Removal or Change of Auditor of Company
A company must appoint a statutory auditor within 30 days of incorporation in order to remain in compliance. An auditor may be appointed for a term of one to five years. A company’s auditor may need to be replaced in some circumstances. In this article, we describe the procedure for replacing or removing a company’s statutory auditor.
Removal of Auditor
Before the auditor’s term is out, the Companies Act of 2013 allows for dismissal or replacement. the procedure for dismissing auditors by passing a special resolution after receiving prior Central Government approval. As a result, within 30 days of the Board of Directors’ special resolution authorizing the removal of the Auditor, an application for removal of the Auditor prior to the end of the term must be submitted to the Central Government in Form ADT-2.
After receiving clearance from the Central Government to enact the special resolution, the firm is expected to call an annual general meeting within 60 days of the approval.
The documentation needed to remove an organization’s auditor must be submitted with form ADT-2.
- Service request number of Form MGT-14
- Date that the form was filed
- Date on which the special resolution was passed
- Date of the regular or annual general meeting
Resignation of Auditor
The existing auditor of the company is another way to alter the auditor. An existing Auditor may quit by delivering a letter of resignation to the Board of Directors. An auditor who leaves the company must file Form ADT-3 within 30 days of the resignation date, outlining the reasons and any additional information that may be pertinent to the decision to leave.
Change of Auditor
In order to maintain compliance with the 2013 Companies Act, the company must rotate or replace its auditors on a regular basis every five years. In certain situations, a specific notice is necessary explicitly declaring that a departing auditor shall not be re-appointed for a resolution at an annual general meeting to appoint a person other than a retiring auditor as an auditor. The Auditor may make a written representation to the Company based on the special notice, accepting or opposing the modification as appropriate.
Removal before the expiry of a term
To remove an auditor from his position before the end of his term, a special resolution and prior consent from the Central Government are needed. Within 30 days of the Board Resolution’s adoption, Form ADT-2 requests permission from the Central Government to remove auditors.
The corporation must hold a general meeting (EGM) within 60 days of receiving clearance from the central government to enact a special resolution. The clause stipulates that the auditor shall be given a fair chance to speak during the meeting.
Forms involved in the Auditor Removal Procedure
The following forms shall be required to be filled and submitted for auditor removal:
- MGT-14;
- ADT-2;
- RD-1.
Removal after the expiry of a term
In accordance with Section 139, the Company may select a different company to serve as its auditor if the retiring auditor has served continuously for a term of five or ten years. In these situations, it is necessary to provide a Notice in order for the AGM to consider the Resolution for an appointment, which must explicitly state that the departing auditor is not eligible for re-appointment and name a replacement auditor. The organization must also provide the departing auditor with a copy of the notice. Auditors who are retiring are eligible to make a representation.
When the retiring auditor makes a written representation and requests that the company notify the company’s members of the same, the company shall make clear in the notice to the members that the retiring auditor has made a representation.
All people eligible to receive the meeting notice will receive a copy of the representation that has been made. The auditor’s representation may be read out at the meeting in the event that the Company is unable to send the required documents. A copy of the representation must be lodged with the ROC in cases when it is not sent as directed above.
Conclusion
An auditor when appointed by a company is appointed for a period of 5 years however sometimes the Board management may remove the auditor. The provisions regarding auditor removal are provided under the Companies Act of 2013.
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Disclaimer: The information presented here is only meant to be informative. Although this article was carefully crafted, it should only be regarded as general advice because it has been expressed in general terms. You should not act on the information provided in this article or refrain from acting upon it without first seeking professional advice since it cannot be relied upon to address your unique situation
Author Bio
Excellent information. This is applicable tp Private Limited Co also.