Removal of existing auditor

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 November 2013 Dear Experts There is a Pvt Ltd Company. It has re-appointed its auditor Agarwal & Co for the financial year 2012-13 on 25th September, 2012. On 6th November 2013 i.e. today Pvt Ltd wants to appoint Jain & Co as auditors for same financial year i.e. 2012-13 and remove Agarwal & Co. Agarwal & Co is not providing resignation.
What are the Options available with the current auditor and the pvt ltd company in this scenario as the due for filing of income tax return , AGM and audit for financial year 2012-13 has expired?

Ajay Mishra

Ajay Mishra (Expert)
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12 November 2013 Hi

If you have appointed Agarwal 7 Co. as auditor and then you want to appoint Jain & Co. as auditor then you will follow the provision of section 225 and 224(7) of the Companies Act, 1956.

The Board of directors of a company has no powers to remove an auditor appointed by the company in general meeting. Accordingly, the said auditor can be removed only by the company in general meeting after receiving the previous approval of the Central Government. Powers has been delegated to the Regional Director vide Notification No. GSR 288(E), dated 31-5-1991.

Ajay Mishra

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12 November 2013
Removal of auditor(s) at a general meeting with the prior approval of the Central Government:

An auditor can be removed before expiry of his term only by the company in general meeting after obtaining the previous approval of the Central Government (Power has been delegated to the Regional
Director).

Procedure for removal of auditors

The company shall take further action as prescribed in section 225 and make an application to the concerned Regional Director in e-Form 24A as prescribed by the Notification No. GSR 56(E) dated 10th Feb., 2006 for his approval.

. Person filing

Managing Director or Whole-time Director or Manager or Secretary.

2. Time limit

The application has to be filed for appointment within seven days of the annual general meeting and for removal before general meeting.

3. Guidelines
(i) The power of the Central Government to appoint auditors become exercisable when no auditors are appointed or re-appointed at an annual general meeting of a company.
(ii) Obligation has been cast on the company that within seven days of the Central Government power
becomes exercisable; it shall give a notice of that fact to the Central Government in the prescribed e-Form 24A electronically.
(iii) The powers of the Central Government under section have been delegated to the Regional Directors of the Department of Company Affairs.
(iv) Reasons for not appointing any auditor at the annual general meeting and other relevant details should be furnished.
(v) Only the company in general meeting after obtaining the previous approval of the Central Government (Regional Director) can remove an auditor before expiry of his term.
(vi) The remuneration of auditors appointed by the Central Government may be fixed by the Central Government. But if the Central Government does not fix such remuneration then remuneration of auditors shall be fixed by the company in general meeting or in such manner as the company in general meeting may determine.
(vii) The remuneration which has been fixed for an auditor is considered to be inclusive of all expenses allowable to him and consequently, he cannot claim any amount in addition to the fixed remuneration.

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Ajay Mishra

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12 November 2013
Ordinary Resolution passed at the EGM for appointing new auditors subject to approval of Regional Director:

RESOLVED THAT pursuant to the provision of section 224, 224(1B) and 225 of the Companies Act, 1956 and subject to the approval of the Central Government (Powers delegated to the Regional Director) for the removal of the existing Auditors of the Company, M/s K. T. Jain & Co., Chartered Accountants of Indore, M/s Prabhat Jain & Associates, Chartered Accountants of Indore, be and are hereby appointed as the Auditors of the Company to hold office from the date of order of removal of the Auditors as approved by the Regional Director up to the conclusion of the next Annual General Meeting of the Company on a remuneration of Rs. 7,875 plus out of pocket expenses.

Ajay Mishra

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12 November 2013
Specimen of the Board Resolution for Authorizing to file Application

RESOLVED THAT an application in the prescribed e-Form 24A for approval for the removal of Auditor u/s 224(7) of the Companies Act, 1956 be made to the Regional Director, Ministry of Company Affairs,
Western Region, Mumbai.

RESOLVED FURTHER THAT Shri DKJ, Director and/or Ms. AJ, Company Secretary of the Company be and is hereby authorised to sign the application on behalf of the Board and execute an affidavit verifying
the contents of the application.

RESOLVED FURTHER THAT MS AJ, Company Secretary be and is hereby authorised to file the above said application with the Regional Director, Western Region, Department of Company Affairs and to appear before the Regional Director on behalf of the Company and to do all such acts, deeds and things as may be required in the matter and to give all details, statements as may be required by the Regional Director.

Ajay Mishra

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12 November 2013
Ordinary Resolution passed at the EGM for removing existing auditors subject to approval of Regional Director

RESOLVED THAT pursuant to the provision of section 224(7) of the Companies Act, 1956 and subject to the approval of the Central Government (Powers delegated to the Regional Director), M/s ABC & Co., Chartered Accountants of Indore, who were appointed as the Auditors of the Company at the last Annual General Meeting to hold office up to the conclusion of the next Annual General Meeting of the Company, be and are hereby removed from such office of the Auditors, before the expiry of their term.

Ajay Mishra

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12 November 2013
Specimen of the Special Notice/Requisition Received from a member to call an EGM

From:
S.A. Patel
Member,
ABC Foods Ltd.
123 Sati Darwaja
Ujjain (M.P.)

To.
The Board of Directors,
ABC Foods Ltd.,
123, Sati Darwaja,
Ujjain (M.P.)

Sub: Requisition for calling an Extraordinary General Meeting u/s 169

Sir.
I, the under signed member of the Company holding 41.60% of the paid up share capital issued by the Company as set out in the Schedule hereto requires you in terms of section 169 of the Companies Act, 1956
and Article 64 of the Articles of Association of the Company to convene an Extra Ordinary General Meeting of the members of the Company, to transact the following businesses by Ordinary Resolution:

(1) REMOVAL OF AUDITORS
RESOLVED THAT pursuant to the provision of section 224(7) of the Companies Act. 1956 and subject to the approval of the Central Government (Powers delegated to the Regional Director), M/s ABC & Co.,
Chartered Accountants of Indore, who were appointed as the Auditors of the Company at the last Annual General Meeting to hold office up to the conclusion of the next Annual General Meeting of the Company
be and are hereby removed from such office of the Auditors, before the expiry of their term.
(2) APPOINTMENT OF NEW AUDITORS:
RESOLVED THAT pursuant to the provision of sections 224, 224(18) and 225 of the Companies Act, 1956 and subject to the approval of the Central Government (Powers delegated to the Regional Director)
for the removal of M/s ABC & Co., Chartered Accountants, the existing Auditors of the Company, M/s Prabhat Jain & Associates,. Chartered Accountants of Indore be and are hereby appointed as the Auditors of the Company to hold office from the date of Order of Removal of the Auditors as approved by the Regional Director up to the conclusion of the next Annual General Meeting of the Company on a remuneration of Rs. 7,875 plus of out of pocket expenses.

Name of the requisitionist: S.A.Patel
L. F. No.: 002
Shares held: 1,25,100
% Holding: 41.60%

Signature
PLACE: UJJAIN
DATED:

Querist : Anonymous

Querist : Anonymous (Querist)

12 November 2013 Dear Sir Thanks for your reply, i was waiting for it since the very first day i posted it on this forum.

Please provide one more clarification

When the new Auditor need to intimate the Auditor being removed for his NOC:
(i) before providing company his "consent and eligibility" section 224(1B) and 226(1) or
(ii) before accepting the appointment letter from the company or
(iii) after accepting the appointment letter from the company

AND

Along with Form 24A do we need to attach the "grounds of making application for removal of auditor"?

Pls advice
Thanks

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Ajay Mishra

Ajay Mishra (Expert)
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12 November 2013 Yes, you will take NOC from auditor who is going to removed.

You will also give the reason of removal. It will be in explanatory statement.

The new auditor after appointment will file Form-23B with ROC.

Querist : Anonymous

Querist : Anonymous (Querist)

12 November 2013 Dear Ajay Sir

My Query was
When (time or date) the new Auditor need to intimate and take the NOC from previous Auditor?

(i) before providing company his "consent and eligibility" section 224(1B)and 226(1)or
(ii) before accepting the appointment letter from the company or

Thanks
(iii) after accepting the appointment letter from the company

Ajay Mishra

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12 November 2013 After accepting the appointment letter from the company.

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Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2013 Thank You Ajay Sir..

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Ajay Mishra

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13 November 2013 My Pleasure........

Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2013 Dear Ajay Sir,

Pls clarify what is the penalty for late filing of Form 24A to the Regional Director?

What could be the consequences ??

Thanks

Ajay Mishra

Ajay Mishra (Expert)
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13 November 2013 Penalty is not specified under the Act.

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Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2013 Ajay Sir,

My query was what could be the consequences if we file the form 24a after prescribed time in law means after 7 days?

Can the form be rejected??

Ajay Mishra

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13 November 2013 Section 224(3) provides that if no auditors are appointed or re-appointed at an annual general meeting of a company, the Central Government may appoint a person to fill the vacancy. Therefore, the power of the Central Government to appoint auditors becomes exercisable when no auditors are appointed or reappointed at an annual general meeting of a company. The Company is required to give intimation
electronically to the Regional Director (Powers of the Central Government were delegated to the Regional Director) vide Notification No. GSR 288(E) dated 31st May, 1991) in new e-Form 24A prescribed by
Notification No. GSR 56(E) dated 10th Feb., 2006.

Obligation has been cast on the company that within seven days of the Central Government's power u/s 224(3) becoming exercisable, it shall give a notice of that fact to that Government; and if a company fails to give such notice, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.
Further, omission or failure to pass a special resolution at an annual general meeting for appointment of an auditor under section 224A has under mentioned two consequences:—
(a) it shall be deemed that no auditor or auditors had been appointed by the company at its annual general meeting; and
(b) the power of the Central Government under section 224(3), to appoint auditors becomes exercisable.

Circular No. 5 of 1972, dated 21-2-1972 inter alia provides that the Government's power to appoint auditors under section 224(3) becomes available where at an annual general meeting no auditors are appointed or re-appointed. Where auditors are not appointed or re-appointed in accordance with the provisions of the Act including section 224(2), as read with sections 225 and 190, section 224(3) becomes attracted in the matter.

The above provision is also applicable on section 224(7) or not we can not said on it.

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