Procedure for Filling Casual Vacancy in the Office of Auditor Caused by Resignation

Aakanksha Singhal

Aakanksha Singhal

Published on: Jul 6, 2020

Khushboo Sharma

Updated on: Sep 30, 2023

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Introduction

A casual vacancy gets created in the office of Auditor due to many reasons, one of which is Resignation by the Auditor. When an existing Auditor resigns, the company has to fill the vacancy so created by appointing a new Auditor.

Applicable Provisions:

1. Section 96, 100, 139, 140, 141 & 177 of Companies Act, 2013
2. Rule 4 & 8 of the Companies (Audit and Auditors) Rules, 2014
3. Regulation 30 and 46 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

Mandatory Requirements for Filling Casual Vacancy caused by Resignation of Auditor

1. Any casual vacancy in the office of an auditor caused by Resignation shall be filled by the Board of Directors within thirty days subject to approval by the members at a General Meeting convened within three months of the recommendation of the Board and he shall hold the office till the conclusion of the next Annual General Meeting.
2. Every Company which is required to constitute an Audit Committee shall take the recommendations from the Committee for filing the casual vacancy.
3. The Auditor shall have to indicate/declare in the certificate as mentioned-above that it satisfies the criteria provided in section 141 of the Companies Act, 2013.
4. Consider the Qualifications and Experience of the Proposed Auditor. If a company has Audit Committee, then the committee or otherwise the Board shall consider the qualification and experience of the proposed Auditor. They will also consider any order or pending proceeding relating to professional matters of conduct against the proposed auditor before the Institute of Chartered Accountants of India or any competent authority or any Court.

The Following Procedure is to be followed for Filling Casual Vacancy caused by Resignation of Auditor

1. Filing of Form ADT-3 by the Resigning Auditor [Section 140(2) & Rule 8 of the Companies (Audit and Auditors) Rules, 2014]
   The auditor who has resigned from the company shall file within a period of thirty days from the date of resignation, a statement in FORM ADT-3 with the Company and the Registrar.
2. Obtain written consent and Certificate from the Proposed Auditor [Section 139(1) & Rule 4(1) of the Companies (Audit and Auditors) Rules, 2014]
   Company shall receive before such appointment, 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. The Auditor shall submit a certificate
   • That the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules or regulations made thereunder
   • That the proposed appointment is as per the term provided under the Act
   • That the proposed appointment is within the limits laid down by or under the authority of the Act
   • That the list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
3. Obtain recommendations from the Audit Committee [Section 139 (11), 177]
   Where a Company is required to constitute an Audit Committee under section 177, shall receive a recommendation from the committee for the appointment and remuneration of the Auditor. [For convening meeting of Audit Committee, Refer the Procedure for Conducting Audit Committee Meeting].
4. Convene a Meeting of Board of Directors [As per Section 173 & Secretarial Standard-1 (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 and pass a Board Resolution to consider the appointment of Auditor to fill a casual vacancy in the office of Auditor, on the recommendation of the Audit Committee, if applicable.
   • To fix the day, date, time and venue of the General Meeting and to approve the draft notice convening the General Meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013 and authorize the Director or Company Secretary to sign and issue notice of General Meeting.
   • Listed Company shall submit disclosure of the appointment of Auditor to the Stock Exchange as soon as reasonably possible and but not later than the following:
     • thirty minutes from the closure of the meeting of the board of directors in which the decision pertaining to the event or information has been taken
     • 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 conclusion of the Board 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]
   • 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]
5. Filing Notice of Appointment with ROC
   The Company shall inform the Auditor so appointed about the appointment and file a notice of such appointment with the Registrar in E-Form ADT-1 within 15 days of the board meeting. [Section 139(1) and Rule 4(2) of the Companies (Audit and Auditors) Rules, 2014] along with the following attachments
   • Certified true copy of the Board Resolution passed in the Board Meeting
   • Intimation/Offer Letter given by the Company to the Auditor
   • Consent Letter given by the Auditor to the Company
   • Certificate given by the Auditor to the Company.
6. Convene General Meeting [As per Section 96, 100 and Secretarial Standard-2 (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 and Auditors of Company, to the Secretarial Auditor, to 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 a shareholder’s meeting on the fixed date and pass the Ordinary Resolution for appointment of the Auditor and shall fix the remuneration to be paid to the Auditor.
   • Listed Companies shall disclose the proceedings of General Meeting to the Stock Exchange as timeline specified therein 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]
   • Prepare the minutes of General Meeting, get them signed and compile accordingly. [Refer the Procedure for Preparation and Signing of Minutes of General Meeting].
7. Filing Notice of Appointment with ROC
   The Company shall inform the Auditor so appointed about the appointment and file a notice of such appointment with the Registrar in E-Form ADT-1 within 15 days of the general meeting. [Section 139(1) and Rule 4(2) of the Companies (Audit and Auditors) Rules, 2014] along with the following attachments
   • Certified true copy of the Ordinary Resolution passed in the Board Meeting
   • Intimation/Offer Letter given by the Company to the Auditor
   • Consent Letter given by the Auditor to the Company
   • Certificate given by the Auditor to the Company.