30 December 2009
Please refer to section 224 and 225 of the companies act 1956 for the appointment and removal of the auditors along with the terms and conditions thereof as to when can be appointed when can be removed under what circumstances and what is the formalities to be completed etc.
Board of directors has no power to remove an auditor 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 under section 224(7). Powers has been delegated to the Regional Director vide Notification No. GSR 288(E), dated 31-5-1991.
REMOVAL BEFORE EXPIRY OF HIS TERM
Removal of auditor(s) at a general meeting with the prior approval of the Central Government As per Section 224(7) 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.
Time limit The application has to be filed for appointment within seven days of the annual general meeting and for removal before general meeting.
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.
The company may at an AGM provide expressly that a retiring shall not be re-appointed or appoint an auditor other than a retiring auditor.
Special notice shall be required for any of the above 2 purposes. Special notice ensures that no existing auditor is removed without the matter being specifically considered by the shareholders. The procedure mentioned u/s 225(2) and (3) shall be followed for his removal.
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