NON-RATIFICATION OF AUDITOR
APPOINTMENT OF AUDITO IN CASE OF
NON-RATIFICATION
OF AUDITOR
Provision of Ratification
of Auditor: {First Provision of 139(1)}
Act Language: The Company shall place the matter
relating to such appointment for
Ratification by
members at every Annual General Meeting.
Rule 3(7) Proviso: Appointment of Statutory Auditor shall be subject
to ratification in every annual general meeting till the sixth such meeting by
way of passing of an ordinary resolution
“As per the above proviso Companies are required to
ratify the appointment of Statutory Auditors who was appointed in last AGM for
5 financial years. Therefore from this year, every year in AGM an Ordinary
Resolution is to be passed for ratification to continue as Statutory Auditor of
the Company.”
If the Statutory Auditor is not ratified in AGM then it will be consider
as
CASUAL
VACANCY.
FAQ’S
|
|
A.
|
Whether it is
power in the hand of shareholders to ratify continuation of Statutory
Auditors.
|
Yes,
This is power
in the hand of Shareholders to ratify continuation of Auditor or Not. {As per
provision of 139(1) first proviso)
|
|
B.
|
If at AGM
Ratification is not made by the Shareholder then how it will consider.
|
It will
consider as casual Vacancy. {Section 139(8)(i)}
|
|
C.
|
How to Appoint
new auditor in case of non ratification?
|
Appoint
auditor as filing of casual vacancy. Process in detail discussed below.
|
|
D.
|
What will be
the term of auditor appointed due to Casual Vacancy?
|
Term of such
appointment will be upto conclusion of next Annual General Meeting.
|
|
E.
|
Whether the
dis-continue auditor need to file ADT-3 with ROC not.
|
Discontinue
auditor will not file ADT-3 because it’s not resignation of Auditor.
|
|
F.
|
Whether need
to file any form for appointment of proposed auditor
|
Yes, ADT-1
required to file within 15 days of passing of Board Resolution.
|
PROCESS FOR RATIFICATION OF AUDITOR
PROVISIONS RELATING TO CASUAL VACANCY:
v
Power of
Appointment:
The Board of Directors of a Company has the power
to fill up any casual vacancy in the office of an auditor except casual
vacancy caused by resignation of an auditor.
v Term of such Appointment:
Such Statutory Auditor shall hold office till the
conclusion of the next Annual General Meeting.
v Filing Requirement:
The Company shall inform the Auditor concerned of
his appointment and file a notice of such appointment in e-form ADT-1 with the
ROC within 15 days of the meeting in which the auditor is appointed.
DRAFTS FOR THE REFERENCE:
v Draft board resolution:
“RESOLVED THAT M/s ABC & Company, the Chartered Accountants,
(FRN:___________) Delhi- 110085, be and are hereby appointed as Statutory
Auditor of the Company to fill up the casual vacancy caused by the resignation
of the M/s. PQR & Associates, the Chartered Accountants, (FRN:
____________), until the conclusion of the next Annual General Meeting of the
Company at a remuneration of Rs. . . . . . . Plus reimbursement of any out- of-
pocket expenses that may be incurred, in connection with the audit.”
Sir, I really appreciate the article.
ReplyDeleteBut, please clarify that in case of non ratification of auditor, do we need to follow procedure of casual vacancy or do we need to appoint new auditor according to explanation being provided in rule 3 of Companies (Audit and Auditors) Rules.
Regards
CS Pavitra Agarwal
yes
ReplyDeleteI think non ratification of statutory auditor,amounts to removal of auditor [Section 140(1)] wherein Regional director's (Central government has delegated the powers to Regional director) approval is required. This decision was recently held in the NCLT, Hyderabad incase of SPC & Associates vs DVAK & Co
ReplyDeleteyes ganesh you are right. i have published article on same. if you want the copy of the same send me a mail on csdiveshgoyal@gmail.com
DeleteDivesh....If shareholders not ratified the appointment auditor, do we need to appoint another auditor by Board as casual vacancy or need to get RD approval for removal.
ReplyDeleteAppreciating the persistence, you put into your blog and detailed information you provide.
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