What is Procedure for Removal of Statutory Auditor from a Company?

Narendra Kumar

01 Dec, 2020

In case a Company isn’t satisfied with the services of statutory auditor the company can start the process of removal of the auditor as mentioned in the process. The auditors so appointed under the Act may be removed from his office before the expiry of his term only by special resolution of the company, after obtaining the previous approval of the Central Government in that behalf in the manner mentioned in the Act.

Important Points for the Removal, Resignation of a Statutory Auditor

1. Any auditor who is appointed under section 139 can be removed earlier to the expiry of this period only by way of special resolution of a company, after obtaining the previous approval of Central Government (C.G). Provided as mentioned in it, the Auditor shall be given a rational opportunity of being heard.
2. An auditor who has resigned from the Company shall file within the period of 30 days from date of resignation in e-form ADT-3 with the Registrar (ROC) & in case of Companies as mentioned, the auditor will also file such statement with comptroller & auditor-general (C&AG) of India, signifying the reason and other facts as may be necessary. 3. If the auditor doesn’t comply with the above-mentioned Section it will be punishable by a fine that shall not be less than Rs.30,000/- but can be extended to Rs.5,00,000/-.
3. (i) A Special notice will be needed for the resolution at an (AGM) annual general meeting by appointing him as auditor a person other than the retiring auditor or can also prove that the retiring auditor shall not be re-appointed, excluding where the retiring auditor has finished a consecutive period of 5 years or 10 years as the case may be as prescribed.

(ii) On receipt of the notice of such resolution, the company shall send a copy of such to the retiring auditor.

(iii) Where a notice is given of such resolution & the retiring auditor makes representation in writing to the company (within the reasonable time as given) & request Company to forward it to the members unless representation received is too late:

1. Any notice of resolution given to members of the Company, mention the fact of such representation made by the Auditor.
2. Send a copy of the representation to all member to whom such notice has been sent. In case the copy of the representation is not sent as it has been received too late or on behalf of the Company’s default then the same has to be read at the ensuing meeting.

In case the copy of representation is not sent, then the same has to be filed with the registrar. And in case the tribunal is satisfied on application by the Company or an auditor that the rights conferred by the auditor have been abused then a copy of the representation need not be sent and need not be read out at the meeting.

The tribunal is satisfied either suomotu or an application made to it by Central Government or by any person concerned shall direct the company to change the auditor within 15 days if the auditor has acted in a fraudulent manner, and may also direct him to appoint other in his place.

Sec 147 (Punishment for contravention)

If the provisions of Sec 139 to 146 is infringed, the Company shall be punishable with Fine that shall not be less than Rs.25,000/- but may extend to Rs.5,00,000/- & every officer of the Company who is in default will be punishable by imprisonment for a period that may extend to 1 year or with fine of not less than Rs. 10,000/- that may extend to Rs. 1,00,000/- or with both.