Appointment of auditors in place of resigning auditor??

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Querist : Anonymous

Querist : Anonymous (Querist)

30 November 2013 Hello All

I hav to appoint new auditors at the AGM in place of existing auditors who hav tendered there resignation ?

what's the procedure for the same and please share draft resolution for the same to be adopted at AGM..

Thanks in advance.

Ajay Mishra

Ajay Mishra (Expert)
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30 November 2013
APPOINTMENT OF OTHER THAN A RETIRING AUDITOR

A special notice of a resolution to be moved at an annual general meeting for appointing an auditor other than the retiring auditor or removing of an existing auditor is given to the company in the manner as prescribed under the Act.

Requirement of special notice to the company
Section 225(1) provides that special notice shall be to be given by a member and such special notice
must comply with the requirements of section 190. Following two types of resolutions or notice may be
given under section 225 of the Act:—
(a) resolution at an annual general meeting for appointment of a person other than a retiring auditor as auditor; and
(b) resolution at an annual general meeting providing expressly that retiring auditor shall not be reappointed.
Special notice has to be given to the company at least fourteen days before the date of the meeting. The period of fourteen days is exclusive of both the day of meeting and the day of notice. Moreover, special notice has to be given fourteen days before the date of the original meeting and not adjourned meeting.
Thus, special notice received after the adjournment of original meeting cannot be taken and acted upon by a company.
In the case of Santosh Mani v New Delhi YMCA (1995) 19 CLA 178 (Del), it was held that even though the resolution moved by a shareholder not to re-appoint a retiring auditor failed to comply with requirement of section 188, yet since it was passed in annual general meeting when notice of resolution was given by company to all members and was carried by a majority, the same could be implemented.

The Department's Circular No. 5 of 1972, dated 21-2-1972 inter alia states that in view of section 225 special notice shall be required for a resolution appointing as an auditor a person other than the retiring
auditor. Non-compliance with the provisions of the said section would render such a resolution illegal and ineffective.
Section 190 which provide a resolution requiring special notice applies to special notice under section 225

Ajay Mishra

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30 November 2013
Intimation shall be given by the company to all members on receipt of notice or draft of resolution

The company shall on receipt of a notice or draft resolution from a member give intimation of the same to all the members immediately and where it is not possible to do so then the company shall give notice to the members by advertisement in the newspaper circulating in the place of its registered office, not less than seven days before the meeting.

Intimation shall be given by the company to the retiring auditor

On receipt of notice under section 225(1) of the Act, for the removal of a retiring auditor the company shall send a copy of the notice to the retiring auditor forthwith. The Department's Circular No. 2/81, dated 17-10-1981 states that in order to appoint a person other than the retiring auditor or to provide that the retiring auditor shall not be re-appointed; a special notice has to be given proposing that such a resolution would be moved at the next annual general meeting. On receipt of the special notice, the company should send a copy thereof to the retiring auditor. It is advisable to send the same by registered post with acknowledgement due.

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Ajay Mishra

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30 November 2013
Circulation of the retiring auditors' representation to all the members
Where the retiring auditor makes a representation on the notice or resolution for their removal, the
company shall circulate the same to all the members of the company, if it is possible to do so before the
meeting. If it is not possible to circulate the representation to the members, the auditor may require the
same to be read at the meeting, unless the Central Governmenton an application by the company or an aggrieved person orders that copies of the representation need not be sent to members nor read at the meeting.
Following are the other relevant provisions in this regard:—
(i) In case where the retiring auditor makes with respect thereto representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the
company, the company shall do the following:—
(a) the company shall state the fact of the representations having been made, in any notice of the resolution given to members of the company;
(b) the company shall send a copy of the representations to every member of the company to
whom notice of the meeting is sent, whether before or after the receipt of the representations
by the company;
(c) the company is not bound to send the copy of representations to members, if the
representations are received by it too late to do so;
(d) if a copy of the representations is not sent as aforesaid because they were received too late or
because of the company's default, the auditor may require that the representations shall be
read out at the meeting. This right is in addition to the right of auditor to be heard orally at the
meeting.
(ii) Section 225 applies to all companies, whether public or private.
(iii) Department's clarifications on the wording of the resolution:
Circular No. 22 of 1976, dated 26-6-1976 provides that a point has been raised as to whether the
words 'other than a retiring auditor' occurring in section 225(1) of the Companies Act, 1956,
should be mentioned in the special notice under section 225(1) of the Act, while proposing a new
person to be appointed as auditor and whether the words 'instead of him' should be mentioned in
the resolution passed in the annual general meeting appointing a person other than a retiring
auditor as an auditor of the company under section 224(2)(c) of the Companies Act, 1956. The
issue has been examined in detail and this Department is of the view that the provisions of section
225(1) or 224(2)(c) do not require that the words 'other than a retiring auditor' or 'instead of him'
should be specifically mentioned either in the special notice or in the resolution of the annual
general meeting respectively. Since the re-appointment of the retiring auditor is not automatic and
a specific resolution for the re-appointment of the retiring auditor is a must and in the absence of
such a resolution the term of the retiring auditor shall automatically come to an end at the
conclusion of the annual general meeting, these words have no specific meaning attached to them.
These words are suggestive only to indicate a new person, and are not mandatory requirement of
law requiring these words to be included in the special notice under section 225(1) or in the
resolution passed under section 224(2)(c) of the Act. Thus, passing of a resolution in the annual
general meeting appointing another person as an auditor of the company without mentioning the
words 'instead of him' is quite sufficient and valid under section 224(2)(c) of the Act and similarly
a special notice proposing to move a resolution to appoint a new person as an auditor of the
company without mentioning the words 'in place of retiring auditor's is sufficient compliance
under section 225(1) of the Act.
(iv) Any resolution requiring special notice must comply with the requirements of section 190. Contravention of the provision of section 225 would attract penalty to the company under section 629A.
(v) Acceptance of the position as auditor previously held by a retiring auditor without first communicating to the existing auditor shall be deemed to be guilty of professional misconduct as contemplated by clause (8) of the First Schedule to the Chartered Accountants Act, 1949.

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30 November 2013
Specimen of General meeting resolution for filing the casual vacancy caused by
resignation of the auditors

The Chairman took the matter for appointment of M/s Bhorkar & Kulkarni, Chartered Accountants, Indore, in place of M/s Maheshwari & Gupta, Chartered accountant, the retiring Auditors who have
expressed their unwillingness for re-appointment and who has to vacate their office at the conclusion of this
Meeting.
The Chairman informed that the Company has obtained an eligibility letter from M/s Bhorkar & Kulkarni in terms of section 224(1B) of the Companies Act, 1956 and proposed the resolution for approval
of the members:
RESOLVED THAT M/s Bhorkar & Kulkarni, Chartered Accountants of Indore, be and are appointed
as the Auditors of the Company, in place of M/s Maheshwari & Gupta, Chartered Accountants, to hold
the office of Auditors from the date of this Meeting to the conclusion of the next Annual General
Meeting of the Company on such remuneration and out of pocket expenses as may be decided by the Board.

Explanatory Statement

M/s Maheshwari & Gupta, Chartered Accountants, the existing Auditors of the Company has resigned from the office of Auditor of the Company, therefore creating casual vacancy in the office of Auditors. The Company has received a notice from member alongwith a letter u/s 224 of the Companies Act, 1956 informing the eligibility signifying his intention to appoint M/s Bhorkar & Kulkarni, Chartered Accountants, to fill the casual vacancy.
In terms of the provision of section 225 of the Companies Act, the appointment of Auditors in place of existing Auditors of the Company requires the approval of General Meeting by way of Ordinary resolution.
Therefore, the Board recommend to pass necessary resolution by way of ordinary resolution to appoint M/s Bhorkar & Kulkarni, Chartered Accountants, as the casual Auditors of the Company in place of M/s Maheshwari & Gupta, Chartered Accountants to hold office of the Auditors of the Company till the conclusion of the next Annual General Meeting on the remuneration as may be fixed by the Board.
A copy of the resignation tendered by the Auditors and eligibility letter as referred elsewhere are available for inspection of the members till the date of the meeting during business hours.

None of the director of the Company is concerned or interested in the proposed resolution.

Ajay Mishra

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30 November 2013
Specimen of special notice for appointment of auditors other
than the retiring auditors
From …………. (Member) Dated 7th September, 2006
To
The Board of directors
AFA Ltd.
RATLAM (MP)
Sub: Notice under section 225(1) of the Companies Act, 1956 for appointment of auditors M/s.
N.V.N. & Co., Chartered Accountants, in place of M/s S.M.J. & Co.
Dear Sir/s
This has in reference to your notice, dated 2nd September, 2006 for the 11th Annual General Meeting
of the Company to be held on 29th September, 2006.
I, would like to inform that I have …….. Equity Shares of the company constituting …… % of the
total paid up capital of the company and in reference to the provisions of section 225(1) read with the
provisions of section 190 of the Companies Act, 1956, I hereby give a notice that M/s. N.V.N. & Co.,
Chartered Accountants of Ratlam be a ppointed in place of M/s. S.M.J. & Co., Chartered Accountants, the retiring auditors of the company.

I hereby submit a draft of the resolution for approval at the annual general meeting to be held on 29th September, 2006.
You are requested to please do the needful as per provisions of the Companies Act, 1956.

Thanking you
Yours faithfully
(……………..)
Members,
L.F. No. ………

Encl.: 1. Draft of the resolution
2. Eligibility letter given by M/s. N.V.N. & Co., Chartered Accountants.

Ajay Mishra

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30 November 2013 Specimen of the resolution to be submitted by member's alongwith the notice

RESOLVED THAT M/s N.V.N. & Co., Chartered Accountants of Ratlam be and is hereby appointed as the auditors of the company in place of the retiring auditors M/s. S.M.J. & Company, Chartered Accountants to hold the office of the auditors till the conclusion of the next annual general meeting on such remuneration as may be determined by the Board of directors of the company.

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Querist : Anonymous

Querist : Anonymous (Querist)

30 November 2013 thanks sir but i was asking for appointment of new auditors at AGM by the members in place of existing auditors who hav tendered their resignation after signing the annual accounts for the FY 2012-13 on 30/08/2013 and date of AGM in my case is 11/09/2013..

so i believe section 225 will not be applicable and proviso to sub section 6a of section 224 of the CA, 1956 will be applicable which provides that vacancy caused by resignation of auditor shall only be filled by the co in general meeting..

so can i simply show in AGm appointment of new auditors in place of resigning auditors without folowing the special notice req as given in sec 225 of CA, 1956?

pls correct me if i am wrong and yeah form 23 B is also to be filed in my case for appoinment of auditors in place of resigned auditors where such app is done at AGM?

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