- Here we discuss the removal of a statutory auditor appointed by BODs (Board of Directors) or Shareholders. The way or method or procedure to remove auditor is given under section 140 of Companies act 2013 & rule 7 of Companies (Audit & Auditors) rule, 2014.
- The following ways to remove an auditor from the company are:-
- Removal of Auditor by Board of Directors;
- Removal of Auditor by Shareholders;
- Removal of Auditor by NCLT;
- Resignation by the Auditor.
REMOVAL OF AUDITOR BY BODS
As per section 140(1) of Companies Act, 2013 the company has a power to remove an auditor of the company before the expiry of his term after getting approval of Central government as per the provisions of rule 7 of companies (audit & auditor) rules, 2014.
PROCEDURE OF REMOVAL OF AUDITOR
CALLING OF BOARD MEETING
The authorised person of the company sent advance 7 days notice to all director of the company to passed a resolution to remove the auditor before the expiry of his term and discuss other motion mention in the agenda.
RESOLUTION PASSED BY BODS
- The Board of Director passed Board Resolution (Majority of Director vote in Favor) to remove an auditor of the company and authorised some person to coordinate & take approval from the Central government for the resolution passed by BODs.
- The BODs authorised the person to call EGM (Extraordinary General Meeting) after taking Central Government approval.
OBTAIN APPROVAL OF CG
- The authorised person file an application with Central Government (Regional Director) in eform ADT-2 within 30 days of the resolution passed by BODs.
- The following details are required & documents attached with eform ADT-2 are:-
- CTC (Certified true copy) of Board Resolution;
- Grounds of Removal of Auditor;
- Details of any proceeding pending between company & concerned Auditor;
- Details of Last 3 years Financial statement qualification;
- SRN (Service Request Number) of ADT -1;
- Details of Auditor remuneration pendency;
- Pendency of any Audit.
CALLING OF EGM
- The Authorised person call EGM within 60 days of getting approval of Central Government for removal of Auditor.
- The company sent advance 21 clear days notice to all the members along with explanatory statement or agenda or resolution required to be discussed in the EGM
RESOLUTION PASSED BY SHAREHOLDERS
- The Concerned auditor has a right to present in the EGM and read his representation in front of all shareholders before passing of any resolution.
- The members of the company required to passed Special resolution (75% of members vote in favour) to remove an auditor from the company.
INTIMATION TO ROCS
The company required to intimate ROCs through Eform MGT-14 within 30 days from the date of passing of Special resolution and the following documents attached are:-
- Notice of EGM with the explanatory statement;
- Agenda of EGM;
- CTC (Certified True Copy) of the resolution passed by BODs & Shareholders;
- Representation of Concerned auditor
- Approval of Central Government.
REMOVAL OF AUDITOR BY SHAREHOLDERS
- As per section 140(4) of Companies Act, 2013 the shareholder has power or right to appointment some another in place of retiring Auditor or Not reappoint the retiring auditor.
- The shareholders of the company have a right to appoint an auditor in place of retiring auditor or don’t want to reappoint the retiring auditor by sending special notice as per section 115 of companies act, 2013.
- The Special notice not sent for the retiring auditor who has completed the term of 5/10 years as per section 139(2) of the companies act, 2013.
Calling of General Meeting.
- The 21 clear days advance notice sent to all shareholders of the company along with Motion (all the resolution before passing are motion) with explanatory statement & any other agenda.
- The date of dispatching, Receiving of notice & date of meeting excluded from the 21 days clear notice.
- The shareholder required to sent special notice to the company if they don’t want to reappoint retiring auditor or appoint another Auditor in place of retiring auditor.
- The special notice sent to the company at least 14 days before the date of the General Meeting of shareholders.
- The Special notice is signed & sent by members holding not less than 1% of the total voting power or holding shares on which such aggregate sum not exceeding five lakh rupees.
Intimate to Concerned Auditor
- The company intimate to the concerned Auditor for which special notice is sent by the shareholders.
- The concerned Auditor has a right to heard the resolution to be pass in the general meeting of shareholders.
Representation by Concerned Auditor
- The concerned Auditor sent representation to the company in respect of resolution for his removal.
- The copy of representation sent by the company to every shareholder who entitled to attend the meeting.
- If a company not able to sent the representation to the shareholders than representation is orally read in front of all the shareholders.
Passing of Ordinary resolution
- The shareholders of the company have the power to remove an Auditor from the company.
- The representation of concerned Auditor is read in front of all the shareholders if representation not sent along with the Notice of General Meeting.
- If the company think the representation is against the interest of shareholders then company not required to read representation of removing Auditor after getting approval from the NCLT.
- The resolution moved towards the shareholders to discuss and pass the ordinary resolution to remove an Auditor from the company.
- Ordinary resolution means more than 50% of shareholder present in the meeting vote in favour of the resolution.
Intimation to ROCs by company
The company needed to file Eform ADT -1 with ROCs within 15 days of passing of a resolution for removal of Auditor along with following documents are:-
- Notice sent to shareholder along with explanatory statement;
- Special Notice of Shareholders;
- Representation of concerned Auditor;
- CTC (certified true copy) of a resolution passed by shareholders.
REMOVAL OF AUDITOR BY NCLT
- The NCLT (National Company Law Tribunal) has the power to remove an auditor from the company as per section 140(5) of Companies Act, 2013.
- The application is made by the following person to remove an auditor of the term before the expiry of his term are:-
- Suo Moto or
- Central Government or
- Concerned person.
- The NCLT on receiving an application from the mentioned person and satisfied that the Auditor of the company involves or acted directly or indirectly in any fraud concerning the company or its Directors or officers.
- The NCLT may pass the order and the auditor removed from the company within 15 days of order.
- If the application made by the Central government then NCLT authorised the Central government to appoint another Auditor in place of removing Auditor.
- The Auditor (Individual or Firm) is not eligible for any appointment in ANY COMPANY for 5 years from the date of NCLT order and Auditor also liable for action under section 447 of companies act, 2013.
Intimation to ROCs by company
The company required to file Eform ADT -1 with ROCs within 15 days of passing of a resolution for removal of Auditor by NCLT along with following documents are:-
- NCLT Order;
- Application made by a concerned person or Central Government;
- Any appointment of Auditor by Central Government
RESIGNATION BY THE AUDITOR
- The section 140 (2) (3) of the Companies Act, 2013 and Rule 8 of the Companies (Audit & Auditors) Rule, 2014 deals with the resignation of the Auditor from the Company.
- The company (other than government company) Auditor shall file his resignation in Eform ADT-3 within 30 days from the date of resignation to the following person are:-
- Company &
- ROCs (Registrar of Companies).
- The Government company or company which is directly or indirectly controlled by the government (state or central) auditor shall file his resignation in Eform ADT-3 within 30 days from the date of resignation to the following person are:-
- CAG (Comptroller & Auditor General) &
- ROCs (Registrar of Companies).
- The following Information & documents are required for filing Eform ADT-3 are:-
- Reason of Resignation;
- Date of Resignation;
- Resignation letter;
- Personal Details of Auditor or firm;
- Date of Appointment of Auditor or firm &
- Declaration of Auditor etc
- If auditor fail (One time) to comply with section 140(2) & (3) of companies act, 2013 he shall liable for the following penalty are:-
Amount of Remuneration
(whichever is less)
- If auditor Continue fails to comply with section 140(2) & (3) of companies act, 2013 he shall liable for the penalty of Rs.500 per day from the date of failure but maximum Rs. 5 Lakhs.
APPOINTMENT OF AUDITOR IN CASUAL VACANCY DUE TO RESIGNATION
As per the provisions of companies act, 2013 if the casual vacancy of an auditor arises in the company due to resignation by existing Auditor then its responsibility of members or shareholders to fill the casual vacancy within 3 months from the date of recommendation given by Board of Directors.
Tenure of Auditor
The auditor of the company holds his position up to the conclusion of next AGM of the company.
The CAG (Comptroller Auditor General of India) will appoint a new auditor of the company within 30 days from the date of resignation of Auditor.
Tenure of Auditor
The newly appointed auditor of the company holds his office up to the conclusion of next AGM of the company.