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Appointment auditors and casual vacancy due resignation or other wise.

Appointment of First Auditor & in Casual Vacancy

We are receiving quarries on regular basis for the appointment of First Auditors and Appointment in Casual Vacancy created as a result of resignation and for filing of their forms ADT-1 and ADT-3 with the Registrar of Companies (RoC).

The followings are the explanation:

First Auditor Appointment :

In terms of sub-section 6 of Section 139 of the Companies Act, 2013, the first auditor need to be appointed within 30 days of the date of incorporation by the board, otherwise, same can be done within 90 days by Extra-ordinary General Meeting. Such auditors will hold the office till the conclusion of the First AGM.

The law is silent regarding the filing of documents for the First Auditor with the Registrar of Companies (RoC). However, for good corporate governance, we suggest to file Form ADT-1 within 15 days of the date of appointment along with Board Resolution, Appointment Letter, and Willingness Letter.

 

Casual Vacancy for Auditor due to resignation:

If any casual vacancy is created in the Office of Statutory Auditor due to the resignation of auditor, such vacancy is required to be filled by the Board of Directors within 30 days but such new appointment shall also be approved by the members at a general meeting convened within 3 Months from such appointment and such Auditor will hold the office till the conclusion of next Annual General Meeting (AGM).

Case: If XYZ & Co. was appointed as statutory auditors for X Pvt. Ltd for the F.Y. 2015-16. Now If XYZ resigns from the office before finalisation of accounts for the year and the Board has appointed ABC & Co. for the office of Statutory Auditors. The newly appointed auditors cannot audit the accounts of the company until its appointment is approved by the members in the General Meeting and such approval shall take before the AGM.

Stakeholders are requested to hold Extra-Ordinary General Meetings (EGM) for complying with the provisions of Section 139 (8) (i) of the Companies Act, 2013. Such appointment cannot be approved directly in the AGM because in AGM shareholders approve the Audited Financials.

Further, note that Form ADT-1 cannot be filed before approval of Form ADT-3 from RoC.

Casual Vacancy for Auditor due to reasons other than resignation:

There may be situations where casual vacancy is created in the office of the Statutory Auditors due to reasons other than resignation, such vacancy is required to be filled by the Board of Directors within 30 days and such Auditor will hold the office till the conclusion of next Annual General Meeting (AGM). No shareholders' approval will be in such case.

Case:

1. If XYZ & Co. (a Proprietorship Firm of Mr. A) was appointed as statutory auditors for X Pvt. Ltd for the F.Y. 2022-23. If an unfortunate demise happens to Mr. A or Mr. A disqualified to continue as Auditors, such vacancy shall be filled in by the Board of Directors within 30 days and such Auditors will hold the office till the conclusion of the next Annual General Meeting (AGM). No shareholders' approval will be in such a case.
2. If XYZ & Co. was appointed as statutory auditors for X Pvt. Ltd for the F.Y. 2022-23 later XYZ & Co. merged into NBC & Co. Such an event will be considered as casual vacancy and shall be filled in by the Board of Directors within 30 days and such Auditors will hold the office till the conclusion of the next Annual General Meeting (AGM). No shareholders' approval will be in such a case.

 

by Team