In the case of a Government Company, one or more governments will own the total paid-up capital, and this should be 51% or more, while the significant shareholding of the paid-up capital will be with a private individual in the case of a non-government company.
Appointment of First Auditor
As per Section 139(6) of the Companies Act, 2013, the first Auditor of a company that is a non-government company should be appointed by the Board of Directors within 30 days, computed from the date of incorporation or registration of the Company.
And in case of failure on the part of the Board of Directors to appoint the Auditor, it shall inform the members of the Company, who shall, within 90 days from such notification, at an extraordinary general meeting, appoint such Auditor. Such an auditor, who is appointed, shall hold the office of Auditor until the conclusion of the first Annual General Meeting (AGM).
Procedure for Appointment of First Auditor
Board of Directors in the Board Meeting Appoints the Auditor
- Obtain a written consent certificate from the Auditor who is proposed for the appointment, and this certificate should certify that:
– The Auditor is eligible for appointment and is not disqualified for appointment as per the provisions of the Companies Act or the Chartered Accountants Act, along with the reading of relevant Rules and Regulations made thereunder.
– The proposed appointment is as per the term and limit laid down by the Companies Act.
– The list of proceedings pending against the Auditor or the audit firm or any partner of such audit firm with respect to any conduct with regard to professional matters, which is disclosed in the certificate, is true and correct.
- Now, in the case of a company mandated to constitute an audit committee as per Section 177, such a committee, and in the case of any other company, the Board shall take into consideration the qualifications and experience that the individual or firm of auditors should hold for being appointed as the Auditor of the Company. They shall also consider the details of any pending procedures with respect to the conduct of the Auditor before the court or the ICAI (Institute of Chartered Accountants of India) or such other competent authority.
iii. Notice shall be issued at least 7 days before the date of the meeting of the Board to every director of the Company at the address which he registers with the Company. And a Board Meeting shall be called within 30 days, which is computed from the date of incorporation of the Company, mainly for appointing the first Auditor of the Company.
- The Board Resolution shall be passed for appointing the Auditor and also fixing the remuneration of the first Auditor, who shall hold the office of the Auditor until the conclusion of the first AGM.
The remuneration that the first auditors fix shall include any additional payments, such as expenses incurred by the Auditor in connection with the audit of the Company and any facilities extended to him. However, it would not include the remuneration paid to him for services rendered at the Company’s request.
- The Board shall now file an e-form ADT-1 within 15 days of the Board meeting following such appointment, and also inform the auditors accordingly. The following shall be attached to such form:
– A true copy of the Certified Board Resolution for Appointment of First Auditor
– The copy of the Intimation Letter given by the Company to the Auditor
– Consent Letter issued by the Auditor to the Company.
Members Appointing the First Auditor in an Extraordinary General Meeting
Section 139(6) of the Companies Act provides that if the Board fails to appoint auditors within 30 days from the date of incorporation of the Company, it shall inform the members, who shall then appoint the Auditor within 90 days from such date of informing. And the procedure for this shall include:
- Send a notice of the general meeting to all shareholders, directors, auditors, and other persons at least 21 days before the date of such meeting.
- Hold shareholders meeting on the date which was determined earlier, so as to pass the Ordinary Resolution for the appointment of the first Auditor of the Company. An auditor shall hold the office until the conclusion of the first Annual General Meeting (AGM), which shall be held every year after the Company’s incorporation. Additionally, approval for the remuneration that will be paid shall also be obtained.
iii. Now the same shall be intimated to the Auditor and the ROC (Registrar of Companies) by filing form ADT-1 within 15 days from the date of the general meeting and passing of the resolution, along with the attachments which were stipulated before, say:
– A true copy of the Certified Board Resolution for Appointment of First Auditor
– The copy of the Intimation Letter given by the Company to the Company’s
– Consent Letter issued by the Auditor to the Company.
Following the conclusion of the first AGM, the same Auditor or a different auditor shall be appointed as the auditors of the Company. The company auditor shall hold office until the conclusion of the sixth Annual General Meeting (AGM), which means for a term of five years.
