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Companies Act, 2013: Removal, resignation of auditor and giving of special notice

Removal of auditor before expiry of his term [Section 140(1)]

Resolution: Such removal requires a special resolution (SR).

Approval: Previous approval of Central Government (CG) must be obtained.
                Procedure for obtaining approval of CG and passing SR (Rule 7):
Ø  An application shall be made to CG in Form ADT-2. The application shall be accompanied with the prescribed fees.
Ø  The application shall be made to CG within 30 days of passing of the Board resolution (BR).
Ø  The company shall hold the general meeting (GM) within 60 days of receipt of approval of CG for passing of the SR.

Opportunity of being heard: Before taking any action for removal, the auditor shall be given a reasonable opportunity of being heard.

Resignation by Auditor [Section 140(2) and 140(3)]
When an auditor resigns, he is required to file a Statement in the prescribed form. The Statement shall indicate the reasons and other facts as may be relevant with regard to his resignation.
The Statement shall be filed within 30 days from the date of resignation. The Statement shall be filed with-
Ø  The company
Ø  The Registrar
Ø  Comptroller and Auditor General Of India (C&AG) (in case of a Government company)

Fine for non-filing:
Ø  Minimum: Rs. 50000
Ø  Maximum: Rs. 500000

Special Notice for not reappointing the retiring auditor (Section 140(4)]
Requirements of special notice:

a) At an Annual General Meeting (AGM), special notice shall be required for-
Ø  Appointing as auditor a person other than the retiring auditor; or
Ø  Providing expressly that the retiring auditor shall not be re-appointed.

b) However, special notice shall not be required if the retiring auditor has completed consecutive tenure of 5 years/ 10 years, as provided under section 139(2).

On receipt of notice of such a resolution, the company shall forthwith send a copy thereof to the retiring auditor.

Right of auditor to make a representation and to get it circulated:

a) The retiring auditor is entitled to make a representation against his removal. The representation (not exceeding a reasonable length) shall be in writing and shall be sent to the company.
b) He may request the company to circulate the representation to the members of the company.

Duties of the company w.r.t representation:

a) The company shall state the fact that the retiring auditor has made a representation against his removal, in any notice of the resolution that is given to the members of the company.
b) The company shall send a copy of the representation to every member of the company to whom notice of the meeting is sent (unless the representation is received by the company too late).
c) If a copy of the representation is not sent because it was received too late or because of the company’s default, then-
Ø  The auditor may require that the representation shall be read out at the meeting;
Ø  A copy of the representation shall be filed with the Registrar.


Contributed by CA Shruti Agarwal
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