

vii. Send Intimation letter to the New Appointed Auditor Firm pertaining to his appointment in a Company from the conclusion of this Extra Ordinary General Meeting until the conclusion of ensuing Annual General Meeting.

viii. File an e-form ADT-1 for appointment of new Auditor within 15 days of appointment of Auditor in an Extra-Ordinary General Meeting.

NOTE:

a) Attachments to an e-form ADT-1 are :

1) Copy of intimation sent by the Company to the Auditor.

2) Consent & certificate from the Auditor

3) EGM Resolution

4) Notice along with explanatory statement, Form MGT-11, attendance slip and route map

b) Draft formats are given under.

3) FROM THE PERSPECTIVE OF NEW AUDITOR.

A. Applicable Provisions: Section 139(1), 141 of the Companies Act 2013 read with Rule 3: Manner and Procedure of Selection and Appointment of Auditors and Rule 4: Conditions for Appointment and Notice to Registrar under the Companies (Audit and Auditors) Rules, 2014.

B. Procedure:

i. Obtain letter from Company seeking consent and certificate for appointment of Auditor.

ii. Send consent & certificate for the appointment as per the Companies Act, 2013 to the Company.

iii. Ensure that Company has filed an e-form ADT-1 for such appointment.

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:_______________

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 ________ subject to Shareholders’ approval.

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.

Details of our Firm are as below:

1. Name of the Firm
2. Constitution of the firm
3. Firm Registration Number
4. Address of office of the Firm
5. PAN of the Firm
6. Membership Number
7. Email id of the firm

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:  ________________________)

Form No. MGT-11

Proxy form

[Pursuant to Section 105(6) of the Companies Act, 2013 and Rule 19(3) of the Companies (Management and Administration) Rules, 2014]

CIN:  
Name of the Company:  
Registered office:  

I/ We, being the member (s) of ___________________________ Private Limited holding…….shares of the above named Company, hereby appoint

1. Name:
Address:
E-mail ID:
Signature: …………………………………………………………………….or failing him/her

2. Name:
Address:
E-mail ID:
Signature: …………………………………………………………………….or failing him/her

as my/our proxy to attend and vote (on a poll) for me/us and on my/our behalf at an Extra-Ordinary General Meeting of members of the Company, to be held on ________, the __th day of ________, 2017 at _____ a.m./p.m. at the registered office of the Company at ____________________________________ and at any adjournment thereof in respect of such resolutions as are indicated below:

Sr. No. Ordinary Resolutions

 

For Against Abstain
1. Appointment of Statutory Auditors to fill Casual Vacancy

Affix revenue Stamp

Signed this ________________day of ____________2017

Signature of Shareholder(s)_______________________________

Signature of Proxy holder(s)_______________________________

 

Signed this ________________day of ____________2017

Signature of Shareholder(s)_______________________________

Signature of Proxy holder(s)_______________________________

Note: This form of proxy in order to be effective should be duly completed and deposited at the Registered Office of the Company at ______________________________________________ not less than forty-eight hours before the commencement of the Meeting.

Attendance Slip for Extra-Ordinary General Meeting 

Date : __th _________ 2017, ___________ at _____ a.m./p/m.

Folio No./DP ID Client ID No.
Name of First Named Member/Proxy/Authorised Representative
Name of Joint Member(s), if any:
No. of Shares held

……………………………………..

Name of the Member/Proxy

(in BLOCK Letters)

……………………………………………..

Signature of the Member/Proxy/

Authorised Representative

Note:

1. Members/Proxy holders are requested to bring their attendance slip with them when they come to attend the meeting and hand it over at the entrance after signing it.

2. Members/Proxy holders who come to attend at the meeting are requested to bring their copies of the Notice convening this Extra-Ordinary General meeting.

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 our earlier letter on the captioned matter, 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.

Thanking you,

Yours faithfully,

For __________________________________ PRIVATE LIMITED

_________________

(Director)

DIN: ____________

Add.: __________________

More Under Company Law

Posted Under

Category : Company Law (3945)
Type : Articles (17276)
Tags : Companies Act (2412) Companies Act 2013 (2185)

36 responses to “Casual vacancy due to resignation of Auditor under Companies Act, 2013 with relevant formats”

  1. anhamika says:

    I have a query

    What if stat auditor “X”ppointed for 5 years. Three year overs which was ratified at every AGM too. At the next AGM Stat Auditors “X” to be changed due to change in global auditors.Still is resignation letter required ?or Special Notice from a member for appointment of Auditor other than reitiring Auditor would suffice

  2. abhay ladhani says:

    What if, when the Company has approved the appointment of Auditor in casual vacancy arise due to resignation in the annual general meeting, because the AGM of the company is conducted within 3 months, so in this case what is tenure of Auditor?

    • Neha Gupta says:

      In my view, ratification of appointment and Appointment for 5 years, both should have been made in that AGM.

      Please you should take other views of Seniors also.

  3. CA Vivek says:

    Hi CS Neha,

    Thanks for presenting the provisions in meaningful manner.

    Do you have such information compiled in case of removal of auditors and appointment of new auditors in their place? Need to analyse this situation.

    Regards,
    CA Vivek

    • Neha Gupta says:

      Hello Vivek Sir,

      Welcome Sir.

      And thank you so much for appreciating my effort.

      And please contact at gnehar10@gmail.com for any query. I will try my level best to resolve your query.
      Thanks

      Regards
      CS Neha R. Gupta

  4. Amit says:

    Hi Mam

    The article is very useful and self explanatory.

    Kindly clarify:-
    A company does not ratify the appointment of its existing auditor and intimate them for their termination and send an offer letter to new auditor in place of existing auditor. After getting consent letter and eligibility certificate the company has appointed new auditor for next 5 years in the AGM.

    Now whether the ADT-3 will need to be filed in this case. Further in case Auditor does not file ADT-3, Then ADT -1 can be filed without SRN of ADT-3.

    Please clarify.
    Amit

  5. Amit Anand says:

    How to file ADT-1 in case of resignation of statutory auditor due to death.wheather ADT-3 will be filled or not ? And in ADT-1 THERE IS AN OPTION FOR SRN NO WHICH SRN NO TO BE FILLED.

    • Neha Gupta says:

      Appointment will be done as it is in the case of casual vacancy and likewise ADT-1 will also be filed but ADT-3 will not be filed in such a case…

      SRN of ADT-1 of old auditor’s appointment.

  6. Hemanth says:

    great article on casual vacancy and thanks for sharing your knowledge.

  7. cs pooja sharma says:

    thanks a lot. really very help

  8. CA Sanjeev Dua says:

    Dear Neha,
    Very useful and self explanatory. Thanks a ton.

    But, what if previous auditor does’t file ADT-3?? Can we file ADT-1 before ADT3??
    Rgds.

  9. CA Dharmesh Pandya says:

    Dear Neha,

    Very useful article and self explanatory

    Just awesome…

    MAny thanks,
    CA Dharmesh Pandya

  10. Prateek Garg says:

    Hello Madam

    1) 4th Proviso to S.139(1) [Read with R.4] mandates the filing of Form ADT-1 for appointments made under that sub section only. Whether this requirement can be extended to made it applicable for appointments made u/s 139(8).

    2) Would you recommend the filing of Form ADT 1 for non resignation cases also, where a board resolution is sufficient for filling the vacancy.

    3) Would you recommend filing of Form ADT-1 for appointment of first auditors u/s 139(6).

    • Neha Gupta says:

      Hello Prateek

      Recently, the Ministry has come out with Companies (Audit and Auditors) Amendment Rules 2018 on 16.02.2018 where they substituted the new form ADT-1 and ADT-2 where you can see in e-form ADT-1, there they ask the nature of appointment of Auditor under point no. 3(b) that whether first auditor is appointed by board/members, appointment/reappointment in AGM, auditor appointed in case of casual vacancy etc., so from this you can say that you have to intimate the ROC for respective appointments.

  11. Pratima says:

    hi Neha,
    Could you please guide me under which provision of companies act MGT-14 is required in case of appointment for filling casual vacancy of Auditor.

  12. Sonal Agarwal says:

    Hello Mam,
    Auditor has resigned in December, 2017. Whether the Board can appoint the auditor and can get approval from shareholders in EGM or can only recommend name which will be finally appointed in EGM.
    Appointment will be in Board or EGM?
    Please reply.

  13. Mayank Joshi says:

    Nice article. In ADT-1 under point 7(a) I will have to fill “whether the appointment is as a result of casual vacancy? and in point 7(b) I will have to fill “SRN No.”. Does it mean that resolution with explanatory statement to be filed with MGT-14 or I will have to give SRN No. of ADT-3 filed by previous auditor.

  14. SANJAY B TRIVEDI says:

    Nice article. thanks for sharing your valuable knowledge.

  15. Chirag Sheth says:

    If an auditor has resigned in August and there is no sufficient time for holding EGM. So new auditor which has been appointed in board be re-appaointed in coming Annual General Meeting for a period of 5 years

  16. Shivani Arora says:

    Auditor has resigned in September itself.. Can the ratification be done in AGM in Sept.?
    instead of holding EGM.?

  17. Shivani Arora says:

    Auditor has resigned in August. There is no sufficient time to convene EGM. Can the ratification be done in AGM in Sept.?

    do reply plz

  18. Deepak Sugandhi says:

    Auditor has resigned in August. There is no sufficient time to convene EGM. Can the ratification be done in AGM in Sept.?

  19. Aayushi Agarwal says:

    I require a format for board resolution for filling the casual vacancy of auditor other than resignation.

  20. Arun Kumar Maitra says:

    Very useful and informative article on the relevant subject.

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