One of the compliance requirements under the Companies Act, 2013, is the appointment of auditors. Usually, companies must submit Form ADT-1 to notify the Registrar of Companies (ROC) of the appointment of auditors. But some exemptions have been given in which the appointment details are already available with the Ministry of Corporate Affairs (MCA) in other filings. One such exemption applies to instances in which Form ADT-1 has been considered submitted using Form GNL-2.
This blog describes the definition, legal requirement, applicability and practical effects of the exemption of Form ADT-1 submitted by GNL-2.
Introduction
The Companies Act, 2013, on corporate compliance entails the filing of numerous forms with the Registrar of Companies. Form ADT-1 is one of them, which is important in informing the ROC concerning the appointment or reappointment of auditors.
The MCA has, over time, also brought in relaxations to eliminate redundancy of filings. Some exemptions were also applied to companies, under which the corresponding auditor appointment details were already provided with the help of Form GNL-2. It is necessary to know about this exemption in order to avoid unwarranted filings and penalties.
What is Form ADT-1?
Form ADT-1 is registered under section 139 of the Companies Act 2013. It is employed to inform the Registrar with regard to the appointment, reappointment or ratification of auditors by the company.
The form should usually be submitted within a period of fifteen days of the auditor’s appointment, either at the Annual General Meeting or the Board meeting, depending on the meeting. The company and officers may face punishment in case of failure to submit ADT-1 within the specified time.
What is Form GNL-2?
Form GNL-2 is an overall form where documents or information can be sent to the Registrar, which are not provided by any particular e-form. Form GNL-2 was previously used in some of the filings, such as intimation of auditor appointment pursuant to transitional provisions.
This type was the most applicable during the period of transition once the Companies Act, 2013, had come into force.
Background of the Exemption
When the Companies Act, 2013, superseded the Companies Act, 1956, the companies had to regularise auditor nomination according to the new Act. In this transition phase, MCA had allowed that companies should submit information pertaining to auditor appointment in Form GNL-2.
As auditor information was already known to the ROC through GNL-2, MCA made it clear that filing of an individual Form ADT-1 was not necessary in such instances. This exemption was granted to prevent overlap of compliance and lighted load on firms.
Legal Basis for Exemption
The exemption on the filing of Form ADT-1 by way of GNL-2 is based on MCA circulars and clarifications provided during the early years of the adoption of the Companies Act, 2013. These clarifications accepted that in the case that the auditor appointment information had already been filed using Form GNL-2, the compliance requirement of filing ADT-1.
The Companies Act required the filing of ADT-1; however, administrative relaxations provided that the usual filing could be done by an alternative form of filing within certain periods of time.
Applicability of the Exemption
This exception is limited to particular situations in which details about the appointment of auditors were properly filed on the form GNL-2 as per the instructions of the MCA. It is not applicable to every company and every appointment of an auditor.
Companies that engaged their auditors in the transition period and were in compliance under GNL-2 were not supposed to re-file ADT-1 under the same appointment.
Practical Implications for Companies
Companies under this exemption were not required to file a separate ADT-1, and non-filing of ADT-1 under this exemption should not be deemed as non-compliance.
Nonetheless, the companies are expected to have adequate evidence of filling the GNL-2 form because they might need it in an audit, inspection or due diligence.
Relevance of the Exemption in the present day
Today, the appointment of auditors is required to be made on Form ADT-1 and Form GNL-2 is seldom used for that purpose. The exemption applies primarily in historical checking of compliance, particularly when conducting audits by the company secretaries or when handling old records.
This happens to professionals when they are reviewing filings of previous financial years.
Implications of wrong interpretation
There are penalties for non-filing of ADT-1 due to incorrect assumptions of exemptions where it was not applicable. Thus, one should take a closer look at whether the appointment of the auditor was actually contained in the GNL-2 filing exemption.
In the case of no such filing, the company might be required to provide ADT-1 with extra charges or consult a professional in order to regularise it.
Conclusion
Form ADT-1, which is filed by GNL-2, received a transitional provision of relaxation of compliance, benefiting the transition to the Companies Act, 2013. It is only applicable in particular situations in which the details of auditor appointments were previously provided in Form GNL-2. Although this exemption is not relevant today, it is still significant to learn about the past compliance and prevent unwarranted punishment. Records should be thoroughly reviewed by companies and professionals before deciding whether to file an ADT-1.
