Procedure for Removal of Auditor

Aakanksha Singhal

Aakanksha Singhal

Published on: Dec 7, 2020

Khushboo Sharma

Updated on: Sep 30, 2023

★★★★★(60 Rating)

91282

Introduction

The auditor appointed under section 139 may be removed from his office before the expiry of his term only by a special resolution of the company, after obtaining the previous approval of the Central Government in that behalf.

Mandatory Requirements

1. Approval of Central Government is required for removal of auditor.
2. The concerned auditor shall be given an opportunity of being heard.
3. Company has to take Shareholders’ approval within 60 days of receipt of approval of Regional Director.

Following Procedure is to be followed

1. Approval for Removal from the Audit Committee
   Where a Company is required to constitute an Audit Committee under section 177 then the proposal to remove the auditor shall be approved by the Audit committee in a duly convened meeting of Committee. [For convening meeting of Audit Committee, Refer the Procedure for Conducting Audit Committee Meeting].
2. Convene a Meeting of Board of Directors [As per Section 173 & Secretarial Standard-1 (SS-1)]
   • Fix the date of Board Meeting for removal of auditor in consultation with the Chairman or the Managing Director of the Company.
   • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
   • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
   • Intimate the concerned auditor about the date of Board Meeting at which resolution for his removal shall be passed in order to give him an opportunity of being heard.
   • Hold a meeting of Board of Directors and pass the following Board Resolution
     • to consider the removal of the auditor before expiry of his tenure.
     • to authorize CS or CFO or any director of the Company to file the application with Regional Director (RD).
     • to authorize practicing CA/CS/CMA/Advocate to appear before RD and execute a Vakalatnama or Memorandum of appearance.
   • Listed Company shall submit the disclosure to the Stock Exchange about the decision to file application for removal of Auditor as soon as reasonably possible but not later than 30 minutes from the date of the Board Meeting and post the same on the website of the Company within 2 working days. [Regulation 30 & 46(3) of the SEBI (LODR) Regulations, 2015]
   • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
3. File an Application to the Regional Director
   Company shall file an application to the Regional Director for removal of Auditor within 30 days of the resolution passed in the Board Meeting in Form ADT-2 along with the details of the grounds for seeking removal of auditor.
4. Hearing and Order by Regional Director
   • On receiving the application, Regional Director shall give a date for the hearing.
   • After hearing, RD may give approval for removal of the Auditor.
5. Intimation to the Stock Exchange about the Order [Regulation 30 and 46(3) of SEBI (LODR) Regulations, 2015]
   Listed Companies shall submit the disclosure about the order of RD to the Stock Exchange as soon as reasonably possible but not later than the following:
   • within twelve hours from the occurrence of the event or information, in case the event or information is emanating from within the listed entity
   • twenty four hours from the occurrence of the event or information, in case the event or information is not emanating from within the listed entity, from the date of hearing and post the same on the website of the company within 2 working days.
6. File Certified Copy of Order with ROC
   Company shall file certified copy of order with ROC in Form INC-28 within 30 days from the date of issue of certified copy of order.
7. Convene a Meeting of Board of Directors [As per section 173 & SS-1]
   • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
   • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
   • Hold a meeting of Board of Directors of the Company and pass the necessary Board Resolution
     • to take note of the order of Regional Director.
     • to fix day, date, time and venue for holding General Meeting of the Company.
     • to approve the draft notice of General Meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013.
     • to authorize the Director or Company Secretary to sign and issue notice of the General Meeting and to do such acts, deeds and things as may be necessary to give effect to the Board’s decision.
   • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
8. Convene General Meeting [Section 96, 100 and SS-2]
   • Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
   • Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive the notice of the General Meeting.
   • Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
   • Hold the General Meeting within 60 days from the date of receipt of approval of Central Government and pass Special Resolution for removal of auditor before expiry of his tenure.
   • Listed Companies shall disclose the proceedings of General Meeting to the Stock Exchange within 24 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
   • Listed Companies shall submit to the stock exchange the details of the voting results within two working days from the conclusion of the meeting and post the same on the website of the Company. [Regulation 44 of the SEBI (LODR) Regulations, 2015]
   • Prepare the minutes of General Meeting, get them signed and compile accordingly. [Refer the Procedure for Preparation and Signing of Minutes of General Meeting].
9. File Form MGT-14 with ROC
   File Form MGT-14 with the ROC within 30 days of passing Special Resolution in General Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and with the following attachments
   • Certified True Copies of the Special Resolution passed along with Explanatory Statement
   • Certified Copy of Order of RD
   • Copy of the Notice of meeting sent to members along with all the annexure
   • Shorter Notice Consent Letters from the members in case the General Meeting was convened at shorter notice
   • Copy of Attendance Sheet of General Meeting
   • Any other attachment as may be applicable.