Re-appointment of auditor

[CA Mukesh Patel]

Dear All,

I am auditor of pvt ltd. for 31.03.2012, 31.03.2013 and 31.03.2014, and now i want to continue as auditor of company 

My query is that : -

1) whether i can appoint for 5 year form now onwards i.e. 31.03.2019 

or

31.03.2016.

  

--

No candle loses its light while lighting another candle..so never stop sharing and helping.

[CS Simranjeet Singh]

u can be appointed for 5 years i.e till 31.03.2019..

 

 

Regards,

Simranjeet Singh

Associate Company Secretary

"To know, is to know that you know nothing. that is the meaning of true knowledge."

 

   

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[CA Mukesh Patel]

so can company pass

RESOLVED THAT Auditor or Auditor Firm, Chartered Accountants (Registration No.---------------),

who retire at the conclusion of this Annual General Meeting, be and are hereby re-appointed as

Statutory Auditors of the Company till the conclusion of the sixth Annual General Meeting at a

remuneration to be fixed by the Board of Directors of the Company and billed progressively.

[CS Simranjeet Singh]

yes to add "till the conclusion of the sixth consecutive AGM subject to ratification of the appointment by the members at every AGM held after this AGM) at a remuneration__________________

[Jayashree Chandrasekaran]

i think before answering the question one needs to know which category the private limited company falls

Jayashree

C.JAYASHREE
PROPRIETOR
S.GANESH&ASSOCIATES
CHENNAI
98840 17120

[CS Simranjeet Singh]

hello Mam u r right.. but in excitement of giving the answer i presumed it as small/normal Private Limited Company..

[CA Mukesh Patel]

Dear CS Simranjeet Singh, 

yout presumption is right it small company,

so what is your view mam

[mgra...@gmail.com]

Hi

Go ahead and appoint the auditors for 5 years if the PVT company's capital is less than 10 CR. 

[sid]

If its private company having paid capital below 20 crores or does not have public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more then you may appoint fro 5 years.

On Sunday, October 5, 2014 1:17:21 PM UTC+5:30, CA Mukesh Patel wrote:

[AKASH BATRA]

is it mandatory for a company to appoint auditor for a term of 5 year or company can appoint for lessor term  like 2 year or 3 in case of small companies or pvt co 

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[CS Simranjeet Singh]

yes it is mandatory to appoint  for 5 years subject to ratification at each AGM. appointment for lessor terms is to be done in listed companies and other specified class of companies 

 

 

Regards,

Simranjeet Singh

Associate Company Secretary

"To know, is to know that you know nothing. that is the meaning of true knowledge."

 

   

[AKASH BATRA]

by mistake we have appointed auditor for 3 year in case of small company and filed ADT-1, now what should we do in this case?

[CS Simranjeet Singh]

in my view nothing can be done to rectify this but u can use Section 136(10) in 4th and 5th year and in 6th AGM appoint them for 5 years.. other views solicited.

[CS Simranjeet Singh]

sorry read as Section 139(10).

[Sunil Tripathi]

Dear All,

Please confirm if tenure of auditor's firm has already expired i.e. morethan 10 years in a company which is not listed and further does not fall under the category of class of companies, now, in agm of 2014, this company appointed auditor's firm for a period of 5 years.

please give your suggestions.

 

Best Regards,

CS SUNIL TRIPATHI

Cell No. 8896015567

[AKASH BATRA]

as per my views nothing wrong in that as if we have appointed auditor in small company for 3 year 

[ramela rangasamy]

Section 139 (1) speaks about Appointment of auditors (for Non-classified company – i.e. company not falling with in such class or classes of the companies prescribed under Section 139(2) of the Act.

[Pprovisions under Rule 3 (7) and Rule 4 applies]

In case of companies falling under Section 139(1):

We have to follow the following procedure.

1. Convene a Board Meeting to consider about the appointment of auditor for a term of 5 years. (i.e 02/09/2014 in our case – board resolution already forwarded)
2. Obtain the consent (for 5 years) of the Auditor on the date of drafting of AGM notice i.e. in Board Meeting date for approval of accounts. 
3. In the AGM Notice about appointment of auditors and fix remuneration. In the shareholders Resolution - mention clearly about 5 years and to consider the AGM 2014 (held after the coming into force of CA 2013) as First AGM (Refer Rule 7) and appoint auditors for five years (i.e to hold office up to Sixth AGM i.e., upto AGM 2019. Type of resolution is ordinary resolution. We may consider the following resolution.

“RESOLVED THAT M/s. -----------------------, Chartered Accountants, be and they are hereby appointed as Auditors of the Company to hold office for five years period commencing from conclusion of this Annual General Meeting till the conclusion of the sixth Annual General Meeting on such remuneration as may be decided by the Board of Directors of the Company subject to ratification by the shareholders in every annual general meeting till the sixth annual general meeting.”

4. In ADT 1, we have to mention the terms of appointment as 5 years. There is no option to mention about tenure. So can attach extract of ordinary resolution with this ADT -1.
5. For above justification, please also refer to Fourth proviso of Section 139(1), the ADT 1 form may not allow to file for each year. This form is required to be filed within 15 days of the meeting in which the auditor is appointed. The word each annual general meeting is missing. So it may refer to First Annual General Meeting (i.e AGM 2014).
6. If we refer to Form GNL – 2, the form does not allow us to fill the tenure of appointment. This is the form through which ADT -1 is required to uploaded. So it is advisable to fill the ADT -1 for five years tenure commencing from FY 2014-15. To file GNL -2 with ADT -1 and ordinary resolution. Reference of the SRN of this GNL 2 is required to mentioned for 5 years in all annual filing for all financial years falling within the 5 tenure period.

 

Yours truly,
R.Ramela
Company Secretary in Practice
A-6, Aaryaa Harmony Apartment, A.S.Colony,
Police Kandasamy Street, Olympus,
Ramanathapuram,
Coimbatore 641 045.
Cell No.9442617180
Phone No.0422 – 2317180
e-mail: ram...@rrcompanysecretaries.com

[Kallki Sree]

Dear Ramela Mam,

Presume the real intention of this section is to set upper limit of years for appointing an auditor to a Company.  Feel that appointing for a year is not incorrect.

Others views are solicited.

Best Regards,

Kallki

[AKASH BATRA]

yes Kallki 

[Vijaykumar Cn]

As rightly pointed by Kallki and Akash, the intention of the section is only to set the upper limit of 5 Years...

 

It in not incorrect even if a new appointment is made every year...

 

Others views are welcome...

[ramela rangasamy]

Dear Friends,

Please refer to Rule 3(7) and also the expalanation given thereunder.

 

Yours truly,
R.Ramela
Company Secretary in Practice
A-6, Aaryaa Harmony Apartment, A.S.Colony,
Police Kandasamy Street, Olympus,
Ramanathapuram,
Coimbatore 641 045.
Cell No.9442617180
Phone No.0422 – 2317180
e-mail: ram...@rrcompanysecretaries.com

[AKASH BATRA]

i have read that rule still i think upper limit is 5 year and we can appoint the auditor for lessor term

[Vijaykumar Cn]

The auditor appointed in the annual general meeting shall hold office from the conclusion of that meeting
till the conclusion of the sixth annual general meeting, with the meeting wherein such appointment has been made being  counted as the first meeting:

Provided that such appointment shall be subject to ratification in every annual general meeting till the sixth
such meeting by way of passing of an ordinary resolution.

Explanation.- For the purposes of this rule, it is hereby clarified that, if the appointment is not ratified by the
members of the company, the Board of Directors shall appoint another individual or firm as its auditor or auditors after following the procedure laid down in this behalf under the Act.

 

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Inference: The auditor appointed in AGM can hold office for a max of 5 years...

 

But Board of Directors are within their rights to propose change of statutory auditor year after year before AGM and based on the proposal it is upto the decision of the shareholders...

 

Nothing bars the proposal for one new statuory auditor every year from the Board's side...

 

 

[Vijaykumar Cn]

Infact if the appointment of statutory auditor is not fixed for 5 years subject to ratification i.e if the Board want to propose rotation of auditors every 3 years or so... it will upload the spirit of the applicable section and rules...

[AKASH BATRA]

yes vijaykumar ji

[Kallki Sree]

Dear Friends,

As Per Sec-139

(1) Subject to the provisions of this Chapter, every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting and the manner and procedure of selection of auditors by the members of the company at such meeting shall be such as may be prescribed:

Provided that the company shall place the matter relating to such appointment for ratification by members at every annual general meeting:

Explanation.—For the purposes of this Chapter, “appointment” includes reappointment.

Provided further that before such appointment is made, the written consent of the auditor to such appointment, and a certificate from him or it that the appointment, if made, shall be in accordance with the conditions as may be prescribed, shall be obtained from the auditor:

Ratification Means:
to confirm and adopt the act of another even though it was not approved beforehand

When an appointment was confirmed for 5 years, why do we go for ratification... In case of MD appointment for 5 years, we are not ratifying our act at every AGM.  So, we shall interpret the sections as;

* Maximum years of appointment is for 5 years,

* Even if appointing for 5 years, have to ratify this action and reappoint auditor at every AGM,

* Good  Practice is appointing auditor (even Different Auditor) for every year, as it gives fair picture on the companies performance to the Shareholders

Other Views Are Solicited. Best Regards, Kallki

[Vijaykumar Cn]

absolutely correct kallki... No dispute...

[VANDANA PERIWAL]

Auditor shall be appointed for a term of 5 years only. No lessor period is prescribed except in case of prescribed companies who can do so as per the already served period by auditors and that too for this first time only.

 

Sec 139(1) uses the word "SHALL" and  not word "MAY". Thus it is mandatory to appoint auditor for 5 years.

[Kallki Sree]

Dear Vandana Periwal,

Just for the discussion,  would here replace the word shall with may...

Auditor May be appointed for a term of 5 years only.

Here the following meaning shall be assumed;

* Even beyond 5 years, we shall appoint...

* May gives liberal - choice of more years..

* Only - can be taken as a upper cap..

* Shall used to restrict more years to lesser years..

* Can Act compel shareholders to have a particular auditor for particular long tenure...

* Please look into real intention of this section when compared to earlier section..

It is very interesting to discuss on this important issue at this right time.  Invite senior members views on this issue.

Best Regards,

Kallki

 

Sec 139(1) uses the word "SHALL" and  not word "MAY". Thus it is mandatory to appoint auditor for 5 years.

[AKASH BATRA]

Kallki Sree is right

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[CS Simranjeet Singh]

everyone is right bro.. everyone is interpreting this loosely drafted CA, 2013 in its own way. 

 

 

Regards,

Simranjeet Singh

Associate Company Secretary

"To know, is to know that you know nothing. that is the meaning of true knowledge."

 

   

On Tue, Oct 7, 2014 at 4:34 PM, Kallki Sree <kallki...@gmail.com> wrote:

[VANDANA PERIWAL]

Act is generally to the point. If you read the word "SHALL" as "SHALL" only no other meaning would arise.

 

Had the intention of law been to set the upper limit, it would have mentioned it in the way, as mentioned in Sec 196 for appointment of MD/WTD

 

Shareholders cant be compelled to face single auditor for such long time, thats why ratification is required every year, and if shareholders doesnt ratify, then company has to either take resignation of auditor(mutual consent) or shall go for removal of auditor(legal action).

 

 

Thanks and Regards
CS Vandana Periwal

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[Kallki Sree]

Dear Vandana,

Sec-139

(10) Where at any annual general meeting, no auditor is appointed or re-appointed, the existing auditor shall continue to be the auditor of the company. Your views are invited... Best Regards Kallki

[Vijaykumar Cn]

As rightly pointed by Kallki, the usage of word "shall' and not may be understood in the context of its usage.

 

To illustrate

In a situation where the appointment was made for 5 years but where the shareholders does not ratify the appointment of auditor in the 3rd AGM, the Company need not file for removal of auditor... Removal of auditor is required only when it happens between 2 AGMs....In this case, simply the Board proposes the appointment of another Statutory Auditor and the shareholders may agree to consent such proposal...

 

In such a case where there is no requirement for filing of removal, how can it be construed that the appointment was made of 5 years...

 

 

 

On Tue, Oct 7, 2014 at 4:34 PM, Kallki Sree <kallki...@gmail.com> wrote:

[Harini Prasad]

Dear All,

Section 139 (1) contemplation is mandatory. i.e the words "shall"  make all the difference and make the provision a mandated one. And in the absence of any explanation etc, following simple interpretation, we have to appoint for 5 year term, with ratification at each meeting. I also understand the intent of legislature to be -'to set an upper limit' though..

Counter views please for getting to know more.

Regards

Harini