In this article we will be discussing how to remove a company auditor and filing of e-form ADT-2 with ROC for removal.
As per section 140 of Companies Act, 2013, an auditor can be removed before his or her term ends by a special resolution of the company after obtaining prior approval from the central government.
However, before initiating the procedure or taking action under section 140 for removal, the auditor concerned shall be given a reasonable opportunity of being heard.
Provisions related to removal of auditor before the expiry of his or her terms is specified under section 140 of Companies Act 2013 read with companies (audit and auditors) rules, 2014. Here are the steps that a company can follow for removal of auditors.
- Conduct a board meeting to pass a resolution for removal of auditor.
- Auditor has to be given reasonable opportunity of being heard. This provision was not their in old companies act 1956. But now it’s mandatory to give reasonable opportunity of being heard to auditor.
- Apply for Central government approval within 30days from the date of passing board resolutions in e-Form ADT2 as an attachment to e-Form RD1.
- After getting approval, the company is required to hold general meeting within 60 days from the date of approval to pass a special resolution approving central government’s approval.
For getting such approval, company has to file e-Form ADT2 as an attachment to e-Form RD1 for approval of regional director i.e. central government. Such e-Forms are required to accompany with fees as specified under the companies (registration office and fees) rules, 2014.
e-Form ADT2 should specify following things;
- Ground of seeking removal of auditor
- Whether the accounts have been qualified during last three years
- Date of appointment of auditor and SRN of notice of such appointment
- Whether audit fee has been paid or not.
As SRN number of filing ADT-1 is a requirement for getting approval of central government, companies need to make sure that ADT1 is filed before uploading ADT2.
Removal of auditor by Tribunal or on an application made by central government
Where the present auditor of a company has directly or indirectly acted in a fraudulent manner or abetted or colluded in any fraud by or in relation to the company or its directors or officers then the Tribunal may, by order, direct the company to change its auditors.
In this matter, if any application is made by the central government and the Tribunal is satisfied that any change of the auditor is required then it shall within 15 days of receipt of application make an order that the auditor shall not function and central government may appoint another auditor in his place.
The auditor, whether individual or firm, against whom Tribunal has passed final order under section 140 for removal shall not be eligible to be appointed as an auditor of any company for a period of 5 years from the date of passing order. In such cases, both the audit firm and partner concerned will be jointly and severally liable.