The procedure for the appointment of an auditor in the case of a casual vacancy due to resignation is governed by Section 139(8) of the Companies Act, 2013.
This procedure applies specifically to companies other than those whose accounts are subject to audit by an auditor appointed by the Comptroller and Auditor-General of India (CAG).
Here is the detailed procedure, incorporating the roles of the Board, shareholders, and the resigning auditor:
1. Requirements for the Resigning Auditor
When a casual vacancy arises due to resignation, the procedure begins with the statutory duty of the retiring auditor:
- Filing of Statement (Form ADT-3): The auditor who has resigned from the company must file a statement in the prescribed Form ADT-3 with the company and the Registrar of Companies (ROC).
- Timeline: This statement must be filed within a period of thirty days from the date of resignation.
- Contents: The statement must indicate the reasons and other relevant facts regarding the resignation.
- Government Companies: In the case of companies referred to in Section 139(5) (Government companies), the auditor must also file this statement with the Comptroller and Auditor-General of India (CAG).
2. Procedure for the Company (Board and General Meeting)
The appointment process involves mandatory steps at both the Board level and the General Meeting level, unlike casual vacancies arising from other reasons.
Step A: Board of Directors' Action
- Convene Board Meeting/Audit Committee Recommendation:
- If the company is required to constitute an Audit Committee under Section 177 of the Act, the proposed appointment must first be placed before the Audit Committee for its consideration and recommendation to the Board.
- The appointment of the proposed auditor is then placed before the Board of Directors for consideration.
- Board Appointment and Timeline: The casual vacancy must be filled by the Board of Directors within thirty days from the date of resignation of the existing auditor.
- Recommendation for General Meeting: The Board's decision (if the casual vacancy is due to resignation) constitutes an appointment that must subsequently be approved by the shareholders.
Step B: Shareholder Approval
- Convene General Meeting: The appointment made by the Board must be approved by the company at a General Meeting (usually an Extraordinary General Meeting).
- Timeline for General Meeting: This General Meeting must be convened within three months of the recommendation made by the Board.
- Tenure: The auditor appointed to fill the casual vacancy shall hold office only until the conclusion of the next Annual General Meeting (AGM).
3. General Compliance and Filings
- Eligibility and Qualification: The company must ensure that the proposed auditor meets the eligibility and qualification criteria specified in Section 141 of the Companies Act, 2013.
- Filing Notice of Appointment (Form ADT-1): The company must inform the Registrar of Companies (ROC) about the appointment of the auditor in Form ADT-1.
- Timeline for ADT-1 Filing: This form must be filed within 15 days of the Board meeting or the General Meeting where the appointment was made, whichever is applicable.
- Mandatory SRN: The Service Request Number (SRN) of the resigning auditor’s Form ADT-3 is required to be provided when filing Form ADT-1 for the appointment of the new auditor.
Summary of Key Actions and Timelines
| Action | Party Responsible | Statutory Requirement | Timeline |
|---|---|---|---|
| File Statement of Resignation (Form ADT-3) | Resigning Auditor | Section 140(2) | Within 30 days from the date of resignation. |
| Appoint Auditor (Board Resolution) | Board of Directors (after Audit Committee recommendation, if applicable) | Section 139(8)(i) | Within 30 days from the date the vacancy arose. |
| Approve Board Appointment | Company (Shareholders via General Meeting) | Section 139(8)(i) | Convened within 3 months of the Board's recommendation. |
| File Notice of Appointment (Form ADT-1) | Company | Section 139(1) | Within 15 days of the meeting where the appointment was made. |