Procedure For Removal Of Auditor Before The Expiry Of His Term

I. INTRODUCTION

Section 140 of Companies Act, 2013 and Rule 7 of Companies (Audit and Auditors) Rules, 2014 states the law and procedure regarding removal of auditor before expiry of his term.

II. SECTION 140(1) – REMOVAL OF AUDITOR BEFORE THE EXPIRY OF HIS TERM

Section 140(1) of the Act provides for removal of auditor before the expiry of his term. The auditor may be removed from his office before expiry of his term only by a special resolution and after obtaining the previous approval of the Central Government. However, before taking any such action, the auditor concerned shall be given reasonable opportunity of being heard.

III. Rule 7 of COMPANIES (AUDIT AND AUDITORS) RULES, 2014 deals with Procedure for removal of the auditor before expiry of his term

1. An application shall be made to Central Government for removal of auditor shall be made in Form ADT-2 and shall be accompanied with fees as provided under the Companies (Registration offices and Fees) Rules, 2014.
2. The application shall be made within thirty days of the resolution passed by the Board.
3. The Company shall hold the general meeting within sixty days of receipt of approval of the Central Government for passing the special resolution.

Form to be filed by a company in case of removal of Auditor:

1. File MGT-14 with MCA with requisite fees and relevant annexures within 30 days of passing special resolution pursuant to Section 117 of Companies Act, 2013.

IV. PROCEDURE FOR APPOINTMENT OF AUDITOR OTHER THAN RETIRING AUDITOR [SECTION 140(4)]:

• A Special notice shall be required for a resolution at an annual general meeting for :
  1. Appointing as auditor a person other than the retiring auditor; or
  2. Providing expressly that a retiring auditor shall not be re-appointed except where the retiring auditor has completed a consecutive tenure of five years or ten years as the case may be.
• On receipt of notice of such a resolution, the company should forthwith send a copy of the same to the retiring auditor.
• The retiring auditor can make a representation. Where he makes any representation in writing to the company, then the company should, unless the representations are received by it too late for it to do so:
  1. In any notice of the resolution given to the members state the fact of the representations having been made; and
  2. Send a copy of the representation to every member of the company to whom notice of the meeting is sent.
• Where a copy of the representations is not sent as aforesaid, because they are received too late or because of the company’s default, the auditor may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting.
• Obtain a certificate from the auditor to be so appointed to the effect that such appointment, if made, will be in conformity with the limits specified in the Act.
• In the general meeting, the appointment will be considered and the necessary resolution will be passed.