Auditor Appointment in Casual Vacancy Procedure Rules

Section 139(8) deals with the Appointment of An Auditor in Casual Vacancy under the Companies Act 2013. The Following article is an detailed explanation of Appointment of Auditor along with the Procedure for the Appointment of an Auditor in Casual Vacancy and Provisions for Appointment of An Auditor in casual Vacancy under the Companies Act 2013. A vacancy in the office of the auditor of the company before the term has expired is a casual vacancy. The term has not been defined in the Act. But there are several circumstances in which the casual vacancy arises.

Introduction: Casual Vacancy in the Office of Auditors (Section 139(8))

The term casual vacancy has not been defined in Companies Act, 2013. Generally, it means a vacancy caused due to death, disqualification, resignation etc of the auditor after accepting a valid appointment because of which the auditor cease to act as auditor of the company. Where no auditor is appointed or re-appointed, it does not result casual vacancy.

Reasons For Casual Vacancy 

There are two reasons of Casual Vacancy of Auditor:

  • Death of an Auditor
  • Resignation of the auditor
  • Contracting disqualifications under Section 226(3)
  • Incapacity to contract
  • Ceasing to be a member of ICAI
  • Change in status of the auditor

Appointment of Auditor in casual Vacancy : procedure

The procedure of appointment of auditor in case of casual vacancy can be discussed under two broad headings. Appointment of auditor in Casual Vacancy in every company except Govt. Company or company owned/ controlled by CG/SG/CG and SG [Section 139(8)(i)]:-

Casual vacancy arising by other than resignation:

Whereas casual vacancy is arising by other than resignation then vacancy shall be filled the Board within 30 days.

Procedures:

  1. Obtain certificate in writing from the proposed auditor confirming his eligibility to be appointed.
  2. Convene a Board meeting within 30 days of arising casual vacancy after giving notice to all directors and pass resolution appointing the new auditor in the place of old auditor.
  3. Inform the auditor so appointed with a certified copy of resolution.
  4. Inform the Registrar in prescribed form with requisite filing fee and annexures

Casual vacancy arising due to resignation:

If casual vacancy is arising due to the resignation of auditor, it shall be filled within 30 days by the Board of directors, and the appointment made by the Board shall be approved in a general meeting convened within 3 months from the date of recommendation of the Board.

Procedure:

  1. Obtain certificate in writing from the proposed auditor confirming his eligibility to be appointed.
  2. Convene a Board meeting within 30 days of arising casual vacancy after giving notice to all directors and pass resolution appointing the new auditor in the place of old auditor.
  3. Inform the auditor so appointed with a certified copy of resolution.
  4. Issue notice to hold general meeting within 3 months from the date of recommendation of the Board to the members of the company.
  5. Hold the general meeting and approve the appointment of auditor already made by the Board of directors.
  6. Inform the Registrar in prescribed form with requisite filing fees and annexures.
  7. In case of listed company, forward promptly to the stock exchange the notice and proceedings of the general meeting.

Appointment of auditor in Casual Vacancy in case of Govt. Company or company owned/ controlled by CG/SG/CG and SG [Section 139(8)(ii)] :

Casual vacancy shall be filled by the CAG within 30 days. If CAG fails to fill the vacancy within given time then BOD shall fill the vacancy within next 30 days.

Procedures:

The following procedure follows after the CAG’s failure to appoint auditor to fill up casual vacancy within 30 days.

  1. Obtain certificate in writing from the proposed auditor confirming his eligibility to be appointed.
  2. Convene a Board meeting within 30 days of information of CAG’s failure to appoint auditor to fill up casual vacancy after giving notice to all directors and pass resolution appointing the new auditor in the place of old auditor.
  3. Inform the auditor so appointed with a certified copy of resolution.

Inform the Registrar in prescribed form with requisite filing fees and annexures.

Appointment of Auditor in casual Vacancy: Provisions 

In case of Casual Vacancy due to reason other than Resignation of Auditor

If a Casual Vacancy arises due to casual vacancy other then resignation then Board of Directors of Company has the power to appoint Auditor.

Time Period: BOD of Company within 30 days of arisen of Casual Vacancy appoint a Statutory Auditor on place of old Auditor.

Term of Appointment: Such Auditor will become auditor of the Company upto ensuing Annual General Meeting. He is liable to retire or may be re-appoint on ensuing AGM.

Form Filing: BOD will file ADT-1 within 15 days of appointment of Auditor.

Circular Resolution: Circular Resolution passed by Board Resolution is enough for appointment of auditor in case of casual vacancy.

Filing of MGT-14: No need to file e-form MGT-14 in case of appointment of Auditor.

In case of Casual Vacancy arise due to Resignation of Auditor

If a Casual Vacancy arises due to resignation of auditor then new auditor will be appoint by Board of Director but such appointment shall be approve by the Shareholder in their Extra-Ordinary General Meeting.

Time Period: BOD of Company within 30 days of arisen of Casual Vacancy appoint a Statutory Auditor on place of old Auditor.

Extra Ordinary General Meeting: Such appointment must be approved by the shareholders in their Extra- Ordinary General Meeting within 90 days of appointment of such auditor.

Term of Appointment: Such Auditor will become auditor of the Company upto ensuing Annual General Meeting. He is liable to retire or may be re-appoint on ensuing AGM.

Ordinary Resolution: Such appointment shall be approve by passing of “ORDINARY RESOLUTION” in General Meeting.

Form Filing: BOD will file ADT-1 within 15 days of appointment of Auditor in Extra Ordinary General Meeting.

Circular Resolution: Circular Resolution passed by Board Resolution is enough for appointment of auditor in case of casual vacancy.

Filing of MGT-14: No need to file e-form MGT-14 in case of appointment of Auditor.

Conclusion:

The above all the information Prepared on the basis of the Relevant Provisions under the Companies Act 2013. For better Understanding Cross check the Companies Act 2013. For any doubts and quarries comment below.