As per 139 of CA 2013 , first auditor should be appointed by BOD within 30 days from the date of registration. If board fails to do so, members should appoint within 90 days through an EGM.
Private limited company was incorporated in Jan 16 and BOD has appointed a firm as auditor within the time limit. But for some reason, company decided to remove the existing auditor and appoint new auditor. Can the company do so??If yes, plz let me know the procedure.
Also, the law is silent on from when the time limit of 90 days should start. Would you help me on the interpretation of the same as from when it should be taken into consideration.
12 December 2016
Yes the company can remove the first auditor and appoint new auditor. The procedure would be same as appointment of audit as prescribed in S.139 of CA. The time limit of 90 days would start from the date of formation of company.
27 December 2016
Thank you Amrita for your valuable opinion.
Would you rectify me if I'm wrong in my understanding on auditor appointment in the below context.
Mr. X , CA has been appointed as first auditor of a company at its EGM (board failed to appoint within 30 days) and auditor has tendered his acceptance as well. Subsequent to this, Mr. X has joined as a partner in a new firm of CA's and he don't wish to practice in his name as an individual. Hence, he submits his resignation as auditor and request the company to appoint his firm. Accordingly, company convenes an EGM (casual vacancy on account of resignation) and appoints the firm as an auditor of the company.
If my understanding is not correct or there a simpler way(without conducting EGM) of appointing firm as auditor, kindly let me know.
24 July 2024
Your understanding of the process seems mostly correct, but let's clarify the appointment of auditors in the context you described:
1. **Initial Appointment of Mr. X as Individual Auditor:** - Initially, Mr. X was appointed as the first auditor of the company at an Extraordinary General Meeting (EGM), presumably because the Board failed to appoint an auditor within 30 days of incorporation as required by the Companies Act.
2. **Resignation and Appointment of Mr. X's Firm:** - Subsequently, Mr. X joined a new firm of Chartered Accountants and resigned as the auditor of the company. According to the Companies Act provisions (specifically Section 139(8)), a casual vacancy arose due to Mr. X's resignation.
3. **Process for Filling Casual Vacancy:** - When a casual vacancy occurs in the office of an auditor, the company is required to appoint a new auditor to fill the vacancy. This appointment needs to be ratified by the shareholders at a general meeting (EGM or AGM), as per Section 139(8) of the Companies Act, 2013.
4. **Appointment of Mr. X's Firm as Auditor:** - To appoint Mr. X's firm as the new auditor, the company convened an EGM to pass a resolution to appoint the firm to fill the casual vacancy caused by Mr. X's resignation. This EGM was necessary to comply with the legal requirement of shareholder approval for the appointment of auditors.
5. **Alternative Ways of Appointment:** - Typically, the appointment of auditors (whether an individual or a firm) requires shareholder approval at a general meeting. There isn't usually a simpler way to appoint a firm as an auditor without convening a general meeting unless the firm was appointed as the auditor from the beginning or the appointment is made by the Board (where applicable).
In summary, your understanding that an EGM was necessary to appoint Mr. X's firm as the auditor to fill the casual vacancy caused by his resignation appears correct. This process ensures compliance with the Companies Act and shareholder approval requirements for the appointment of auditors. If the Board could have appointed the firm directly without an EGM, it would typically need to do so within the framework of the law and the company's Articles of Association, but in this case, an EGM was likely necessary due to the casual vacancy.
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