company auditor

Under s 131 (6), a company can remove an auditor from office at any time by passing an ordinary resolution . If the directors propose to remove the auditors, they may call a general meeting and give 14 days’ notice to all the members. However, if the shareholders of the company propose to do so,

a special notice is required under s 132 (1). The members must give the notice at least 28 days before the meeting and the company must then give the members at least 21 days’ notice of the resolution. In s131 (5),

it provided that when there is a vacancy arises due to removal of the auditors before the expiration of his term of office, the directors or the company can make an appointment in a general meeting to fill the vacancy. Special notice is required for a resolution at general meeting to fill a causal vacancy.

 if casual vacancy arise due to reason other than resignation of existing auditor then casual vacancy will be filled up by board of directors. (board resolution)

if casual vacancy arise due to resigination then the shareholders in general meeting will fill casual vacancy. (special resolution if sec. 224A is applicable, otherwise ordinary)

thanks a ton....

Dear Richa,

I am not fully satisfied with the above 2 answers.

Let's discuss in detail.

Section 224(6) talks about Filling up of casual vacancy.

1. If vacancy caused by resignation of auditor before the expiry of his term it is required to be filled by General Meeting (EGM) by ordinary resolution. No special resolution is required for this. In fact section 224A is entirely a different case.

2. If vacancy is caused due to any other reason like death or disqualification of auditor u/s 226(3) then it may be filled by board of directors in BM and shareholders approval not required.

Removal of Auditor under section 224(7) read with section 225.

There may be 3 kind of removal in companies act.

1.  Company may remove Ist auditor in GM by passing OR as mentioned in section 224(5). for this special notice is not required. Procedure of sec.225(2) & (3) shall apply.

2. under section 224(7) a company may remove statutory auditor before the AGM with the prior approval of CG. for this also special notice is not required. Procedure of sec.225(2) & (3) shall apply. 

3. Lastly an auditor may also be removed by the company at the AGM as per the provisions of section 225(1). Special notice is required for the same and procedure given in sec. 225(2) & (3) required to be followed.

REASON/LOGIC BEHIND NO CG APPROVAL REQUIRED FOR REMOVAL AT THE AGM

As at the AGM the removal is in the handa of shareholders and not in the hands of management. That's why law exempts the CG approval for this. On the other hand in removal before the expiry of the term he may be removed by management unreasonably for not agreeing to management's wrong demands. Hence CG's approval is required to prevent auditor's independence.

Hope this discussion will help you.

Best Regards--Ankur Garg   ankur_gargcs @ rediffmail.com

If casual vacancy is caused due to resignation then the shareholder will appoint auditor in  EGM. the special resolution will be passed when the section 224(A) attracts. 

section 224A apply when not less than 25% of subscribed capital is held by any one of the following singly or jointly :-

1. A public finaincial institute or a govt. co. or the central govt. or any state govt. OR

2. any financial institute established by govt. in which govt. holds not less than 51% of sub. capital. OR

3. A nationalised bank or insurance co. (General)

if a co. covered under this section then Auditor of that CO. WILL BE ALWAYS APPOINTED BY passing a SPECIAL RESOLUTION. even in case of casual vacany due to resignation.

My point is While discussing filling up of casual vacancy no need to club section 224A. We need to follow section 224(6) only.

Obviously if funda of 25% of subscribed capital u/s 224A is applicable to the company-- casual vacancy casued due to resignaton of auditor required to be fill by passing SR in EGM. 

But at the same time if Casual Vacancy casued due to resignation of auditor in the company where section 224A not applicable, then it is required to be filled by passing OR in the EGM. 

My point is While discussing filling up of casual vacancy no need to club section 224A. We need to follow section 224(6) only.

Obviously if funda of 25% of subscribed capital u/s 224A is applicable to the company-- casual vacancy casued due to resignaton of auditor required to be fill by passing SR in EGM. 

But at the same time if Casual Vacancy casued due to resignation of auditor in the company where section 224A not applicable, then it is required to be filled by passing OR in the EGM.